As filed with the Securities and Exchange Commission on March 11, 2014May 20, 2016

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

FOR THE FISCAL YEAR ENDED DECEMBER 31, 20132015

OR

OR

Commission file number: 001-15256

OI S.A.

(Exact Name of Registrant as Specified in Its Charter)

Rua Humberto de Campos, 425

8º andar

Leblon, Rio de Janeiro, RJ, Brazil 22430-190

(Address of Principal Executive Offices)

Bayard De Paoli GontijoFlavio Nicolay Guimarães

Investor Relations Officer

Rua Humberto de Campos, 425

8º andar

Leblon, Rio de Janeiro, RJ, Brazil 22430-190

Tel: +55 21 3131-2918

invest@oi.net.br

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The total number of issued and outstanding shares of each class of stock of Oi S.A. as of December 31, 20132015 was:

599,008,629519,751,658 common shares, without par value

1,198,077,775155,915,486 preferred shares, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x¨    No  ¨x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                Accelerated filer  x                Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ¨  Item 17    x¨  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

i

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references herein to “real,” “reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “US$” are to U.S. dollars.

On March 6, 2014,May 13, 2016, the exchange rate forreais into U.S. dollars was R$2.3093.504 to US$1.00, based on the selling rate as reported by the Central Bank of Brazil (Banco Central do Brasil), or the Brazilian Central Bank. The selling rate was R$3.905 to US$1.00 on December 31, 2015, R$2.656 to US$1.00 on December 31, 2014 and R$2.343 to US$1.00 on December 31, 2013, R$2.044 to US$1.00 on December 31, 2012, and R$1.876 to US$1.00 on December 31, 2011, in each case, as reported by the Brazilian Central Bank. The real/U.S. dollar exchange rate fluctuates widely, and the selling rate on March 6, 2014May 13, 2016 may not be indicative of future exchange rates. See “Item 3. Key Information—Exchange Rates” for information regarding exchange rates for thereal since January 1, 2009.2010.

Solely for the convenience of the reader, we have translated some amounts included in “Item 3. Key Information—Selected Financial Information” and in this annual report fromreais into U.S. dollars using the selling rate as reported by the Brazilian Central Bank on December 31, 20132015 of R$2.3433.905 to US$1.00. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate.

Financial Statements

We maintain our books and records inreais. Our consolidated financial statements as of December 31, 20132015 and 20122014 and for the three years ended December 31, 20132015 are included in this annual report.

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles, or U.S. GAAP. Based on our operating cash flows and the impact such operating cash flows have had on our liquidity, in combination with the level of our indebtedness and the potential impact if we cannot satisfy certain financial covenants under our current debt instruments in 2016, our independent registered public accounting firm has included an emphasis paragraph related to the substantial doubt with respect to our ability to continue as a going concern in their report on our consolidated financial statements for the year ended December 31, 2015. However, our financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We are also required to prepare financial statements in accordance with accounting practices adopted in Brazil, or Brazilian GAAP, which are based on:

Brazilian GAAP differs in certain important respects from accounting principles generally accepted in the United States, or U.S. GAAP. Differences between Brazilian GAAP and U.S. GAAP where applicable to Oi are summarized in note 31 to our audited consolidated financial statements included in this annual report.

Certain Defined Terms

Unless otherwise indicated or the context otherwise requires:

ii

ii

Corporate ReorganizationAcquisition and Disposition of PT Portugal

On February 27, 2012, Tele Norte Leste Participações S.A., or TNL, Telemar Norte Leste S.A.,May 5, 2014, we concluded a subsidiary of TNL, or Telemar, Coari Participações S.A., a wholly owned subsidiary of Telemar, or Coari, and Brasil Telecom S.A., a subsidiary of Coari, undertook a corporate reorganization in which:

We refer to these transactions collectively as the corporate reorganization.

The following chart sets forth the ownership structure of TNL, Telemar and Coari in Brasil Telecom immediately prior to the corporate reorganization. The percentages in bold italics represent the percentage of the votingOi capital owned by the parent company of each entity, and the percentages not in bold italics represent the percentage of the total share capital owned by the parent company of each entity.

iii

The following chart sets forth the structure of Brasil Telecom and Telemar immediately following the corporate reorganization.

As a result of the corporate reorganization, we have consolidated the results of TNL into results as from February 28, 2012. We have accounted for the Coari merger and the TNL merger using the carry-over basis of our own assets and liabilities and of the assets and liabilities assumed of TNL, Telemar, and Coari as from the date of the reorganization. The carry-over basis of the assets and liabilities were determined at the lowest level entity in the group (i.e., the effects of the purchase accounting relating to Coari´s acquisition of Brasil Telecom (now Oi S.A.) will not be reflected in the assets and liabilities of Oi S.A. in its consolidated financial statements as a result of the TNL merger). Additionally, our historical financial statements have not been restated to reflect the impacts of the corporate reorganization on a retrospective basis. Our non-current intangible assets and property, plant and equipment are recorded on a different basis in our parent company´s consolidated financial statements, reflecting the amortized purchase price allocated to these assets resulting from Coari´s acquisition of our company on January 8, 2009. For more details regarding the corporate reorganization, see “Item 4. Information on the Company—Our History and Development—Corporate Reorganization of TNL, Telemar and Our Company.”

Information regarding Oi in this annual report is presented giving effect to the corporate reorganization on February 27, 2012. However, financial and other data included in this annual report regarding Oi and its consolidated subsidiaries as of December 31, 2011 and earlier dates and for periods ended on December 31, 2011 and earlier dates is historical in nature and does not give pro forma effect to the corporate reorganization, except as otherwise noted.

In addition, financial and other data included in this annual report regarding TNL and its consolidated subsidiaries as of December 31, 2011 and earlier dates and for periods ended on December 31, 2011 and earlier

iv

dates is historical in nature and includes financial and other data regarding Brasil Telecom, a subsidiary of TNL prior to February 27, 2012. The financial statements of TNL as of and for the year ended December 31, 2011 have not been presented elsewhere in this annual report and have not been filed with the SEC.

Proposed Business Combination

On October 1, 2013, we entered into a memorandum of understanding, or the Memorandum of Understanding, with Portugal Telecom, AG Telecom Participações S.A., or AG Telecom, LF Tel S.A., or LF Tel, PASA Participações S.A., or PASA, EDSP75 Participações S.A., or EDSP, Bratel Brasil S.A., or Bratel Brasil, Avistar, SGPS, S.A., or BES, and Nivalis Holding B.V., or Ongoing,increase, in which we and they agreed to the principles governing a seriesissued (1) 121,674,063 of transactions, including the business combination described below.

The business combination transaction involves three principal components:

In connection with the business combination,closing, Altice Portugal disbursed €5,789 million, of which €869 million was utilized by PT Portugal to prepay outstanding indebtedness in that amount, and €4,920 million were paid to our company in cash. As of December 31, 2015, we expect that:

We believe that the business combination will:

v

For more information on the proposed business combination and related transactions, see “Item 4. Information on the Company—Our History and Development—Proposed Business Combination.”

