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1 A Companhia informa que disponibilizará a versão traduzida para o português deste documento tão logo seja possível.

2 MEETING RIO DE JANEIRO, SEPTEMBER 17

3 AGENDA A Oi s Current Situation B Market Context 1 Telecom Industry Trends 1.A Global Overview 1.B Pay TV Market 2 Brazilian Competitive Environment 2.A Mobile 2.B Fixed C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed 3 IT E Consolidated Expected Results 2

4 Oi s Current Situation LAST YEAR HIGHLIGHTS: AFTER THE BEGINNING OF THE JUDICIAL REORGANIZATION PLAN, THE COMPANY HAS BEEN ABLE TO IMPROVE ITS OPERATIONAL INDICATORS AND EBITDA Focus on Operational Improvement and Cash Flow Generation Increase in infrastructure investments Operational Efficiency and sustainable cost reduction The cash position presented an increase of R$ 2.3 Bi after Judicial Reorganization Filing (2Q16). Routine EBITDA totaled R$ 1,601 million in 2Q17, 10.8% increase YoY (margin reached 27.6%). Oi expanded its investments to R$ 1.2 billion in 2Q17, 1.1% increase YoY, reinforcing its commitment to business sustainability. Capex to net revenue ratio also increased, reaching 21.2%. Oi reduces costs by R$ 687 million in 2Q17, totaling a R$ 1.2 billion cost reduction in the first half of 17. As a result of the improvement in efficiency, Oi s Opex fell 14.1% YoY and 4.2% QoQ, despite accumulated inflation of 3.0% in the last twelve months. Continuous improvement in operational and quality indicators Oi reached better customer experience, with significant reductions in ANATEL, PROCON and Small Claims Court (JEC Juizado Especial Cível) complaint indicators, down 28.6%, 21.6% and 58.7% YoY, respectively. Digital Transformation Digital strategy focus on improving customer experience and operational efficiency gains, with e-billing growth of 171% and online sales of 60% (2Q17 vs 2Q16). Source: Oi Investors Relation. 3

5 Oi s Current Situation EXECUTION OF THE STRATEGIC PLAN (15-18) RESULTS IN IMPORTANT IMPROVEMENTS TO QUALITY OF SERVICES Regulator Complaints (Anatel) Thousand , % y.y 1, , % 1, % (est.)² x 12 4% (est.) ¹ Legal Claims (JEC) Thousand % y.y % % (est.)² x 12-25% (est.)¹ Consumer Complaints Thousand +15% y.y. -14% -5% 17 (est.)² x % (est.)¹ Notes: (1) Realized until June / 17 and considered the same value for the second semester; (2) Variation from January to June 17 versus January to June 16 Source: JEC internal databases and Anatel 4

6 Oi s Current Situation LAST YEAR OPERATIONS AND ENGINEERING INDICATORS SHOW HIGHER OPERATIONAL EFFICIENCY AND GREATER NETWORK CAPACITY Focus on preventive repairs, reduced repair volume and increased productivity positively impacted field operations management and lead to cost reductions Network service provider workforce absorption throughout 16 was fundamental to this process. Operations # Preventives Repairs Thousand +93% # Repairs¹ Thousand -14% Productivity Activities/tec/day +% Technicians Thousand -13% 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Network investment strategy evolving from core to access, aiming to make the network more robust and modern. The increase in capacity of the Company s networks has sustained the rise in data traffic, reducing network congestion Engineering Data Traffic 2G/3G/4G, Tbps IP Traffic - ADSL Tbps Data Access 2G/3G/4G +2%pp +133% 80% dez/15 Dec-15 Jun-17 jun/17 dez/15 Dec-15 Jun-17 jun/17 Dec-15 dez/15 Jun-17 jun/17 Note: (1) Repeated and on warranty repairs Source: Oi 5

7 Oi s Current Situation CUSTOMER CARE INDICATORS ALSO CONTRIBUTED TO INCREASE OPERATIONAL EFFICIENCY Competition increase between service providers to intensify costs reduction. Improve customer experience, develop self care channels and first call resolution strategy. Client Care Program implanted to change Company Culture Service Level % Repeated Calls 24h % -17% -24% Satisfaction Level Research +12% +13% Customer Relations 1T16 1Q16 2T16 2Q16 1T17 1Q17 2T17 2Q17 1Q16 1T16 2Q16 2T16 1T17 1Q17 2Q17 2T17 1T16 1Q16 2T16 2Q16 1T17 1Q17 2T17 2Q17 Service level stabilized at 80% Oi became Repeated Calls 24h benchmark New Customer satisfaction level established Source: Oi Customer Relations Area 6

8 Oi s Current Situation PORTFOLIO EVOLUTION: LAUNCH OF OI TOTAL OFFER (B2C) AND EXPANSION OF FLAT RATE OFFERS (B2B) Fixed: Oi Total national launch, intensifying the bundle strategy, reducing churn and improving profitability Personal Mobility: Prepaid revenue negatively impacted by the macro economic scenario, however, last months have shown signs of improvement due to growth of Oi Livre and positive inflection on unemployment B2C Oi Total Subscribers Thousand Broadband Sales 15 Mbps % of BB Sales Average recharge Oi Livre vs Others R$ +228% p.p +21% 2Q16 2T16 2Q17 2T17 2Q16 2T16 2Q17 2T17 Other Plans Oi Livre Significant quality improvement regarding customer experience and service. 48% decrease in the numbers of billing disputes by large customers and a 27% decrease in the average installation time for landline and broadband for SMEs IT / Data: Despite negative impact due to macroeconomic scenario, IT and Data revenue has been growing due to innovative solutions, increasing its share of total B2B Corporate revenue B2B Corporate and Wholesale Disputes Average installation time¹ Data and IT Revenue Share R$ Thousand Days % Corp +2.4p.p -48% -27% IT 0.6 p.p. Data 1.8 p.p. 2Q16 2T16 2Q17 2T17 2T16 2Q16 2Q17 2T17 2T16 2Q16 2Q17 2T17 Notes: (1) Landline and Broadband. Source: Oi 7

9 Oi s Current Situation OI REMAINS COMPETITIVE THROUGH THE LAUNCH OF NEW OFFERS AND DIGITAL SERVICES Digital Transformation Program New Oi Play Offer E-billing (Pay TV) Digital Product Oi Livre, Oi Mais Technical support by App Minha Oi New register Minha Oi pre login service reconnection feature Aligned to its Digital transformation program and product convergence strategy, the company launched Oi Play. Disruptive product launch, combining fixed broadband services and videos on demand. Minha Oi Pre login bar code Minha Oi E-billing Pre login ( B2B) bar code Control Plans Digital bill Oi Mais Empresas ; new B2B features New mobile plan with unprecedented functionality in the market Oi Total Pay E-billing % E-care +69.5% E-commerce +59.9% The customer can choose between voice minutes or data, with no exchange limits or additional costs. Change between voice minutes and data can be made directly by the Minha Oi app. 2Q16 2T16 2Q17 2T17 2Q16 2T16 2Q17 2T17 2Q16 2T16 2Q17 2T17 Source: Oi I 2Q17 Press Release 8

10 Oi s Current Situation COMPARED TO 12, B2B AND B2C REVENUES DECREASED Revenue Million +1% -3% -4% -5% 28,142 28,422 27,613 26,441 25,164-8% 12,861 11, S16 1S17 B2C Revenue Million +2% -4% -3% -4% 19,198 19,588 18,747 18,106 17,381-3% 8,756 8, S16 1S17 B2B Revenue Million 8,510-1% 8,451-2% 8,3-4% 7,980-5% 7,607-16% 3,984 3, S16 1S17 Source: Oi Controller Department 9

11 Oi s Current Situation OPEX REDUCTION WAS NOT SUFFICIENT TO COMPENSATE THE REVENUE DECREASE, GENERATING A LOSS OF ROUTINE EBITDA Routine OPEX Million +8% -1% -9% -2% 19,589 21,9 21,001 19,211 18,824-12% 9,731 8, S16 1S17 Routine Ebtida Million 8,553-16% 7,213-8% 6,612 +9% 7,2-12% 6,340 +5% 3,1 3, S16 1S17 Source: Oi Controller Department 10