Share Split

On April 10, 2007, we authorized the reverse split of all of our issued common shares and preferred shares into one share for each 1,000 issued shares. This reverse share split became effective on May 14, 2007. In connection with this reverse share split, we authorized a change in the ratio of our Preferred ADS. Upon the effectiveness of our reverse share split and the ratio change, the ratio of our preferred shares to our Preferred ADSs, changed from 3,000 preferred shares per Preferred ADS to three preferred shares per Preferred ADS. All references to numbers of shares and dividend amounts in this annual report have used an additional R$5,350 million of these net cash proceeds for the prepayment and repayment of indebtedness of our company. We expect to use the remainder of these net cash proceeds for the repayment of indebtedness of our company.

In anticipation of the PT Portugal Disposition, PT Portugal transferred Portugal Telecom International Finance B.V., or PTIF, its wholly-owned finance subsidiary, to Oi. As a result of the completion of the PT Portugal Disposition, the indebtedness of PTIF, which had previously been adjustedclassified as liabilities associated with assets held for sale in our consolidated financial statements, was reclassified as indebtedness of our company. In addition, in connection with the PT Portugal Disposition, PTIF assumed all obligations under PT Portugal’s outstanding 6.25% Notes due 2016.

In addition, PT Portugal transferred to give effect toOi all of the 1,000-for-one reverseoutstanding share split.capital of PT Participações, SGPS, S.A., or PT Participações, which holds:

iii

Share Splits

On August 15, 2012, we changed the ratio applicable to our Preferred ADS from three preferred shares per Preferred ADS to one preferred sharesshare per Preferred ADS. All references to numbers of Preferred ADSs in this annual report have been adjusted to give effect to this change in ratio.

On November 18, 2014, our shareholders acting in an extraordinary general shareholders meeting authorized (1) the reverse split of all of our issued common shares into one common share for each 10 issued common shares, and (2) the reverse split of all of our issued preferred shares into one preferred share for each 10 issued preferred shares. This reverse share split became effective on December 22, 2014. There was no change in the ratio of our Common ADSs or Preferred ADSs in connection with this reverse share split; each Common ADS continues to represent one of our common shares and each Preferred ADS continues to represent one of our preferred shares. All references to numbers of shares of our company, dividend amounts of our company and earnings per share of our company in this annual report have been adjusted to give effect to the 10-for-one reverse share split.

On February 1, 2016, we changed the ratio applicable to our Common ADSs from one common share per Common ADS to five common shares per Common ADS. All references to numbers of Common ADSs in this annual report have been adjusted to give effect to this change in ratio.

Market Share and Other Information

We make statements in this annual report about our market share and other information relating to the telecommunications industry in Brazil. We have made these statements on the basis of information obtained from third-party sources and publicly available information that we believe are reliable, such as information and reports from the Brazilian federal telecommunications regulator (Agência Nacional de Telecomunicações), or ANATEL, among others. Notwithstanding any investigation that we may have conducted with respect to the market share, market size or similar data provided by third parties or derived from industry or general publications, we assume no responsibility for the accuracy or completeness of any such information.

Rounding

We have made rounding adjustments to reach some of the figures included in this annual report. As a result, numerical figures shown as totals in some tables may not be arithmetic aggregations of the figures that precede them.

viiv

CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. Some of the matters discussed concerning our business operations and financial performance include forward-looking statements within the meaning of the U.S. Securities Act of 1933, as amended, or the Securities Act, or the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.

Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. Although we believe that these forward-looking statements are based upon reasonable assumptions, these statements are subject to several risks and uncertainties and are made in light of information currently available to us.

OurMany important factors could cause our actual results to differ substantially from those anticipated in our forward-looking statements, may be influenced by factors, including, the following:among other things:

vii

Our forward-looking statements are not guarantees of future performance, and our actual results or other developments may differ materially from the expectations expressed in the forward-looking statements. As for forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections. Because of these uncertainties, potential investors should not rely on these forward-looking statements.

v

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

viiivi

PART I

Not applicable.

Not applicable.

Selected Financial Information

The following selected financial data should be read in conjunction with theour consolidated financial statements of Oi (including the notes thereto), “Item 5. Operating and Financial Review and Prospects” and “Presentation of Financial and Other Information.”

The following selected financial data have been derived from our consolidated financial statements. The selected financial data as of December 31, 20132015 and 20122014 and for the years ended December 31, 2013, 20122015, 2014 and 20112013 have been derived from our audited consolidated financial statements included in this annual report. The selected financial data as of December 31, 2011, 20102013, 2012 and 20092011 and for the years ended December 31, 20102012 and 20092011 have been derived from our consolidated financial statements that are not included in this annual report.

Our consolidated financial statements are prepared in accordance with Brazilian GAAP, which differs in certain important respects from U.S. GAAP. Differences between Brazilian GAAP and U.S. GAAP where applicable to Oi are summarized in note 31 to our audited consolidated financial statements included in this annual report.

We have included information with respect to the dividends and/or interest attributable to shareholders’ equity paid to holders of our common shares and preferred shares since January 1, 20092011 inreaisand in U.S. dollars translated fromreaisat the commercial market selling rate in effect as of the payment date under the caption “Item 8. Financial Information—Dividends and Dividend Policy—Payment of Dividends.”

		As of and For the Year Ended December 31,
		2013(1)				2013				2012				2011				2010				2009
		(in millions of US$, except per share amounts)				(in millions ofreais, except per share amounts and as otherwise indicated)
Income Statement Data:
Brazilian GAAP:
Net operating revenue		US$	12,131			R$	28,422			R$	25,161			R$	9,245			R$	10,263			R$	10,919
Cost of sales and services			(6,513	)			(15,259	)			(12,670	)			(4,587	)			(4,732	)			(5,764	)
Gross profit			5,618				13,163				12,491				4,659				5,531				5,155
Operating expenses			(3,362	)			(7,876	)			(7,731	)			(3,091	)			(3,072	)			(6,232	)
Operating income (loss) before financial income (expenses) and taxes			2,256				5,287				4,760				1,567				2,459				(1,077	)
Financial income			587				1,375				2,275				1,406				979				630
Financial expenses			(1,985	)			(4,650	)			(4,491	)			(1,478	)			(1,060	)			(912	)
Financial income (expenses), net			(1,398	)			(3,275	)			(2,216	)			(72	)			(80	)			(281	)
Income (loss) before taxes			859				2,012				2,544				1,495				2,379				(1,358	)
Income tax and social contribution			(222	)			(519	)			(760	)			(490	)			(408	)			339
Net income (loss)		US$	637			R$	1,493			R$	1,785			R$	1,006			R$	1,971			R$	(1,019	)
Net income (loss) attributable to controlling shareholders		US$	637			R$	1,493			R$	1,785			R$	1,006			R$	1,971			R$	(1,021	)
Net income (loss) attributable to non-controlling shareholders			0				—				—				—				—				2
Net income (loss) applicable to each class of shares:
Common shares			200				469				560				316				619				(1,021	)
Preferred shares			437				1,024				1,225				690				1,352				—
Net income (loss) per share(2):
Common shares – basic			0.39				0.91				1.09				0.61				1.20				(0.62	)
Common shares – diluted			0.39				0.91				1.09				0.61				1.20				(0.62	)
Preferred shares and ADSs – basic			0.39				0.91				1.09				0.61				1.20				—
Preferred shares and ADSs – diluted			0.39				0.91				1.09				0.61				1.20				—
Weighted average shares outstanding (in thousands):
Common shares – basic			—				514,758				514,758				514,758				514,758				514,758
Common shares – diluted			—				514,758				514,758				514,758				514,758				514,758
Preferred shares – basic			—				1,125,273				1,125,273				1,125,273				1,125,273				1,125,273
Preferred shares – diluted			—				1,125,273				1,125,273				1,125,273				1,125,273				1,125,273

		As of and For the Year Ended December 31,
		2015(1)				2015				2014				2013				2012				2011
		(in millions of US$, except per share amounts)				(in millions ofreais, except per share amounts and as otherwise indicated)
Income Statement Data:
Net income (loss) attributable to non-controlling shareholders			(106	)			(413	)			1				—				7				(261	)
Net income (loss) applicable to each class of shares (2):										R$	(1,569	)			190				289				(296	)
Common shares basic and diluted		US$	(1,011	)		R$	(3,947	)			(3,213	)			414				570				—
Preferred shares and ADSs basic and diluted			(1,335	)			(5,212	)
Net income (loss) per share:											(7.76	)			3.69				5.73				(6.49	)
Common shares – basic and diluted			(3.21	)			(12.55	)			(7.76	)			3.69				5.73				—
Preferred shares and ADSs – basic and diluted			(3.21	)			(12.55	)
Net income (loss) per share from continuing operations:											(1.13	)			3.69				5.73				(6.49	)
Common shares – basic and diluted			(2.91	)			(11.36	)			(1.13	)			3.69				5.73				—
Preferred shares and ADSs – basic and diluted			(2.91	)			(11.36	)
Net income (loss) per share from discontinued operations:											(6.63	)			—				—				—
Common shares – basic and diluted			0.30				(1.19	)			(6.63	)			—				—				—
Preferred shares and ADSs – basic and diluted			0.30				(1.19	)
Weighted average shares outstanding (in thousands):
Common shares – basic			—				314,518				202,312				51,476				50,499				45,615
Common shares – diluted			—				314,518				202,312				51,476				50,499				46,560
Preferred shares and ADSs – basic			—				415,321				414,200				112,527				99,488				53,693
Preferred shares and ADSs – diluted			—				415,321				414,200				112,527				99,488				54,092

		As of and For the Year Ended December 31,
		2013(1)				2013				2012				2011				2010				2009
		(in millions of US$, except per share amounts)				(in millions ofreais, except per share amounts and as otherwise indicated)
Income Statement Data:
U.S. GAAP:
Net operating revenue		US$	12,131			R$	28,422			R$	28,141			R$	27,907			R$	29,479			R$	29,861
Cost of sales and services			(7,028	)			(16,467	)			(15,825	)			(16,180	)			(16,576	)			(18,371	)
Gross profit			5,102				11,955				12,316				11,727				12,903				11,490
Operating expenses			(3,402	)			(7,972	)			8,579				9,016				8,611				3,691
Operating income (loss) before financial income (expenses) and taxes			1,700				3,983				3,737				2,712				4,292				7,799
Financial income (expenses), net			(1,409	)			(3,302	)			(2,617	)			(3,471	)			(2,440	)			(2,385	)
Income (loss) before taxes			290				681				1,120				(759	)			1,852				5,414
Income tax and social contribution			(32	)			(77	)			(254	)			202				20				(548	)
Net income (loss)			257				604				866				(557	)			1,872				4,866
Net income (loss) attributable to controlling shareholders (2)			257				604				859				(296	)			1,492				3,933
Net income (loss) attributable to non-controlling shareholders (2)			—				—				7				(261	)			381				933
Other comprehensive income (loss)			15				34				(319	)			(133	)			(62	)			252
Comprehensive income (loss)			272				638				547				(690	)			1,810				5,118
Net income (loss) applicable to each class of shares (3):
Common shares basic			80				190				289				(296	)			613				1,617
Common shares diluted			80				190				289				(296	)			620				1,637
Preferred shares and ADSs basic			176				414				570				—				878				2,316
Preferred shares and ADSs diluted			176				414				570				—				872				2,296
Net income (loss) per share:
Common shares – basic			0.15				0.37				0.57				(0.65	)			1.79				4.72
Common shares – diluted			0.15				0.37				0.57				(0.65	)			1.76				4.63
Preferred shares and ADSs – basic			0.15				0.37				0.57				—				1.79				4.72
Preferred shares and ADSs – diluted			0.15				0.37				0.57				—				1.76				4.63
Weighted average shares outstanding (in thousands):
Common shares – basic			—				514,758				504,990				456,149				342,917				342,837
Common shares – diluted			—				514,758				504,990				465,598				352,283				353,341
Preferred shares and ADSs – basic			—				1,125,270				994,880				536,927				491,199				490,860
Preferred shares and ADSs – diluted			—				1,125,270				994,880				540,924				495,194				495,601

		As of and For the Year Ended December 31,
		2013(1)				2013				2012				2011				2010				2009
		(in millions of US$, except per share amounts)				(in millions ofreais, except per share amounts and as otherwise indicated)
Balance Sheet Data:
Brazilian GAAP:
Cash and cash equivalents		US$	1,035			R$	2,425			R$	4,408			R$	6,005			R$	3,217			R$	1,717
Cash investments			210				493				2,426				1,084				832				382
Trade accounts receivable, net			3,029				7,097				7,018				2,010				2,070				1,992
Total current assets			7,549				17,687				21,138				12,246				8,487				6,127
Property, plant and equipment, net			10,579				24,786				23,103				5,794				5,317				5,267
Intangible assets, net			1,673				3,919				4,196				1,085				1,318				1,572
Total assets			29,917				70,096				69,150				31,664				26,886				24,564
Short-term loans and financings (including current portion of long-term debt)			1,775				4,159				3,114				1,144				1,044				870
Total current liabilities			6,633				15,540				17,093				8,619				6,691				5,424
Long-term loans and financings			13,527				31,695				30,232				6,962				3,321				3,573
Share capital			3,189				7,471				7,309				3,731				3,731				3,731
Total equity			4,918				11,524				11,109				10,589				11,337				9,906
Shareholders’ equity attributable to controlling shareholders			4,918				11,524				11,109				10,589				11,337				9,905
Shareholders’ equity attributable to non-controlling shareholders			—				—				—				—				—				1

		As of and For the Year Ended December 31,
		2015(1)				2015				2014				2013				2012				2011
		(in millions of US$, except per share amounts)				(in millions of reais, except per share amounts and as otherwise indicated)
Total assets			25,438				99,335				110,741				78,727				78,647				81,382
Short-term loans and financings (including current portion of long-term debt)			3,024				11,810				4,464				4,159				3,114				4,600
Liabilities of assets held for sale(2)			191				745				27,178				—				—				—
Total current liabilities			6,557				25,605				42,580				15,571				17,127				17,114
Long-term loans and financings			12,305				48,048				31,386				31,695				30,232				25,169
Total liabilities			21,175				82,688				83,588				58,713				58,218				56,162
Share capital			5,490				21,438				21,438				7,471				7,308				3,731
Shareholders’ equity			4,263				16,646				27,153				20,013				20,428				25,219
Shareholders’ equity attributable to controlling shareholders			3,958				15,456				25,644				20,013				20,428				13,826
Shareholders’ equity attributable to non-controlling shareholders			305				1,191				1,509				—				—				11,393

(1)	Translated for convenience only using the selling rate as reported by the Brazilian Central Bank on December 31, 2013 forreais into U.S. dollars of R$2.343=US$1.00.