12 Oi s Current Situation INVESTMENTS REDUCTION FROM 12 TO 15, WITH RECOVERY LAST YEAR Capex Million 6,564-5% 6,249-19% 5,074 -% +18% 4,759 4,048 +2% 2,419 2, S16 1S17 Routine Ebitda - Capex Million +107% -50% 3,182 1,989-52% % 1,538 1, % S16 1S17 Source: Oi Controller Department 11

13 AGENDA A Oi s Current Situation B Market Context 1 Telecom Industry Trends 1.A Global Overview 1.B Pay TV Market 2 Brazilian Competitive Environment 2.A Mobile 2.B Fixed C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed 3 IT E Consolidated Expected Results 12

14 Telecom Industry Trends BRAZILIAN CONSUMER IS INCREASINGLY CONNECTED AND DIGITAL, DEMANDING MORE AND MORE OF THE TELECOM INDUSTRY Region II Region I Region III With IoT, the number of connected devices will increase, boosting the B2B market Brazilian youth navigate almost 3 hours a day h Connected 73% of active time 65% of Brazilian population > 13 years have an account Brazil is the 3rd country with more searches São Paulo is the city that uses the most in the world Largest messages community in Brazil Multiple platforms million Brazilians already have 3+ screens Highest growth in Brazil Source: Oi Digital Department 13

15 Telecom Industry Trends BEING CONNECTED BECAME A BASIC NEED 35% Watch videos on cellphone daily Calling a Taxi 51% Use cellphones while watching TV 15% Navigate on smartphone while crossing the street Shopping 31% Use cellphone while on the toilet 38% 60% Would trade sex for a cellphone Check messages in the middle of the night Going to the bank Source: Oi Digital Department 14

16 Telecom Industry Trends WHATSAPP ACTIVE USERS BASE GREW STEADLY AVERAGE APP USAGE IS 195 MINUTES A WEEK WhatsApp active users evolution World Million 0 apr-13 0 aug dec-13 4 jan aug-14 jan-15 sep-15 feb-16 jan jul-17 Comments o o billion WhatsApp messages were sent and received daily on January 15; More than 700 million photos are shared daily on WhatsApp; Whatsapp penetration in 15 4 th quarter by region % of internet users o More than 100 million video messages are shared daily; o 0 million voice messages are shared everyday on whatsapp; Latin America Middle East & Africa Asia World Europe North America o More than 1 million new users register daily; Active users usage frequency in 15 4 th quarter % o On average, users spend 195 minutes a week on Whatsapp; o In April 15, Forbes announced that telecom companies will lose R$ 386 billion between 12- More than once a day Daily Weekly Less frequent 18 to OTTs like Whatsapp. Source: Statista; Business Insider 15

17 Telecom Industry Trends THE GROWTH AND DIVERSITY OF THE OTTS IMPACTED THE DYNAMICS OF THE TELECOM SECTOR, BRINGING NEW CHALLENGES TO OPERATORS OTTs positioning map OTTs Impact Communication Content 1 Voice Revenue deterioration 2 Increase of connection speed and average bandwidth consumption by the broadband users 3 Consumption experience customization Consumer choses what to watch (more non-linear content) and how to watch (Smart TV, Mobile, Tablet, PC, etc..) Commerce Technology/Productivity Advertising 4 Content Production enlargement 5 End of Commercials? a) We already have business models without advertisement b) Advertisement could be more targeted and more assertive with better audience knowledge 6 Non-linear consumption opens space for content production for very different tastes and profiles, stimulating even greater production of series, films, etc... Live sports content will reach TV apps (Netflix, Amazon, Apple TV, etc...) Source: Oi Strategy 16

18 Monthly Cost/Revenue per user (US$) Telecom Industry Trends OTTS ACCELERATE THE VIDEO CONSUMPTION GROWTH, CHALLENGING TELECOM OPERATOR S MARGIN Traffic Evolution by Type ExaBytes/month (B2C) Landline Traffic Evolution by Type ExaBytes/month (B2C) Mobile Traffic Evolution by Type ExaBytes/month (B2C) Internet video Web, and data File sharing Online gaming Total Profit Trend - Business Data Data ARPU Other Costs Margin XXXXX Total Costs (Others+network) Network Costs 1.In 11 LTE provided the decrease of the network costs (cheaper megabyte on access ) 2.With the traffic growth, the costs rise again in the following years 3.New solutions will be required to maintain the positive margin Source: Cisco VNI, Alcatel Lucent 17

19 Telecom Industry Trends GROWTH OF THE TRANSMISSION SPEED AND THE NEED FOR AVAILABLE BANDWITH DUE TO THE HIGHER QUALITY OF INTERNET VIDEOS World Internet videos quality profile 1% 2% 7% 13% 23% % Average Speed Required 18 Mbps Content Delivery Networks (CDNs (1) ) Usage ExaBytes/month % 23% 80% 18% 80% 13% 77% 10% 70% 7% 66% 4% 7.2 Mbps 2 Mbps UHD HD SD CDN Others In addition to volume increase, the increase of content quality also impacts on the network capacity More and more bandwidth is required to serve large volumes of data at a high rate/speed Network solutions of CDNs, in their different topologies, are essential for demand balance and investment capacity in networks, as they make the traffic cheaper, faster and more reliable Note: (1) CDNs are solutions that bring the content closer to the user Source: Cisco VNI 18

20 Telecom Industry Trends TO MEET OTT AND IOT DEVICES DATA DEMAND, TELECOM OPERATORS NEED TO INCREASE DIGITALIZATION, EXPAND NETWORKS AND DEVELOP NEW CAPABILITIES With IoT, the number of connected devices will increase, boosting the B2B market MM. Logarithmic scale Desktop Internet Internet Of Things Mobile Internet Recommendations 1 Business models digitalization In interviews with global executives, digitization appears as a priority Architecture, however, is the greatest perceived execution challenge Mainframe PC Minicomputer Consumers are always connected, boosting the B2C market Hours Business models and services digitization Technology and network evolution 74 Access Technology Better user experince 54 BSS/OSS Cost control and operational efficiency 46 Systems Architecture and Legacy Platforms 43 Virtualization (SDN) Big data analytics Lack of digital skills and expertise h Inactive time 3 Telecoms expected skills in Connected 73% of the active time Digital customer experience expertise Big Data and Analytics Network virtualization IoT information security Source: Cisco; EY 19

21 Telecom Industry Trends CURRENT TRENDS DEMAND INVESTMENT CAPACITY FROM COMPANIES DUE TO EXPONENTIAL GROWTH OF DATA DEMAND, NEW TECHNOLOGIES AND OTTS Structural trends Data Demand grows exponentially Erosion of prices and impossibility of monetizing new services remain a threat (OTT threat) Devices expansion and Data/Information explosion Strong investment need cash flow pressure Regulation is a key element in the creation / destruction of value in TMT Next generation network Technological Progress in video compression and management, automation, and regulatory changes toward network sharing will force telecoms to invest in 5G, network virtualization, and adjacent networks Player s Conduct Revenue grows slower than costs Significant EBITDA pressure Reinforcement on the Digital component Customer is digital, but operators are not End-to-end digitalization (e2e) Efficiency gains can be increased through digitization (eg, sales channels digitalization can reduce costs by 15%) Increased customer satisfaction and leaner operations through digital customer service Sector s Performance Telecom sector loses value compared to the rest of the market Lower telecoms weight in GDP Less projects with NPV>0, reflecting the cash-out strategy Analytics Customization Machine Learning optimizes customer segmentation and understanding, maximizing ARPU (e.g. better CRM and cross-sell) and reducing churn Source: Mckinsey, Oi Strategy

22 Telecom Industry Trends TELECOM SECTOR IN BRAZIL PRESENTS CHALLENGES/OPPORTUNITIES COMPARED TO OTHER COUNTRIES Investments recently increased in Brazil, contributing to margin loss Brazil s Telecom: CAPEX/Revenue % Brazil s EBITDA margin % imposing an additional challenge to Brazil in comparison to international references Telecom: CAPEX/Revenue, 16 % Africa China Brazil Middle East South and Central Asia India Latin America Russia Oceania, East and Southeast Asia Eastern Europe Western Europe North America EBITDA margin, 16 % Middle East Russia Africa North America South and Central Asia Oceania, East and Southeast Asia China India Eastern Europe Western Europe Brazil Latin America Source: Ovum; Telebrasil; Bloomberg, Press Search 21