(2)

We adoptedAs of December 31, 2014, includes short-term loans and financings (including current portion of long-term debt) of R$1,935 million and long-term loans and financings of R$16,958 million that remained obligations of our company following the provisionscompletion of FASB ASC 810-10-65-1, related to non-controlling interest, asour sale of January 1, 2009.PT Portugal.

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5

Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer ofreais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

Since 1999, the Brazilian Central Bank has allowed the U.S. dollar-real exchange rate to float freely, and, since then, the U.S. dollar-real exchange rate has fluctuated considerably.

In the past, the Brazilian Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Brazilian Central Bank or the Brazilian government will continue to permit thereal to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. Thereal may depreciate or appreciate against the U.S. dollar and/or the euro substantially. Furthermore, Brazilian law provides that, whenever there is a significant imbalance in Brazil’s balance of payments or there are serious reasons to foresee a significant imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that such measures will not be taken by the Brazilian government in the future. See “—Risk Factors—Risks Relating to Brazil—Restrictions on the movement of capital out of Brazil may impair our ability to service certain debt obligations.”

The following table shows the commercial selling rate or selling rate, as applicable, for U.S. dollars for the periods and dates indicated.The information in the “Average” column represents the average of the exchange rates on the last day of each month during the periods presented.

Source: Brazilian Central Bank

Risk Factors

You should consider the following risks as well as the other information set forth in this annual report when evaluating an investment in our company. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of issuers in the United States. Additional risks and uncertainties not currently known to us, or those that we currently deem to be immaterial, may also materially and adversely affect our business, results of operations, financial condition and prospects. Any of the following risks could materially affect us. In such case, you may lose all or part of your original investment.

General Risks Relating to the Brazilian Telecommunications Industry and Our Company

Our fixed-line telecommunications services face increased competition from mobile services providers, other fixed-line service providers and cable television service providers, which may adversely affect our revenues and margins.

Our fixed-line telecommunications services in Region I (which consists of 16 Brazil states located in the northeastern and part of the northern and southeastern regions) and Region II (which consists of the Federal District and nine Brazilian states located in the western, central and southern regions) face increasing competition from mobile services as the prices for mobile services decline and approach those of fixed-line services. Based on information available from ANATEL, from December 31, 2010 to April 30, 2013 (the latest date for which such information is available from ANATEL), the number of fixed lines in service in Brazil increased from 42.0 million to 44.5 million. We expect (1) the number of fixed lines in service in Regions I and II to experience slow growth, as certain customers eliminate their fixed-line services in favor of mobile services, and (2) the use of existing fixed lines for making voice calls to decline as customers substitute calls on mobile phones in place of fixed-line calls as a result of promotional mobile rates (such as free calls within a mobile provider’s network). The rate at which the number of fixed lines in service in Brazil may decline depends on many factors beyond our control, such as economic, social, technological and other developments in Brazil. In addition, new fixed lines that we install are expected to be less profitable than existing ones because new fixed-line customers generally have lower average incomes than our existing customers, subscribe to our lower cost service plans and generate fewer chargeable minutes of usage. For the year ended December 31, 2013, our traditional local fixed-line telecommunications services represented 29.4% of our net operating revenue. Because we derive a significant portion of our net operating revenue from our traditional local fixed-line telecommunications services, the reduction in the number of our fixed-lines in service has negatively affected and is likely to continue to negatively affect our net operating revenue and margins.

We also compete in the market for local fixed-line services with other fixed-line service providers, primarily with Empresa Brasileira de Telecomunicações – Embratel, or Embratel, and GVT S.A., or GVT. In addition to direct competition for corporate customers Embratel competes with us for residential customers in Regions I and II with services that it provides using the cable infrastructure of its subsidiary, Net Serviços de Comunicação S.A., or Net. Net is a cable television company that is our main competitor in the broadband services market. Embratel is a subsidiary of América Móvil S.A.B. de C.V., or América Móvil, one of the leading telecommunications service providers in Latin America. Under an agreement entered into between Embratel and Net in November 2005, Net offers integrated voice, broadband and pay television services to the Brazilian residential market through a single network infrastructure. In addition, we compete in each of these service regions with smaller companies that have been authorized by ANATEL to provide local fixed-line services. Embratel, GVT and Net are each controlled by multinational companies that may have more significant financial and marketing resources, and greater abilities to access capital on a timely basis and on more favorable terms, than our company. Our loss of a significant number of fixed-line customers would adversely affect our net operating revenue and may adversely affect our results of operations. For a detailed description of our competition in the local fixed-line services market, see “Item 4. Information on the Company—Competition—Local Fixed-Line Services.”

Our mobile services face strong competition from other mobile services providers, which may adversely affect our revenues.

The mobile services market in Brazil is extremely competitive. We face competition from large competitors such as TIM Participações S.A., or TIM, Telefônica Brasil S.A., or Telefônica Brasil, which markets its mobile

services under the brand name “Vivo,” and Claro S.A., or Claro. As of November 30, 2013, based on information regarding the total number of subscribers as of that date available from ANATEL we had a market share of 18.6% of the total number of subscribers in Brazil, ranking behind Telefônica Brasil with 28.7%, TIM with 27.0% and Claro with 25.2%, and we captured 10.7% of all net additions of mobile subscribers in Brazil (calculated based on the number of mobile subscribers at the end of a period less the number of mobile subscribers at the beginning of that period) during 2013. Telefônica Brasil, TIM and Claro are each controlled by multinational companies that may have more significant financial and marketing resources, and greater abilities to access capital on a timely basis and on more favorable terms, than our company.

Our ability to generate revenues from our mobile services business depends on our ability to increase and retain our customer base. Each additional customer subscribing to our service entails costs, including sales commissions and marketing costs. Recovering these costs depends on our ability to retain such customers. Therefore, high rates of customer churn could have a material adverse effect on the profitability of our mobile services business. During 2013, our average customer churn rate in the mobile services segment, representing the number of subscribers whose service was disconnected during each month, whether voluntarily or involuntarily, divided by the number of subscribers at the beginning of such month, was 4.2% per month.

We have experienced increased pressure to reduce our rates in response to pricing competition. This pricing competition often takes the form of special promotional packages, which may include, among other things, mobile handset subsidies, traffic usage promotions and incentives for calls made within a mobile services provider’s own network. Competing with the service plans and promotions offered by our competitors may cause an increase in our marketing expenses and customer-acquisition costs, which has adversely affected and could continue to adversely affect our results of operations. Our inability to compete effectively with these packages could result in our loss of market share and adversely affect our net operating revenue and profitability. For a detailed description of our competition in the mobile services market, see “Item 4. Information on the Company—Competition—Mobile Services.”

Our long-distance services face significant competition, which may adversely affect our revenues.

In Brazil, unlike in the United States and elsewhere, a caller chooses its preferred long-distance carrier for each long-distance call, whether originated from a fixed-line telephone or a mobile handset, by dialing such carrier’s long-distance carrier selection code (Código de Seleção de Prestadora). The long-distance services market in Brazil is highly competitive. Our principal competitors for long-distance services are TIM and Embratel, which are currently offering long-distance services throughout Brazil at rates that are charged on a per call, rather than per minute, basis. We compete with Telefônica Brasil, which is the incumbent fixed-line service provider in Region III. Increased competition from long-distance service providers has resulted in pressure on our long-distance rates and adversely affected our revenue from these services. In addition, the proliferation of new types of service plans, such “same network” subscription plans that offer unlimited long distance calls and data combination plans are impacting the long-distance services market in Brazil. Competition in the long-distance market may require us to increase our marketing expenses and/or provide services at lower rates than those we currently expect to charge for such services. Competition in the domestic market has had and could continue to have a material adverse effect on our revenues and margins. See “Item 4. Information on the Company—Competition—Long-Distance Services.”