23 Telecom Industry Trends BRAZIL UNDERWENT A DEEP TRANSFORMATION WITH FIXED-MOBILE CONSOLIDATION AND THE DEVELOPMENT OF NATIONAL FOOTPRINTS /04 07/10 ' Regional Carriers ' Mobile with National footprint " Integrated Players R I 1 R II 2 R III 3 R I R II R III R I R II R III Sky Sky Resid/ Fixed line Telemar BrT Telesp Telemar Net BrT Telesp VIVO/GVT Net/Claro/Embratel Embratel Embratel Oi TIM TIM Vivo Mobile TEF Telemig TMT 4 TEF TCO Celular Telesp Celular Telemig Claro Oi TIM TIM Notes: (1) R1=North/Northeast/Southeast; (2) R2=Centralwest/South; (3) R3=São Paulo; (4) Tele Nordeste Celular. Source: Anatel; Compnies Websites 22

24 AGENDA A Oi s Current Situation B Market Context 1 Telecom Industry Trends 1.A Global Overview 1.B Pay TV Market 2 Brazilian Competitive Environment 2.A Mobile 2.B Fixed C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed 3 IT E Consolidated Expected Results 23

25 Pay TV Market CONTRARY TO FORECASTS, THE FIXED LINE MARKET REMAINED RESILIENT, REACHING ITS PEAK ONLY IN 14. DEFENSE OF CUSTOMER BASE RESULTED IN THE ARPU FALL. More pessimistic forecasts have not materialized... Projections such as the September 05 issue of the well-known The Economist magazine did not materialize, as Fixed Line remained resilient for several years.... and the Brazilian fixed line market reached the peak only in Base EOP - Million % 41.2 Economic Crisis -3.6% +0.3% +1% +2% +2% +3% +1% -2.9% -4.2% % although the fall in ARPU has been happening for some time. ARPU Oi Nominal Terms ARPU Oi Real Terms R$/month R$/month (base dec 16) 17/09/ % Economic Crisis -1.6% -0.2% -2.7% -3.0% % Economic Crisis -8.4% -6.2% -10.6% -10.9% Source: Anatel; Oi Strategy and Controller Department 24

26 Pay TV Market DESPITE THE COMPETITION OF OTTS, POSITIVE FACTORS AND VALUE CHAIN PLAYERS REACTIONS SHOULD PREVENT AN ACCELERATED CUSTOMER BASE FALL Pay TV Market Projections and Oi Customer Base Base EOP - Million 19,5 19,1 18,8 18,5 18,0 18,3 18,4 18,6 18,8 16,2 Brazil + Positive Influence Pay TV resilience vs. OTTs in the USA: The largest retraction observed was 1.7% (15) and the highest reduction is 2.4% (17), stabilizing below 1% from 18 on Bundles changes and simplifications (Skinny-bundles ): Focus on options not available on OTTs (sports, news, shows, and other live contents) 9,8 12,7 10,0 11,1 12,1 11,8 11,6 11,4 11,3 11,3 11,5 11,6 R1+R2 Recovery from the economic crisis : GDP of +0,39% in 17(E), vs. -3,8% (15) and -3,6% (16) Low Pay TV penetration in Brazilian households: 31% in Brazil vs. 81% in North América and 61% in Europe High household growth vs. developed markets: Projected CAGR of 1.94% for Brazil vs. 0.79% for USA until 21 7,5 5,8 7,6 TV Globo Market Power Financially vested in Pay-TV content production 4,3 Negative Influence The rise and growth of OTTs services (Netflix, Hulu, Amazon Prime, etc.), influenced by: Source: McKinsey; Oi Strategy and Oi Controller Department. - - Non-linear content demand; - Expansion and increase of the broadband average speed; - Smart TVs Popularization; - Live content offers. 25

27 Pay TV Market STABILITY OF CUSTOMER BASE IS ONLY ACHIEVED THROUGH ARPU REDUCTION, RESULTING IN DECREASED SECTOR REVENUE Base Scenario Revenue Erosion Pay TV Market Base EOP - Million 16,2 18,1 19,6 19,2 18,9 18,6 18,4 18,5 18,8 18,9 Market Revenue Nominal 1 R$ Billion/year 7,5 9,8 12, % ARPU Nominal R$/month -1.9% % 24.9% 22.2% 16.4% 8.9% -2.2% -6.7% -6.6% -5.2% -6.9% -6.0% -5.6% % Real Variation of Revenue YoY Note: 1 Pay TV Operators revenue Source: Teleco Site; McKinsey; Oi Strategy; Brazilian Central Bank. 26

28 Pay TV Market ISOLATING THE EFFECTS OF ECONOMIC CRISIS AND OTTS, THE MOVEMENTS OBSERVED IN FIXED LINE AND BY THE US TV MARKET, SUPPORT THE EXTRAPOLATION OF THE PROJECTION Pay TV Market Forecast Base EOP - Million 12,7 9,8 16,2 18,1 19,6 19,6,9 21,9 19,2 18,9 23,7 24,0 24,3 24,5 24,6 24,7 24,8 24,9 23,2 22,6 2 18,6 18,4 18,5 18,8 18,9 18,8 18,5 18,0 17,1 16, Disregarding the effect of the economic crisis and the competition of OTTs, the market follows the expansion trend demonstrated before 14 until its maturity. The change in consumption patterns are estimated using the impacts observed on US Pay TV and Brazil's Fixed Income. 7, The initial forecast (until 21) and the curve 2 converge, generating a resulting scenario that takes into account the various factors. Source: McKinsey; Anatel; Oi Strategy. 27

29 Pay TV Market FROM 22 ON, TOTAL MARKET REVENUE DECLINES MORE RAPIDLY DUE TO COMBINATION OF COSTUMER BASE FALL AND ARPU EROSION Base Scenario Revenue Erosion Pay TV Market Base EOP - Million 18,1 19,6 19,2 18,9 18,6 18,4 18,5 18,8 18,9 18,8 18,5 18,0 17,1 16,2 16,4 12,7 9,8 7, Market Revenue Nominal 1 R$ Billion/year -2.1% % ARPU Nominal 1 R$/month % % % 24.9% 22.2% 16.4% 8.9% -2.2% -6.7% -6.6% -5.2% -6.9% -6.0% -5.6% -6.7% -7.8% -8.7% -10.2% -11.1% % Real Variation of Revenue YoY Note: (1) Subscription revenue of Pay Tv operators disclosed by Teleco site. Source: Teleco Site; McKinsey; Oi Strategy Department; Brazilian Central Bank. 28

30 AGENDA A Oi s Current Situation B Market Context 1 Telecom Industry Trends 1.A Global Overview 1.B Pay TV Market 2 Brazilian Competitive Environment 2.A Mobile 2.B Fixed C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed 3 IT E Consolidated Expected Results 29

31 Brazilian Competitive Environment - Mobile OI LOST MARKET SHARE MAINLY IN POSTPAID Market Share % VIVO CLARO TIM OI (1) Prepaid Postpaid excluding M2M Total excluding M2M jun jun jun-17 Base Million VIVO CLARO TIM OI Prepaid Postpaid excluding M2M Total excluding M2M jun jun jun-17 Note: (1) MS considers other competitiors: Nextel, CTBC, Porto Seguro, Sercomtel, Datora and Terapar. Source: Anatel

32 Brazilian Competitive Environment - Mobile OI MOBILE SERVICES REVENUE TOTALED R$ 7.6 BILLION IN 16, A REDUCTION OF 12.6% VS 13 % y/y Service Revenue R$ - Million 8,722 8, % 8,019 7,623 Service Revenue R$ - Million 16,148 15, % 14,727 13, % -1.4% -4.9% -2.5% -6.5% -5.1% Service Revenue R$ - Million -11.1% Service Revenue R$ - Million +12.2% 12,018 11,073 11,692 10,689 21,691 22,455 23,643 24, % -5.6% -8.6% 3.5% 5.3% 3.0% Source: Oi Controller Department and Companies Press Releases 31