Data transmission services are not subject to significant regulatory restrictions and, as a result, we face an increasing amount of competition in this business.

Competition in data transmission services is not subject to significant regulatory restrictions and, therefore, the market is open to a large number of competitors. Some competitors, such as cable operators, offer telephone and broadband services, which do not require them to use our fixed-line network, thereby allowing them to reach our customers without paying interconnection fees to our company. Increasing competition in data transmission services may lead to rate reductions in this segment, adversely affecting the net operating revenue that we generate from this business. Additionally, increased competition for data transmission customers may require us to increase our marketing expenses and our capital expenditures and may lead to the loss of broadband customers, in each case leading to a decrease in our profitability. For a detailed description of our competition in the data transmission services market, see “Item 4. Information on the Company—Competition—Data Transmission Services.”

The telecommunications industry is subject to frequent changes in technology. Our ability to remain competitive depends on our ability to implement new technology, and it is difficult to predict how new technology will affect our business.

Companies in the telecommunications industry must adapt to rapid and significant technological changes that are usually difficult to anticipate. The mobile telecommunications industry in particular has experienced rapid and significant technological development and frequent improvements in capacity, quality and data-transmission speed. Technological changes may render our equipment, services and technology obsolete or inefficient, which may adversely affect our competitiveness or require us to increase our capital expenditures in order to maintain our competitive position. For example, we have made significant investments in the last three years in connection with the implementation of our UMTS (Universal Mobile Telecommunications System), or 3G, services, and we have begun investingare making investments in the implementation of our LTE (Long Term Evolution), or 4G, services. In addition, we believe that in the medium-term, personal mobility service providers in Brazil will experience increasing competition from over-the-top, or OTT, providers, which provide content (such as WhatsApp, Skype and YouTube) over an internet connection rather than through a service provider’s network. OTT providers will become increasingly competitive as customers shift from mobile voice and SMS communications to internet-based voice and data communications through computers and smartphone or tablet applications such as WhatsApp, Viber and Skype. Since November 2011, we have deployed a network of Wi-Fi hotspots in indoor public and commercial sites, outdoor public spaces and residential access points. It is possible that alternative technologies may be developed that are more advanced than those we currently provide. We may not obtain the expected benefits of our investments if more advanced technologies are adopted by the market. Even if we adopt new technologies in a timely manner as they are developed, the cost of such technology may exceed the benefit to us, and we cannot assure you that we will be able to maintain our level of competitiveness.

Our operations depend on our ability to maintain, upgrade and operate efficiently our accounting, billing, customer service, information technology and management information systems and to rely on the systems of other carriers under co-billing agreements.

Sophisticated information and processing systems are vital to our growth and our ability to monitor costs, render monthly invoices for services, process customer orders, provide customer service and achieve operating efficiencies. We cannot assure you that we will be able to operate successfully and upgrade our accounting, information and processing systems or that these systems will continue to perform as expected. We have entered into co-billing agreements with each long-distance telecommunications service provider that is interconnected to our networks in Brazil to include in our invoices the long-distance services rendered by these providers, and these providers have agreed to include charges owed to us in their invoices. Any failure in our accounting, information and processing systems, or any problems with the execution of invoicing and collection services by other carriers with whom we have co-billing agreements, could impair our ability to collect payments from customers and respond satisfactorily to customer needs, which could adversely affect our business, financial condition and results of operations.

Improper use of our networks could adversely affect our costs and results of operations.

We may incur costs associated with the unauthorized and fraudulent use of our networks, including administrative and capital costs associated with detecting, monitoring and reducing the incidence of fraud. Fraud

also affects interconnection costs and payments to other carriers for non-billable fraudulent roaming. Improper use of our network could also increase our selling expenses if we need to increase our provision for doubtful accounts to reflect amounts we do not believe we can collect for improperly made calls. Any increase in the improper use of our network in the future could materially adversely affect our costs and results of operations.

Our operations are dependent upon our networks. A system failure could cause delays or interruptions of service, which could cause us to suffer losses.

Failure in our networks, or their backup mechanisms, may result in service delays or interruptions and limit our ability to provide customers with reliable service over our networks. Some of the risks to our networks and infrastructure include (1) physical damage to access lines and long-distance optical cables; (2) power surges or outages; (3) software defects; (4) disruptions beyond our control; (5) breaches of security; and (6) natural disasters. The occurrence of any such event could cause interruptions in service or reduce capacity for customers, either of which could reduce our net operating revenue or cause us to incur additional expenses. In addition, the occurrence of any such event may subject us to penalties and other sanctions imposed by ANATEL, and may adversely affect our business and results of operations.

The mobile telecommunications industry and participants in this industry, including us, may be harmed by reports suggesting that radio frequency emissions cause health problems and interfere with medical devices.

Media and other entities have suggested that the electromagnetic emissions from mobile handsets and base stations may cause health problems. If consumers harbor health-related concerns, they may be discouraged from using mobile handsets. These concerns could have an adverse effect on the mobile telecommunications industry and, possibly, expose mobile services providers to litigation. We cannot assure you that further medical research and studies will refute a link between the electromagnetic emissions of mobile handsets and base stations, including on frequency ranges we use to provide mobile services, and these health concerns. Government authorities could increase regulation on electromagnetic emissions of mobile handsets and base stations, which could have an adverse effect on our business, financial condition and results of operations. The expansion of our network may be affected by these perceived risks if we experience problems in finding new sites, which in turn may delay the expansion and may affect the quality of our services.

In July 2002, ANATEL enacted regulations that limit emission and exposure for fields with frequencies between 9 kHz and 300 GHz. On June 29, 2015, ANATEL commenced a public consultation regarding its proposed Regulatory Agenda for the 2015-2016 cycle, which, among other items, provides for the reevaluation of regulations regarding human exposure to radiofrequency electromagnetic fields. Although we believe these regulations have not had a material impact on the business of our company to date, the Brazilian government or ANATEL may enact new laws or regulations regarding electromagnetic emissions and exposure that could have an adverse effect on our business.

Risks Relating to Our Company

We have a substantial amount of debt, which could restrict our financing and operating flexibility and have other adverse consequences.

As of December 31, 2015, we had R$59,857 million aggregate principal amount of outstanding debt. We are subject to certain financial covenants under the instruments that govern some of our indebtedness that limit our ability to incur additional debt. The level of our consolidated indebtedness and the requirements and limitations imposed by these debt instruments could adversely affect our financial condition or results of operations. In particular, the terms of some of these debt instruments restrict our ability, and the ability of our subsidiaries, to:

If we are unable to incur additional debt, we may be unable to invest in our business and make necessary or advisable capital expenditures, which could reduce future net operating revenue and adversely affect our profitability. In addition, the cash required to service our indebtedness reduces the amount available to us to make capital expenditures. If we are unable to generate operating cash flows, we may not be able to continue servicing our debt.