33 Brazilian Competitive Environment - Mobile EXCLUDING INTERCONNECTION REVENUE, OI MOBILE REVENUES INCREASED 6.4% SINCE 12, SECOND ONLY TO VIVO % y/y Net Customer Revenue (1) R$ - Million +6.4% Net Customer Revenue (1) R$ - Million +3.0% 6,575 6,732 7,1 6,996 12,534 13,2 13,5 12, % 5.9% -1.9% -2.5% -6.5% -5.1% Net Customer Revenue (1) R$ - Million Unreported Information Net Customer Revenue (1) R$ - Million +25.1% 18,421,159 21,978 23, % 9.0% 4.8% Notes: (1) Excludes handset and network usage revenues. Source: Oi Controller Department and Companies Press Releases 32

34 Brazilian Competitive Environment - Mobile OI HAS THE LOWEST REVENUE SHARE AMONG MOBILE OPERATORS Market Share of Service Revenue (1) (2) (1) (2) (3) (4) OI TIM VIVO CLARO Market Share of Net Customer Revenue OI TIM VIVO 47.9% 49.2% 51.0% 52.8% 36.4% 38.5% 40.1% 42.5% 27.1% 27.0% 25.0% 24.4% 32.6% 32.2%.6% 29.6%.1% 19.0% 19.8% 18.6% 16.4% 15.6% 15.0% 14.5% 19.5% 18.6% 18.4% 17.6% Notes: (1) Revenue in the new Press view, adopted since 4Q16; (2) Includes B2B; MS totaled 100%; (3) Service Revenue excluding handset and network usage revenue; (4) Claro does not disclose this information. Source: Oi Controller Department and Companies Press Releases 33

35 Brazilian Competitive Environment - Mobile OI MOBILE INVESTMENTS ARE SMALLER THAN THE COMPETITOR WITH ONLY MOBILE PRODUCTS CAPEX OI R$ Million Capex/Revenue CAPEX Comparative R$ Million (3) 5,074 4,048 4,759 13,881 13,881-6% 13, % 15.3% 18.9% 17.5% CAPEX TIM R$ Million Capex/Revenue 700MHz License + Cleaning 6,854 2,923 3,931 4, ,658 4,502 16,121 3,029 13, (1) (2).2% 27.2% 28.8% 25.0% Notes: (1) R$ 106 MM referring to the monetary correction of the 700MHz cleaning and the debt of Anatel 4G auction; (2) Disconsiders capex of license for TIM; (3) Includes transmission investments and core for fixed line and mobile. Source: Oi Controller Department and Press Releases 34

36 Brazilian Competitive Environment - Mobile CAPEX RESTRICTION LEADS TO OI S 3G AND 4G COVERAGE GAP AGAINST COMPETITORS, WHICH SUSTAIN THEIR 4G GROWTH WITH 1800 MHZ REFARMING 4G Covered Cities (#) 3G Covered Cities (#) % covered population 52% 73% 411 1,255 1,322 1,850 70% 1,000 1,336 1,741 2,833 2,902 85% 2,916 # Sites (2G + 3G + 4G),664 ¹ 48% 69% 72% 90% ,133 1,374 1,768 2,332 3,083 3,212 3,275 16,635 ¹ 47% 71% 87% 91% ,477 3,137 3,289 3,538 3,652 3,652 3,815 21,090 ¹ 46% 55% 69% 73% ,011 1,280 1,493 1,493 1,493 17,583 ² T17 jun T17 jun-17 Notes: (1) May 17 data from Teleco's website; (2) May 17 data from Oi Engineering (2G = ; only 3G or 3G / 4G = 403; only 4G = 11; Ran Sharing 4G TIM and Vivo = 3,678. Total = 17,896, of which 313 are in deployment) Source: Oi Market Intelligence; Teleco / Oi Demand Planning 35

37 AGENDA A Oi s Current Situation B Market Context 1 Telecom Industry Trends 1.A Global Overview 1.B Pay TV Market 2 Brazilian Competitive Environment 2.A Mobile 2.B Fixed C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed 3 IT E Consolidated Expected Results 36

38 Brazilian Competitive Environment - Fixed OI LOSES BROADBAND MARKET SHARE AND GAINS TV MARKET SHARE (TOTAL BRAZIL 1 ) Market Share % OI CLARO VIVO SKY OTHER Fixed Line Broadband Pay TV Jun Jun May-17 Base Million OI CLARO VIVO SKY OTHER Fixed Line Broadband Pay TV Jun Jun May-17 Notes: (1) Brazil = R1 + R2 + R3; R1=North/Northeast/Southeast; R2=Centralwest/South; R3=São Paulo; (2) For Pay TV, there is only information until May 17. Source: Anatel 37

39 Brazilian Competitive Environment - Fixed OI LOSES MARKET SHARE OF BROADBAND AND GAINS TV MARKET SHARE (R1+R2 ONLY 1 ) Market Share % OI CLARO VIVO SKY OTHER Fixed Line Broadband Pay TV Jun Jun May-17 Base Million OI CLARO VIVO SKY OTHER Fixed Line Broadband Pay TV Jun Jun May-17 Notes: (1) Brazil = R1 + R2 + R3; R1=North/Northeast/Southeast; R2=Centralwest/South; R3=São Paulo; (2) For Pay TV, there is only information until May 17. Source: Anatel 38

40 Brazilian Competitive Environment - Fixed SPEED MIX BELOW THE MARKET AVERAGE MAKES THE COMPANY LESS COMPETITIVE AGAINST MAJOR PLAYERS Evolution of the Fixed Broadband Speed Mix by Operator (1) % 0Kbps - 512Kbps 512Kbps - 2Mbps (2) 17 2Mbps - 12Mbps 12Mbps - 34Mbps > 34Mbps (2) Speed Mix comparison by Operator (1) - Jun17 Market Net Accesses >12 Mbps % (2) (2) 96 Vivo Oi TIM Notes: (1) Considers all SCM (Multimedia Communication Services) accesses available at ANATEL I (2) June 17 Source: Anatel 39

41 Brazilian Competitive Environment - Fixed HOWEVER, OI HAS A ROBUST AND COMPREHENSIVE TRANSMISSION NETWORK Oi Transmission Network Strategic Relevance Function: Main Brazilian concession and largest coverage area Scope: Largest fixed broadband capillarity - 4,700 cities Capacity: OTN / 100G Backbone Size: Largest Brazilian fiber network with 340,000 Km Fiber Radio Satellite Expansion: 64 new routes implemented in 15 Notes: (1) Main transmission profile in the city according to Oi Engineering classification (2) Corresponds to the following classifications: Leased Line, Satellite, Metallic Network, Radio + Leased Line and Radio + Satellite. Source: Oi Engineering and Oi Strategy 40

42 Brazilian Competitive Environment - Fixed FIXED AND FIXED LINE NET CUSTOMER REVENUE COMPARISON % y/y Net Customer Revenue Fixed (1) R$ - Million -2.8% Net Customer Revenue Fixed (2) R$ - Million +4.5% 16,832 16,372 16,095 15,919 11,260 15,971 (1) 16,501 16, % % % 13 Without GVT % % % Net Customer Revenue - Fixed Line R$ - Million Net Customer Revenue - Fixed Line R$ - Million 10,326 9, % 8,644 7,899 6,160 8, % 7,994 7, % % % 13 Without GVT % % % Notes: (1) Considers Fixed Line, Fixed Broadband and Pay TV (2) Considers Fixed Line, Fixed Broadband, Pay TV, Corporate Data and IT, and Other Services. All charts contemplate B2C + B2B Source: Companies Press Releases and Oi Controller Department 41

43 Brazilian Competitive Environment - Fixed BROADBAND AND PAY TV NET CUSTOMER REVENUE COMPARISON % y/y Net Customer Revenue Broadband R$ - Million Net Customer Revenue Broadband R$ - Million 2,706 2, % 2,853 3,022 3,651 5, % 6,001 6, % 2.6% 5.9% Without GVT 55.5% 5.7% 6.9% Net Customer Revenue Pay TV R$ - Million Net Customer Revenue Pay TV R$ - Million +72.1% +42.7% ,050 1, ,354 1,728 1, % % % 13 Without GVT % % % Source: Oi Controller Department and Companies Press Releases 42