Furthermore, some of our debt instruments include financial covenants that require Oi or Telemar to maintain certain specified financial ratios. Prior to December 31, 2015, we executed temporary modifications of each of our debt instruments that contain covenants requiring Oi to maintain specified levels of consolidated debt to consolidated EBITDA (other than the debt instruments governing Oi’s 5^th and 9^th issuances of debentures), pursuant to which Oi was required to maintain a consolidated net debt to consolidated EBITDA ratio, determined based on our financial statements prepared in accordance with Brazilian GAAP, of no more than 6.0 to 1.0 as of December 31, 2015. Most of these temporary modifications continue to require Oi to maintain a consolidated net debt to consolidated EBITDA ratio of no more than 6.0 to 1.0 for each of the fiscal quarters of 2016. Upon the expiration of these temporary modifications, the consolidated debt to EBITDA ratio that Oi is required to maintain under each of these debt instruments will be reduced to their pre-existing levels, the most restrictive of which will require that Oi maintain a consolidated debt to EBITDA ratio of less than 4.0 to 1.0. Under each of these debt instruments, the creditor has the right to accelerate the debt if, at the end of any applicable period we are not in compliance with the defined financial covenants ratios. We have repaid the principal amount outstanding under Oi’s 5^th and 9^th issuances of debentures in the aggregate amount of R$23 million.

Our debt facilities with BNDES contained a number of financial covenants (including ratios with respect to shareholders equity to total assets and consolidated debt to EBITDA) that were measured on a semi-annual basis on June 30 and December 31. Under these debt facilities, noncompliance with two or more of these covenants in one semi-annual period would automatically trigger the right of BNDES to retain proceeds (in an amount equivalent to three times our next amortization payment under each debt facility with BNDES) from receivables otherwise payable to us in reserve accounts pledged for the benefit of BNDES until such time as the breach is cured.

On June 30, 2015, we were not in compliance with the covenants in each of our debt facilities with BNDES that require Oi to maintain a shareholder’s equity to EBITDA ratio of at least 0.25 to 1 and a consolidated debt to EBITDA ratio of less than 4.0 to 1. As a result, BNDES, had the right to retain proceeds from receivables in reserve accounts pledged for the benefit of BNDES, as described above. In November, 2015, we and BNDES amended the terms of each of our debt facilities with BNDES. As a result of these amendments, (1) the consolidated debt to consolidated EBITDA ratio, determined based on our financial statements prepared in accordance with Brazilian GAAP, that Oi was required to maintain was increased to 6.0 to 1.0 for the December 31, 2015 measurement date, (2) the measurement period under each of these debt facilities was reduced to quarterly periods, and (3) BNDES has the right to accelerate the debt under each of these debt facilities, at the end of any applicable period, we are not in compliance with two or more of the financial covenants contained in these debt facilities.

We were in compliance with each of the financial covenants applicable the debt instruments to which Oi and its subsidiaries are a party as of December 31, 2015 (other than the debt instruments governing Oi’s 5^th and 9^th issuances of debentures). We are seeking waivers from those creditors for which these temporary modifications do not cover all measurement periods to and including the periods ending on December 31, 2016. We cannot provide investors with any assurance that these waivers will be obtained. In the event that we are unable to obtain waivers of the anticipated breaches of these covenants in these debt instruments, or identify and implement financial and strategic alternatives to optimize our liquidity and debt profile, we may be unable to meet our obligations under these debt instruments in the event that the creditors under these debt instruments seek to enforce their available remedies.

Under the Trust Deed governing each of the Bonds issued by PTIF (other than the PTIF 6.25% Notes due 2016), or the PTIF Bonds, we were required to file audited financial statements of PTIF as of and for the year ended December 31, 2014 with the Dutch Chamber of Commerce no later than January 31, 2016. On April 29, 2016, Citicorp Trustee Company Limited, the trustee under this Trust Deed, or the PTIF Trustee, delivered a written notice to PTIF and Oi noting that the failure of PTIF to provide the 2014 audited financial statements constituted a potential event of default under the PTIF Bonds and requesting the delivery of those financial statements. PTIF is continuing to work with its auditor to complete the preparation of its 2014 audited financial statements as soon as possible.

The PTIF Trustee has notified PTIF that if PTIF fails to deliver the financial statements on or prior to May 29, 2016 and the PTIF Trustee determines that this failure is materially prejudicial to the interests of the holders of the PTIF Bonds, the PTIF Trustee could declare that the PTIF Bonds are immediately due and repayable. Under the terms of the PTIF Bonds, the PTIF Trustee is not obliged to exercise its discretion to declare any PTIF Bonds immediately due and repayable or to take any other action to enforce the rights of the holders of the PTIF Bonds unless it shall have been indemnified to its satisfaction and specifically directed or requested to do so by a requisite percentage of the holders of the PTIF Bonds in accordance with the terms and conditions of the PTIF Bonds.

The instruments governing a substantial portion of our indebtedness contain cross-acceleration clauses and the occurrence of an event of default under one of these instruments, could trigger an event of default under other indebtedness or enable the creditors under other indebtedness to accelerate that indebtedness or those obligations. Were a substantial amount of our outstanding indebtedness to be accelerated, we may not have sufficient funds to repay such debt when due.

If we are unable to meet our debt service obligations or comply with our debt covenants, we could be forced to renegotiate or refinance our indebtedness or seek additional equity capital. In this circumstance, we may be unable to obtain financing on satisfactory terms, or at all.

On March 9, 2016, we announced that we had retained PJT Partners as our financial advisor to assist us in evaluating financial and strategic alternatives to optimize our liquidity and debt profile. On April 25, 2016, we entered into a customary non-disclosure agreement with Moelis & Company, who acts as advisor for a diverse ad hoc group of holders of the bonds issued by Oi and its subsidiaries, as an initial step towards discussions of a potential restructuring of its indebtedness.

For more information regarding the debt instruments of our company and our indebtedness as of December 31, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

Our independent registered public accounting firm has indicated that our financial condition raises substantial doubt as to our ability to continue as a going concern.

Based on our operating cash flows and the impact such operating cash flows have had on our liquidity, in combination with the level of our indebtedness and the potential impact if we cannot satisfy certain financial covenants under our current debt instruments in 2016, our independent registered public accounting firm has included an emphasis paragraph related to the substantial doubt with respect to our ability to continue as a going concern in their report on our consolidated financial statements for the year ended December 31, 2015. However, our financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we may seek the protection of the courts through ajudicially supervised reorganization (recuperação judicial) proceeding in Brazil or liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. The reaction of investors and others to the inclusion of a going concern statement by our auditors, our operating cash flows and questions regarding our potential inability to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations and may materially adversely affect our share price and our ability to continue to execute our business plans, raise new capital and/or make our scheduled debt payments on a timely basis or at all.

Because our cash flows from operating activities are negative, and are expected to continue to be negative through 2016, we will likely need to meet our obligations and fund our working capital with cash on hand and proceeds from existing amounts available under our financing facilities.

Our cash flows from operations were negative in 2015, and based on our current plans, we expect our cash flows from operating activities to remain negative through 2016. Our current projections are based on a number of key assumptions relating to, among other things, attainment of traffic volume targets, customer base, launching of

bundled products attractive to customers, service sales prices, foreign exchange fluctuation and the success of the efforts to identify and implement financial and strategic alternatives to optimize the liquidity and debt profile. If any of our assumptions are not borne out or are otherwise not correct, our cash flows from operations could be significantly lower than expected. As a result, our cash flows from operating activities could continue to be negative and our capital expenditures and debt service obligations could exceed our cash flows from operations beyond 2016 and for an extended period of time. There can be no assurance that we will succeed in executing on our plans or that we will generate positive cash flows from operations or cash flows from operations sufficient to cover our capital expenditures and debt service obligations in the future.