44 Brazilian Competitive Environment - Fixed OI INVESTED HALF OF THE VIVO CAPEX, THE MAIN CONVERGENT COMPETITOR CAPEX OI R$ Million Capex/Revenue CAPEX Comparative R$ Million 5,074 4,048 4,759 13, % 24,903 (3) % 15.3% 18.9% 17.5% CAPEX VIVO (1) R$ Million Capex/Revenue 700MHz License + Cleaning 13,881 11,161 27,669 2,766 2,766 8,319 8,189 8,395 24,903 (2) % 19.7% 18.8% 19.8% Oi Vivo Notes: (1) Includes GVT operating investment. Excludes value of GVT acquisition of ~R$ 22 billion; (2) Includes R$185.5 MM related to the acquisition of 2.5 GHz licenses in the leftover auction; (3) Excludes purchase of 700 MHz Source: Oi Controller Department and Companies Press Releases. 43

45 AGENDA A Oi s Current Situation B Market Context 1 Telecom Industry Trends 1.A Global Overview 1.B Pay TV Market 2 Brazilian Competitive Environment 2.A Mobile 2.B Fixed C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed 3 IT E Consolidated Expected Results 44

46 Build up of the capital allocation strategy CAPEX WILL REDUCE COMPETITIVE, FINANCIAL AND QUALITY GAPS Relevant capital allocation areas Industry Gaps Network Investments IT/Operations/CPEs 1 Competitive Gaps Financial Gaps Quality of Service Gaps Fixed Broadband Investments allocated by market demand: o Shortening Local Loops o Optical Fiber Mobile 4G Network Expansion: Refarming (1800 MHZ) and Carrier Aggregation Increase of 4G Coverage Area New IT architecture Consolidation and optimization of Oi s systems New investment plan Investment Gaps Data fine tunning and granular prioritization Example: State of Santa Catarina Note: (1) Customer Premisses Equipments; Source: Oi Strategy 45

47 Build up of the capital allocation strategy OI S STRATEGY IS TO FACE COMPETITION BY FOCUSING ON CUSTOMER SERVICE, ADDING VALUE TO THE COMPANY, LIMITED ONLY BY INVESTMENT RESTRICTIONS Customer Focus Strategy on a Competitive Market Cash Focus Strategy Protect Serve Grow City 1 City 2 City 3 City 4 City 8 City 9 City n Full Investiment Mobile Broadband Fixed Broadband Full Investiment Data Network Migration to Control Plans Higher speeds Bundles strategy IT & Network Support Digital services Field Operations quality Increase Unleashing broadband data network New data customer VAS Content City 1 City 2 City 3 City 4 City 5 City 6 City 7 City 8 City 9 City n City 2 City 4 City 3 City 5 City n City 6 City 1 City 2 Company s restrictions - NPV>0 - Limited Capex - Deployment pace Selection where Oi can better compete within its budget Source: Oi Strategy 46

48 Build up of the capital allocation strategy SPEED MIX BELOW THE MARKET AVERAGE MAKES THE COMPANY LESS COMPETITIVE 1 AGAINST MAJOR PLAYERS AND EXPOSED TO LOCAL COMPETITORS ATTACKS Protect Fixed Oi needs higher speeds to compete with big competitors and upgrade broadband speeds in regions with local competition and/or protect customer base against future attacks Market Accesses >12 Mbps % 39 1 Plans with Speed < 10 Mbps Monthly payment x Speed R$ Plans with Speed > 10 Mbps Monthly payment x Speed R$ Net Vivo Oi Oi Broadband without fixed line. Valid only at RJ, BA, ES, PA, PE and SE Mbps Mbps TIM 96 Oi s Broadband +Fixed Line Oi s Broadband ISP's Broadband +Fixed Line ISP s Broadband 1 Oi is more expensive than local competitors in low speeds 2 Above 10 Mbps Oi is more competitive but for speed >35Mbps has no offers Investments on Fixed Broadband improving speed mix make possible: Customer Retention + Customer base monetization Notes: (1) Considers all SCM (Multimedia Communication Services) accesses available at ANATEL ; (2) June 17 Source: Anatel 47

49 Build up of the capital allocation strategy 1 OI INVESTED IN BUNDLE BASE GROWTH DUE TO THE HIGHER ARPU AND LOWER CHURN Protect Fixed Oi Total Base Million ARPU Aug/17 +44% Oi B2C Broadband Million Broadband + Fixed Line Oi Total Churn (% Monthly) -75.7% Oi Total Penetration in Oi s Broadband Million 3% 8% 13% 17% 22% 27% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Broadband Oi Total (1) Investments in Broadband improving speed mix make possible: Bundles + Customer base monetization n Note: (1) Broadband churn for Oi Total customers Source: Oi B2C Marketing 48

50 Build up of the capital allocation strategy 1 MTR REDUCTION AND HIGH USE OF WHATSAPP IMPLY SIM CARDS REDUCTION AND POSTPAID MIX INCREASE Protect Mobile MTR reduction and high use of WhatsApp MTR reduction R$ Postpaid mix evolution (1) % Postpaid 13.2% 14.1% +5.8 p.p. 15.5% 15.7% 19.0% feb-10 0 feb-12 WhatsApp active users evolution World Million 0 apr feb feb feb feb feb feb % 13.8% +9.5 p.p. 15.0% 17.2% 22.7% apr-13 aug-13 dec-13 jan-14 aug-14 jan-15 sep-15 feb-16 jan-17 jul p.p. SIM cards evolution (1) Million 12.7% 14.6% 14.5% 18.4% 21.1% % % 24.9% p.p. 29.5% 36.1% 39.3% jun Notes: (1) Excludes Mini Modem and M2M Source: Oi Controller Department, Statista, Anatel and Operators Press Release 49

51 Build up of the capital allocation strategy 1 WORLD INCREASINGLY CONNECTED WITH OTTS IMPLIES IN DATA REVENUE INCREASE Protect Mobile Brazilian app statistics Brazilian youth navigate almost 3 hours a day 65% of Brazilian population > 13 years have an account Data revenue mix has been increasing in recent years % of revenue data 37.7% 40.0% 42.5% p.p p.p. 46.0% 45.8% (1) 49.3% Brazil is the 3rd country with more searches 43.0% 44.6% 45.8% 45.5% 51.9% 59.9% São Paulo is the city that uses the most in the world p.p. Largest messages community in Brazil 52.6% 56.8% 58.9% 62.3% 68.6% 71.8% Highest growth in Brazil 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Notes: (1) Claro does not disclose this information Source: Oi Digital Department and Operators Press Release 50

52 Build up of the capital allocation strategy 1 TO IMPROVE MAIN KPIS AND INCREASE ARPU, INVESTMENTS IN MOBILE DATA NETWORK WILL BE REQUIRED Protect Mobile Main forces All forces reflect in ARPU increase R$; % CAGR +0.6% MTR / On-net voice offers / Communities SIM cards / Multiplus Prepaid % Voice Traffic +2.5% Prepaid Mix +1.0% Oi current gap Data revenue / Mobile data network need 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Source: Operators Press Release 51

53 Build up of the capital allocation strategy 2 DIGITAL TRANSFORMATION: E-BILLING, E-CARE AND E-COMMERCE RESULTS Técnico Virtual: 24 hour technical support by App Innovative initiative launched by Oi for fixed line, fixed broadband and pay TV customers Oi solves 40% of the reported problems in calls to Oi technical support by Técnico Virtual App E-commerce impacts Acquisition costs Offline Serve Digital B2C Online Oi Mais Empresas: Self Care solution for SMEs -32% 367k Requests 1H17 SMEs improving operational indicators: E-CARE E-BILLING - 17 % of services % of pages B2B 88% Are satisfied +15p.p +4.7p.p Offline Online 56% NPS -14% apr may jun jul aug Source: Oi B2B. 52