We plan to maintain a significant level of capital expenditures in order to continue to pursue our business plans. Additionally, based on our current level of debt, we are obligated to make payments of cash interest and principal in the aggregate amount of R$15,282 million during 2016. In addition, we need to pay cash taxes and fund our working capital.

Because of the combined impact of our recent and projected results of operations, our non-investment grade credit rating, the inclusion of the going concern statement in the report of our independent registered public accounting firm, restrictions in our current debt and/or general conditions in the financial and credit markets, our access to the capital markets is likely to be limited or nonexistent. As a result, we will need to meet our obligations and fund our working capital with cash on hand and proceeds from existing amounts available under our financing facilities. We may not be able to meet our obligations or other means for any significant period of time, and as a result, if we are unable to successfully restructure our debt on terms satisfactory to our company, we may not be able to execute our business plan or meet our obligations. If we become unable to meet our obligations, we may seek the protection of the courts through a judicially supervised reorganization (recuperação judicial) proceeding in Brazil.

Any downgrade in the ratings of our company or our debt securities would likely result in increased interest and other financial expenses related to our borrowings and debt securities and could reduce our liquidity.

Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or Standard & Poor’s, Moody’s Investors Service, or Moody’s, and Fitch, Inc., or Fitch, maintain ratings of our company and our debt securities. Currently, Standard & Poor’s, Moody’s and Fitch maintain ratings of our company on a local and a global basis. On a global basis, Standard & Poor’s maintains a foreign currency rating for our company of “CCC-,” Moody’s maintains a foreign currency rating for our company of “Caa1,” and Fitch maintains a foreign currency rating for our company of “CCC.” Our export credit facility guaranteed by Exportkreditnämnden, or EKN, contained a requirement that we prepay all outstanding amounts in the event that our credit rating was downgraded below Ba2 by Moody’s or BB by Fitch. As a result of the actions by these rating agencies, we were required to prepay the outstanding principal amount under this export credit agreement of R$202 million in April 2016. Any decision by these agencies to downgrade the ratings of our company or of our debt securities in the future would likely result in increased interest and other financial expenses relating to our borrowings and debt securities and the inclusion of financial covenants in the instruments governing new indebtedness, and could significantly reduce our ability to obtain such financing on satisfactory terms or in amounts required by us.

We rely on strategic suppliers of equipment, materials and services necessary for our operations and expansion. If these suppliers fail to provide equipment, materials or services to us on a timely basis, we could experience disruptions, which could have an adverse effect on our revenues and results of operations.

We rely on a few strategic suppliers of equipment, materials and services, including Nokia Solutions and Networks do Brasil Telecomunicações Ltda., or Nokia Solutions, Huawei do Brasil Telecomunicações Ltda., or Huawei, Ericsson Telecomunicações S.A., or Ericsson, and A.R.M. Engenharia Ltda., or A.R.M. Engenharia, to provide us with equipment, materials and services that we need in order to expand and to operate our business in Brazil. There are a limited number of suppliers with the capability of providing the mobile network equipment and fixed-line network platforms that our operations and expansion plans require or the services that we require to maintain our extensive and geographically widespread networks. In addition, because the supply of mobile network equipment and fixed-line network platforms requires detailed supply planning and this equipment is technologically complex, it would be difficult for our company to replace the suppliers of this equipment. Suppliers of cables that we need to extend and maintain our networks may suffer capacity constraints or difficulties in obtaining the raw materials required to manufacture these cables. As a result, we are exposed to risks associated with these suppliers,

including restrictions of production capacity for equipment and materials, availability of equipment and materials, delays in delivery of equipment, materials or services, and price increases. If these suppliers or vendors fail to provide equipment, materials or service to us on a timely basis or otherwise in compliance with the terms of our contracts with these suppliers, we could experience disruptions or declines in the quality of our services, which could have an adverse effect on our revenues and results of operations, and we might be unable to satisfy the requirements contained in our concession and authorization agreements.

As a result of our financial condition, suppliers of the equipment, materials and services necessary for our operations and expansion may require further assurances from us in order to continue doing business with us.

We believe that our suppliers may take our financial condition, particularly to the extent that it is perceived to impact our ability to continue to make timely payments to them, into account when deciding whether to continue or begin providing equipment and services to us. During 2015, our operating cash flows have been negatively affected by a number of factors. If suppliers or potential suppliers who are aware of our deteriorating financial situation become concerned that we will be unable to continue to perform under our agreements or make timely payments, they may require advance payments, financial guarantees or other assurances before they provide equipment, materials or services to us or may refuse to provide equipment, materials or services to us at all. If suppliers were to do so, our ability to expand and maintain our networks or operate our business may be impaired, which could have an adverse effect on our financial condition or results of operations.

We are subject to numerous legal and administrative proceedings, which could adversely affect our business, results of operations and financial condition.

We are subject to numerous legal and administrative proceedings. It is difficult to quantify the potential impact of these legal and administrative proceedings. We classify our risk of loss from legal and administrative proceedings as “probable,” “possible” or “remote.” We make provisions for probable losses but do not make provisions for possible and remote losses. As of December 31, 2015, we had provisioned R$4,435 million for probable losses relating to various tax, labor and civil legal and administrative proceedings against us. As of December 31, 2015, we had claims against us of R$24,048 million in tax proceedings, R$780 million in labor proceedings and R$1,238 million in civil proceedings with a risk of loss classified as “possible” for which we had made no provisions.

We are not required to disclose or record provisions for proceedings in which our management judges the risk of loss to be remote. However, the amounts involved in certain of the proceedings in which we believe our risk of loss is remote could be substantial. Consequently, our losses could be significantly higher than the amounts for which we have recorded provisions.

If we are subject to unfavorable decisions in any legal or administrative proceedings and the losses in those proceedings significantly exceed the amount for which we have provisioned or involve proceedings for which we have made no provision, our results of operations and financial condition may be materially adversely affected. Even for the amounts recorded as provisions for probable losses, a judgment against us would have an effect on our cash flow if we are required to pay those amounts. Unfavorable decisions in these legal proceedings may, therefore, reduce our liquidity and adversely affect our business, financial condition and results of operations. For a more detailed description of these proceedings, see “Item 8. Financial Information—Legal Proceedings.”

The minority shareholder of Africatel has asserted that our acquisition of PT Portugal triggered its right to require us to purchase its shares of Africatel under the Africatel shareholders’ agreement. If we are required to purchase this interest in Africatel, it will divert resources that could otherwise be deployed to reduce indebtedness or make investments under our business plan. If any such purchase is funded through our incurrence of additional debt, there would be a material adverse effect on our consolidated leverage.

We indirectly own 75% of the share capital of Africatel. Samba Luxco S.à.r.l., an affiliate of Helios Investors L.P., or Samba Luxco, owns the remaining 25%. Africatel holds all of our interests in telecommunications companies in sub-Saharan Africa, including our interests in Unitel, Cabo Verde Telecom, S.A. in Cape Verde, Mobile Telecommunications Limited in Namibia, and CST Companhia Santomense de Telecomunicações S.A.R.L. in São Tomé and Príncipe, among others. Pharol, our subsidiaries Africatel GmbH & Co. KG, or Africatel GmbH, and PT Ventures SGPS S.A., or PT Ventures, and Samba Luxco are parties to a shareholders’

agreement, which we refer to as the Africatel shareholders’ agreement.