54 Build up of the capital allocation strategy 2 QUALITY OF SERVICE FIXED SERVICES Serve Fixed Repairs/Subscribers % 17 Network solution impacts Network Solution Monthly Rates FTTC FTTH Repairs/Subscribers (current average) Churn (current avarage) Repairs/Subscribers 1 Deployment of different network solutions impacts on churn reduction and opex savings leverage 2 FTTH provides better connection stability and thus lower churn rate, compared to FFTC solution Notes: (1) internal benchmarking; (2) Churn in local competition zone in 17 Source: Oi Marketing 53

55 Build up of the capital allocation strategy 2 ALTHOUGH ONLY 8% OF THE CITIES PRESENT NETWORK CONGESTION, INCREASING DATA TRAFFIC WILL CAUSE FUTURE NETWORK EXHAUSTION Serve Mobile 3G Data Network Congestion % - July 17 3G Covered Cities = 1,528 Histogram - 3G Data Network Congestion July 17 8% 8% 7% 8% 85% 1,295 1 >=5% % <2% 3G Data Network Congestion Rio De Janeiro State Zoom: Rio de Janeiro State Source: Oi Engineering 54

56 Build up of the capital allocation strategy 3 GROWING MARKET OPPORTUNITY FOR BOTH FIXED AND MOBILE BROADBAND Grow Fixed & Mobile Mobile 4G enabled devices Fixed Broadband Accesses 15 o Brazil: 14,650, o Brazil¹: 11,253,077 o Santa Catarina: 554,783 o Santa Catarina: 741, o Brazil: 84,112, o Brazil¹: 18,094,382 o Santa Catarina : 3,6,531 o Santa Catarina: 1,287,896 (1) Excludes São Paulo Source: ANATEL 55

57 Build up of the capital allocation strategy CUSTOMER FOCUS STRATEGY IMPLEMENTATION IS BASED ON MOBILE 4G COVERAGE AND INCREASED FIXED BROADBAND BANDWIDTH Mobile Broadband Fixed Broadband Full Investiment Customer Focus Strategy on a Competitive Market Protect Serve Grow Data Network Migration to Control Plans Higher speeds Bundles strategy IT & Network Support Digital services Field Operations quality Increase Unleashing broadband data network New data customer VAS Content City 1 City 2 City 3 City 4 City 5 City 6 City 7 City 8 City 9 City n Mobile Broadband Remedy: 4G 1800 MHz Upgrade to 4G 1800 MHz via Refarming Provide better experience to the end user Match state-of-the-art competition Improve mix evolution: from prepaid to control plans and from control plans to postpaid Oi Market capture opportunities: Fair share of net adds in postpaid Fair market share in prepaid Fixed Broadband Remedy: Increased Bandwidth Upgrade broadband speed offers to effectively counteract competitors and protect our customer base against future attacks Source: Oi Strategy 56

58 Build up of the capital allocation strategy CUSTOMER FOCUS STRATEGY IMPLEMENTATION WITH UNRESTRICTED CAPEX IMPLICATES IN A R$ XX BILLION INVESTMENT OVER 10 YEARS Total unrestricted Capex (10 years) R$ Billion 1 Fixed Broadband Capex (10 years) R$ 2 Mobile Capex (10 years) R$ Fixed Broadband + Mobile + IT Mobile 1 Fixed Broadand 2 IT 3.5 K Cities 18.7 K Network Stations Source: Oi 57

59 NPV/IPV Build up of the capital allocation strategy CAPEX PRIORITIZATION WILL CONSIDER A NPV/IPV ANALYSIS OF EVERY PROJECT AND RESTRICTIONS ON EXECUTION Prioritization Model Concept Financial analysis Financial Prioritization Restrictions on execution Project analysis according to financial results and Capex impact Rank projects with greater NPV/IPV Project selection to compose Restricted Capex R$ Billion o Limitation of additional deployment NPV (R$ MM) P 1 P 7 P 4 P 8 P n IPV (R$ MM) P 2 P 3 P 5 o Project 1 o Project 4 o Project 7 o Project 8... o Project n Project 1 Project 7 Project 4 Project 8 Total Capex X Year 1 Year 2 Year 3 Total X Source: Oi Strategy 58

60 AGENDA A Oi s Current Situation B Market Context C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 1 B2C Mobile Demand 2 4G Expansion 2 Fixed 3 IT E Consolidated Expected Results 59

61 B2C Mobile Demand MOBILE DEMAND PROJECTIONS WERE DIVIDED IN TWO PARTS: 1) MARKET EVOLUTION AND OI MARKET CAPTURE IN BRAZIL, 2) BREAKDOWN OF OI S PROJECTIONS PER CITY Base Current Oi Traffic Profile by technology by product # SIM cards Market by technology of associated handset # Oi SIM cards by technology of associated handset Source: Oi Strategy => => => 1ª Phase: Market and Oi Evolution in Brazil Breakdown of Oi base and traffic per City Market Market Traffic Growth Forecast (Cisco VNI) Technology Adoption Curve Projection (2G/3G/4G) Application of "Gap closure" on the market curve # Market Base by product => Market Projections considering world Pre and Postpaid trends and Brazil => => => Projections Oi Projections Brazil level # Oi Average Traffic by technology and product Oi Base Mix by technology # Oi Base by product Investment Scenario 4 # Oi Base by product - Baseline Scenario # Oi total traffic by technology by product Investment Scenario Oi total traffic by technology by product Baseline Scenario Assumptions Oi Projections City Countrywide projections allocation by product, technology, and city: Exemples: 1) Demographic and social Gaps 2) Historical Data 3) Adequacy to the city network Output Investment vs Baseline Scenarios: Base and Traffic By product, by technology and by city Oi future traffic for Brazil will be consolidated based on the Traffic by product / technology / city that will come from the Demand Base already projected at the granularity of Cube and its BOU 60

62 B2C Mobile Demand BRAZIL MOBILE MARKET PROJECTIONS (EX-MINI MODEM AND M2M) Single Users and SIM cards Projections Assumptions: - Population growth and aging IBGE Forecast until 27; - Historical penetration of mobile users in the population with 10+ years of PNAD (single users); - Penetration forecast of single users reaches 90% of the population with 10+ years in 27; - Number of SIM cards per Prepaid user assumes, in 27, the current number of Postpaid; - Number of SIM cards per Postpaid user is constant Million 2.03 Unit Mobile single users SIM cards (EX-Mini Modem and M2M) SIM cards per user Source: Oi Strategy 61

63 Revenue B2C Mobile Demand TECHNOLOGICAL EVOLUTION CURVE BEHAVIOR Conceptual New products Adoption Curve Consumer New Products Adoption Cycle Initial Market Main Market Accumulated Technological Evolution Curve The Chasm Enthusiasts Visionaries Pragmatics Conservatives Skeptics Early Adopters Early Majority Late Majority Laggards Geoffrey Moore, writer of the book "Crossing the Chasm, researched the adoption of new technologies by customers: Time Enthusiasts have great influence over others consumers Visionaries have innovators as reference Pragmatics adopt the innovation only after verifying that such product has a history of success Conservatives value the functionality and practicality of the product and are price sensitive Skeptics do not like to experience new things and only adopt innovation when they have no alternative Summing up the clusters of the different consumers, the accumulated technological adoption curve over time is obtained (orange curve) Source: Oi Strategy 62

64 B2C Mobile Demand APPLYING THE TECHNOLOGICAL EVOLUTION CURVE THEORY, IT IS EXPECTED THAT 4G HANDSETS WILL DOMINATE PARTICIPATION IN 27 Technological Evolution Curve Actual Projections Actual Projections 100% 90% 80% 70% 2G 3G 60% 50% 2G 4G 4G 40% % % 3G 10% 0% Source: Oi Strategy 63

65 Mobile Penetration (%) Mobile Penetration (%) B2C Mobile Demand ANALYZING THE GDP PER CAPITA RELATION VS MOBILE PENETRATION, A GROUP OF COUNTRIES TO PERFORM A BENCHMARKING STUDY WAS IDENTIFIED: CLUSTER BRAZIL GDP per capita vs. Mobile penetration Cluster Brazil: GDP per capita vs. penetration Developing Countries Brazil Developed Countries Developing Countries Brazil Developed Countries Russia Greece Portugal Argentina Italy Chile Malaysa Taiwan Brazil Spain China Turkey Mexico Finland Germany Israel Canada EUA Switzerland Norway Russia Greece Argentina Chile Malaysa Brazil China Turkey Mexico Portugal Saudi Arabia Italy Taiwan Korea Spain GDP/Capita (Thousand US$) GDP/Capita (Thousand US$) Source: Wireless Matrix, Oi Strategy I The Analysis Includes M2M and mini modem SIM cards 64

66 Mobile Penetration (%) B2C Mobile Demand ANALYZING THE GDP PER CAPITA RELATION VS. MOBILE PENETRATION AND POSTPAID MIX, COUNTRIES THAT HAVE A SIMILAR BEHAVIOR TO BRAZIL WERE IDENTIFIED Cluster Brazil: GDP per capita vs. penetration Developing Countries Brazil Developed Countries 180 Russia Greece Portugal 150 Argentina Saudi Arabia 140 Malaysa Chile Italy 1 1 Taiwan Brazil Korea 110 Spain Postpaid Mix evolution (1) - % 62.5% 65.6% 68.7% 67.2% 73.6% 76.9% Spain 41.1% 42.9% 27.4% 27.2% 29.7% 36.4% Portugal 33.5% 34.5% 35.2% 35.0% 34.8% 34.7% China 28.8% 32.7% 19.5%.6% 22.9% 24.8% Brazil Variation 16 vs p.p 15.5 p.p 1.2 p.p 13.2 p.p China Mexico Turkey Chile Italy 25.5% 19.4% 24.5% 21.1% 25.4% 21.7% 26.9% 22.1% 28.2% 22.7% 31.0% 24.4% 5.5 p.p 4.9 p.p GDP/Capita (US$ thousand) 35 Russia 8.6% % % % % % p.p Note: (1) Includes M2M and mini modem Source: Wireless Matrix, Oi Strategy 65

67 B2C Mobile Demand PORTUGAL SHOWS BEST SIMILARITY WITH THE BRAZILIAN MIX CASE IN 3 YEARS, BRAZIL SHOULD MATCH PORTUGAL S 43% POSTPAID MIX, REACHING 50% ON 10 YEARS* Postpaid mix evolution Cluster Brazil (# SIM cards) Including M2M and mini modem 76,9% 60,9% 42,9% 34,7% 29,9% 32,7% 26,7% 24,9% 31,0% 18,9% 17,6% 24,4% 8,8% 12,9% Postpaid mix evolution Brazil vs Portugal Including M2M and mini modem Postpaid mix evolution Brazil (# SIM cards) Including M2M and mini modem 32,7% 28,8% 24,8% 22,9% 18,9% 18,9% 19,5%,6% 25,6% 22,1% 19,0% 16,2% 16,0% 16,3% 15,4% 17,2% 2,6% 3,0% Postpaid Pure postpaid M2M 40,0% 32,8% 51,0% 52,8% 54,4% 55,9% 58,7% 58,7% 57,4% 49,1% 47,1% 45,2% 44,7% 46,2% 47,5% 48,7% 49,9% 49,9% 43,1% 41,4% 39,6% 37,8% 3,3% 5,2% 5,7% 5,8% 6,7% 7,1% 7,2% 7,4% 7,5% 7,7% 7,9% 8,1% 8,2% 8,4% 8,6% 8,8% 8,8% y = 0,0256x + 0,77 R² = 0, ,9% 32,7% The projection of postpaid SIM cards mix curve of brazilian mobile market considered: 26,7% 18,9% y = x R² = years o o Recent adoption curve of Portugal (last 3 years) Deceleration trend of mini-modem and M2M market Note: * Excluding M2M Source: Wireless Matrix, Oi Strategy I Wireless Matrix numbers do not exactly match with ANATEL 66

68 B2C Mobile Demand MARKET PREPAID/POSTPAID MIX PROJECTIONS Mix Prepaid/postpaid and Single Users (excluding M2M and modem) Assumptions: - A decrease in the number of Prepaid SIM cards per user, as a result of the community effect breakdown and SIM card consolidation, due to all-net offers; - Prepaid / Postpaid Mix Projections based on the benchmark study, reaching 50% / 50% in 27; - In 27, Prepaid and Postpaid will have, on average, the same number of SIM cards per user. 100% % Postpaid Chips Pós SIM Pago cards % Chips Prepaid Pré SIM Pago cards 90% % Usuários Postpaid Únicos single users Pós-Pago % Usuários Prepaid single Únicos users Pré-Pago 80% 70% 60% 50% 40% % % 10% 0% Source: Oi Strategy 67

69 B2C Mobile Demand DATA TRAFFIC EXPANSION RESULTS : INVESTMENT SCENARIO Brazil Mobile Data Traffic Forecast - Cisco VNI Petabytes / month Benchmark Operator T BOU per Data users Mbytes / month 7.000,0 y = 110,58e 0,331x CAGR 40% % ,0 4Q15 4Q ,0 Oi Data Traffic B2C ¹ Petabytes / month BOU Oi data users MBytes/month Data users penetration 4.000,0 39% CAGR 3.000, ,0 Y% X% Larger increase than market due to catch up 48% 1.000,0 0, Notes: (1) Considers Oi Forecast 17 Source: Cisco VNI; Oi Strategy 68

70 AGENDA A Oi s Current Situation B Market Context C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 1 B2C Mobile Demand 2 4G Expansion 2 Fixed (B2C) 3 IT E Consolidated Expected Results 69

71 4G Expansion CAPEX RESTRICTION REFLECTS IN OI S 3G AND 4G COVERAGE GAP FACE COMPETITORS, WHICH SUSTAIN THEIR GROWTH IN THE 4G AT 1800 MHZ 4G Covered Cities (#) 3G Covered Cities (#) % covered population 52% 73% 411 1,255 1,322 1,850 70% 1,000 1,336 1,741 2,833 2,902 85% 2,916 # Sites (2G + 3G + 4G),664 ¹ 48% 69% 72% 90% ,133 1,374 1,768 2,332 3,083 3,212 3,275 16,635 ¹ 47% 71% 87% 91% ,477 3,137 3,289 3,538 3,652 3,652 3,815 21,090 ¹ 46% 55% 69% 73% ,011 1,280 1,493 1,493 1,493 17,583 ² T17 jun T17 jun-17 Notes: (1) May 17 data from Teleco's website; (2) May 17 data from Oi Engineering (2G = ; only 3G or 3G / 4G = 403; only 4G = 11; Ran Sharing 4G TIM and Vivo = 3,678 = 17,896, of which 313 are in deployment) Source: Oi Market Intelligence and Oi Demand Planning; Teleco 70

72 4G Expansion ALTHOUGH ONLY 8% OF THE CITIES PRESENT NETWORK CONGESTION, INCREASING DATA TRAFFIC WILL CAUSE FUTURE NETWORK EXHAUSTION 3G Data Network Congestion % - July 17 3G Covered Cities = 1,528 Histogram - 3G Data Network Congestion July 17 8% 8% 7% 8% 85% 1,295 1 >=5% % <2% 3G Data Network Congestion Rio De Janeiro State Zoom: Rio de Janeiro State Source: Oi Engineering 71

73 4G Expansion OI ENGINEERING REALIZED TESTS THAT SHOW AN IMPROVEMENT ON 3G NETWORK WHEN 4G NETWORK IS ACTIVATED Average Throughput/User Percentage Change Before and After 4G (1) Results showed positive impacts in the throughput/user... Before +13% On average, the Throughput/User increased 13% On average, the payload had a slight decrease (-2%) After The number of average users had a slight decrease (-2%) Conclusion: As expected, there is a trend for a slight decrease in payload and a slight decrease in average users (reflecting the 4G traffic transfer). The reflection is a 13% increase, on average, of Throughput / User. Due to the different behavior of each site (e.g. different profiles, different coverage ), some sites do not show the expected behavior. This can be due to several factors (e.g. few migrated 4G users, low 4G coverage, profile change when migrating heavy users to 4G...). Notes: (1) Active sites when Oi is the operator with valid data in the Operation Controller System for comparison. The sample period between is Mar 16 to Dec 16. Source: Oi Engineering 72

74 4G Expansion 1800 MHz AND 2600 MHz COVERAGE COMPARISON 1.1 E-NodeB 4G 2600 MHz E-NodeB 4G 1800 MHz Network shapes like a beehive, with sites occupying areas of regular hexagons Frequency 2600 MHz 1800 MHz Coverage Radius Coverage Area (1) RequiredSites to cover 100 km 2 MHz Km Km 2 3 Radius² 3 = Covered Area/ 2 Site coverage Area 2.5x The site coverage radius increases with decreasing operating frequency Covering an area of 100 km 2 with 1800 MHz instead of 2600 MHz would represent a 2.5x reduction in the number of sites Notes: (1) Circumscribed Hexagon Area Source: Oi Engineering and Oi Strategy 73

75 4G Expansion OI, AT 1800 MHZ, HAS THE BIGGEST BAND COMPARED TO COMPETITORS Oi 2600 MHz (Cap=60) Oi MHz (Cap=) Oi 1800 MHz (Cap=50) Vivo 1800 MHz (Cap=50) Tim 1800 MHz (Cap=40) Claro 1800 MHz (Cap=45) RJ MG MG (Sector 3) ES BA / SE Nordeste Norte / MA MS (Sector 21) MS (Sector 22 CTBC) GO / TO (Sector 24) GO (Sector 25 CTBC) MT / DF / RO / AC RS (Sector 29) RS (Sector CTMR) SC PR (Sector 19) PR (Sercomtel) SP (Area 11) Inner SP (Less CTBC) SP (CTBC) Source: Oi Regulatory 74

76 4G Expansion THE SITES EVOLUTION CAPTURES THE MAXIMUM POTENTIAL OF EXISTING SITES BEFORE IMPLEMENTING NEW SITES Existing sites New sites 4 3 Small Cell 1 Refarming 1800 MHz 4G 1800MHz board installation Requires less sites due to better 1800 MHz vs MHz coverage; Uses 2G, 3G and 4G existing sites (Ran Sharing included) 2 Carrier Aggregation Increases capacity and connected users without deploying new sites by placing new RF transmitters Carrier Aggregation of 2600 MHz, 2100 MHz and 1800MHz frequencies + Sites New additional sites Used where traffic density results unreasonable site density for new sites deployment Intense localized demand fulfilment (hotspots) 4G Coverage Connected Users Capacity Source: Oi Engineering and Oi Strategy 75

77 AGENDA A Oi s Current Situation B Market Context C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed (B2C) 3 IT E Consolidated Expected Results 76

78 B2C Fixed Broadband Demand THE DEMAND PROJECTIONS WERE DIVIDED INTO TWO PARTS: HOUSEHOLD AND PENETRATION PROJECTION (PHASE 1) AND OI MARKET CAPTURE (PHASE 2) Base 1ª Phase: Market Evolution 2ª Phase: Oi Market Capture Departure Base Projections Assumptions Output Current Current Projections (17-27) Oi Market Capture Baseline # Households for sector and for social class (15) # Fixed Broadband For city (16) => => # Households for section and for social class (16) + # Fixed Broadband for section and for social class (16) = # Penetration for section and for social class (16) => => # Households for section and for social class % Penetration for section and for social class # Fixed Broadband for section and for social class Oi 17 # Oi Broandband by section Use of Oi S market share by Station to estimate Oi amounts by section Scenario without investment in network expansion Utilization of available ports (1) Oi Market Capture Investment Scenario Higher speeds offers through network improvements Oi amounts vs Baseline Delta amounts per Cluster Notes: (1) Velox EOP map Dez/16 Source: Oi Strategy and Oi Demand and Optimization Resources Department 77

79 B2C Fixed Broadband Demand GRANULAR PROJECTIONS BASED ON SOCIOECONOMIC PROFILE OF CENSUS SECTORS TO ESTABLISH THE DEMAND BY STATION CLUSTER Granular Analysis Methodology R1+R2 Concept Census Sector Network Section Station Cluster Example: Census Sector XYZ 253 K Census Sectors 62 K Network Sections 9.5 K Station Clusters Source: Oi Strategy 78

80 B2C Fixed Broadband Demand BRAZIL AND R1+R2 RESULTS Fixed Broadband Market - Brazil Growth % YoY Penetration % Subscribers Fixed Broadband Market R1 + R2 CAGR (1) : 3.3% CAGR (1) : 3.7% Growth % YoY Penetration % Subscribers % 33.3% 34.2% 34.9% 35.4% 35.8% 36.2% 36.5% 36.8% 37.0% 37.2% 37.4% 26.4% 27.4% 28.4% 29.1% 29.7%.1%.5%.9% 31.1% 31.4% 31.6% 31.8% Results by Social Class - Brazil Results by Social Class R1 + R2 CAGR (1) % HH 16 % Penetration % CAGR (1) % HH 16 % Penetration % 67 MM Var p.p 53 MM Brazil % 32.3% 37.4% 5.0 p.p R1 + R % 26.4% 31.8% Var p.p 5.4 p.p Class A % 76.0% 83.4% 7.4 p.p Class A % 71.9% 79.9% 8.0 p.p Class B % 56.9% 64.5% 7.6 p.p Class B % 51.2% 59.9% 8.7 p.p Class C % 33.6% 39.2% 5.7 p.p Class C % 28.2% 34.7% 6.4 p.p Class DE % 10.5% 13.0% 2.5 p.p Class DE % 8.8% 11.4% 2.6 p.p Notes: (1) CAGR from 16 to 27 Source: Oi Strategy 79

81 B2C Fixed Broadband Demand RESULTS BY CITY Cities matrix (1) Histogram Cities (1) CAGR % (16-27) 40 Subscribers % Subscribers 67% 25.4% 6.4% 1.0% 0.4% 0.0% 35 1, # Cities ,028 1, RJ SP BH Santos Niterói Barueri S. Caetano CAGR % From 0 to 3% From 3% to 5% From 5% to 10% From 10% to 15% From 15% to % 147 Above % Broadband Penetration in Penetration 51% 33.8% 11.6% 4.4% 1.8% 0.3% Notes: (1) 135 cities are zeroed in 16, São Gonçalo penetration =.5%, São Vicente penetration (SP) = 50.4%. Source: Oi Strategy 80

82 B2C Fixed Broadband Demand EXAMPLE: CITY OF RIO DE JANEIRO BROADBAND MARKET BY CENSUS SECTOR Rio de Janeiro Penetration ,5 1 Detailing Península (Barra da Tijuca) New real estate developments may be without associated sections (Ex. Península, Vila Olímpica). Rio de Janeiro CAGR ,5% 7% Ipanema Strictly Business and Industrial regions without residential parcels do not have mapped sections. Example: Commercial and Public neighborhoods (Corner of Visconde de Pirajá Street with Garcia D avila Street). Source: Oi Strategy 81

83 B2C Fixed Broadband Demand THE STATE EXAMPLE PRESENTS REPAIRS/SUBSCRIBERS BELOW BRAZIL AVERAGE, BUT HAS OPPORTUNITY TO REDUCE PLANT MAINTENANCE OPEX THROUGH NETWORK INVESTMENT Repairs/Subscribers vs Opex State View Opex Thousand 1 Repairs/ Subs. (%) State Example Baseline Scenario 17 Clusters # Opex R$ MM Plant Thousand 0-5% % % % 5-10% 54% 69% 65% 10-15% 11% 8% 4% 15-% 3% 2% 1% 1-25% 1% 1% 0,1% >25% 1% 1% 0,2% = > Broadband Customer BaseB2C Forecast17 Repairs/Subscribers % Source: Operations file

84 AGENDA A Oi s Current Situation B Market Context C Build up of the capital allocation strategy D Detailed Analysis 1 Mobile 2 Fixed (B2C) 3 IT E Consolidated Expected Results 83

85 IT THE CURRENT SYSTEM REALITY OF OI CAUSES VARIOUS TYPES OF IMPACT ON DIFFERENT BUSINESS AREAS 84