On September 16, 2014, our subsidiary, Africatel GmbH, which directly holds our interest in Africatel, received a letter from Samba Luxco in which Samba Luxco claimed that Oi’s acquisition of PT Portugal was deemed a change of control of Pharol under the Africatel shareholders’ agreement, and that this change of control entitled Samba Luxco to exercise a put right under the Africatel shareholders’ agreement at the fair market equity value of Samba Luxco’s Africatel shares. In the letter, Samba Luxco purported to exercise the alleged put right and thereby require Africatel GmbH to acquire its shares in Africatel.

On September 26, 2014, Africatel GmbH responded to Samba Luxco stating that there had not been any action or event that would trigger the right to exercise the put option under the Africatel’s shareholders’ agreement and that Africatel GmbH intended to challenge Samba Luxco’s purported exercise of the put option. On the same date, we issued a Material Fact disclosing Samba Luxco’s purported exercise of the put option, our understanding that the exercise of the put option is not applicable, and that our board of directors had authorized our management to take the necessary actions to sell our interest in Africatel.

On November 12, 2014, the International Court of Arbitration of the International Chamber of Commerce notified Africatel GmbH that Samba Luxco had commenced arbitral proceedings against Africatel GmbH to enforce its purported put right or, in the alternative, certain other rights and claims allegedly arising out of Oi’s acquisition of PT Portugal. Africatel GmbH presented its answer to Samba Luxco’s request for arbitration on December 15, 2014. The arbitral tribunal was constituted on March 12, 2015 and the proceedings are ongoing. Africatel GmbH intends to continue to vigorously defend these proceedings.

If we were to acquire the interest of Samba Luxco in Africatel as a result of the exercise of Samba Luxco’s purported put right under the Africatel shareholders’ agreement, our acquisition of this interest would reduce the resources that would be available to us to reduce our outstanding indebtedness or pursue other investment opportunities. If any such purchase were to be funded through our incurrence of additional debt, the consolidated leverage of our company could increase materially, which could have a material adverse effect on our financial condition and results of operations.

We have indemnification obligations with respect to the PT Exchange and the PT Portugal Disposition that could materially adversely affect our financial position.

In the Exchange Agreement that we entered into with Pharol under which we transferred defaulted commercial paper of Rio Forte to Pharol in exchange for the delivery to our company of common shares and preferred shares of our company as described under “Item 4. Information on the Company—Our Recent History and Development—Rio Forte Defaults and PT Exchange,” we agreed to indemnify Pharol against any loss arising from Pharol’s contingent or absolute tax or anti-trust obligations in relation to the assets contributed to our company in the Oi Capital Increase described under “Item 5. Operating and Financial Review and Prospects—Overview—Oi Capital Increase and Acquisition of PT Portugal,” and from Pharol’s management activities, with reference to acts or triggering events occurring on or prior to May 5, 2014, excluding any losses incurred by Pharol as a result of the financial investments in the Rio Forte commercial paper and the acquisition of the Rio Forte commercial paper from Oi under the Exchange Agreement.

In the Share Purchase Agreement under which we sold PT Portugal in the PT Portugal Disposition, we agreed to indemnify Altice Portugal for breaches of our representations and warranties under the Share Purchase Agreement, subject to certain customary procedural and financial limitations. There can be no assurance that we will not be subject to significant claims under these indemnification provisions and if we are subject to such claims under these indemnification provisions, we could be required to pay significant amounts, which would have an adverse effect on our financial condition.

We are subject to potential liabilities relating to our third-party service providers, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to potential liabilities relating to our third-party service providers in Brazil. Such potential liabilities may involve claims by employees of third-party service providers in Brazil directly against us as if we were the direct employer of such employees, as well as claims against us for secondary liability for, among other things, occupational hazards, wage parity or overtime pay, in the event that such third-party service providers fail to meet their obligations to their employees. We have not recorded any provisions for such claims, and significant judgments against us could have a material adverse effect on our business, financial condition and results of operations.

We are subject to delinquencies of our accounts receivables. If we are unable to limit payment delinquencies by our customers, or if delinquent payments by our customers increase, our financial condition and results of operations could be adversely affected.

Our business significantly depends on our customers’ ability to pay their bills and comply with their obligations to us. During 2015, we recorded provisions for doubtful accounts in the amount of R$721 million, or 2.6% of our net operating revenue, primarily due to subscribers’ delinquencies. As of December 31, 2015, our provision for doubtful accounts was R$561 million.

ANATEL regulations prevent us from implementing certain policies that could have the effect of reducing delinquency of our customers in Brazil, such as service restrictions or limitations on the types of services provided based on a subscriber’s credit record. If we are unable to successfully implement policies to limit delinquencies of our Brazilian subscribers or otherwise select our customers based on their credit records, persistent subscriber delinquencies and bad debt will continue to adversely affect our operating and financial results.

In addition, if the Brazilian economy declines due to, among other factors, a reduction in the level of economic activity, an increase in inflation or an increase in domestic interest rates, a greater portion of our customers may not be able to pay their bills on a timely basis, which would increase our provision for doubtful accounts and adversely affect our financial condition and results of operations.

Our commitment to meet the obligations of our Brazilian employees’ pension plans, managed by Fundação Sistel de Seguridade Social and Fundação Atlântico de Seguridade Social may be higher than what is currently anticipated, and therefore, we may be required to make additional contributions of resources to these pension plans or to record liabilities or expenses that are higher than currently recorded.

As sponsors of certain private employee pension plans in Brazil, which are managed by Fundação Sistel de Seguridade Social, or Sistel, and Fundação Atlântico de Seguridade Social, or FATL, our subsidiaries cover the actuarial deficits of these pension benefit plans, which provide guaranteed benefits to our retirees in Brazil and guaranteed future benefits to our current Brazilian employees at the time of their retirement. As of December 31, 2015, our Brazilian pension benefit plans had an aggregate deficit of R$544 million. Our commitment to meet these deficit obligations may be higher than we currently anticipate, and we may be required to make additional contributions or record liabilities or expenses that are higher than we currently record, which may adversely affect our financial results. If the life expectancy of the beneficiaries should exceed the life expectancies included in the actuarial models, the level of our contributions to these plans could increase. If the managers of these plans should suffer losses on the investments of the assets of these plans, we would be required to make additional contributions to these plans in order for these plans to be able to provide the agreed benefits. Any increase in the level of our contributions to these plans as a result of an increase in life expectancy or a decline in investment returns could have a material adverse effect on our financial condition or results of operations. For a more detailed description of our Brazilian pension plans, see “Item 6. Directors, Senior Management and Employees—Employees—Employee Benefits—Pension Benefit Plans.”

Risks Relating to Our Brazilian Operations

Our Residential Services business faces competition from mobile services and other fixed-line service providers, which may adversely affect our revenues and margins.

Our Residential Services business, which provides local and long-distance fixed-line voice, fixed-line data, or broadband, and subscription television, or Pay-TV, services to our residential customers, as well as bundles of these services together with mobile services, faces competition from:

Based on information available from ANATEL, from December 31, 2012 to December 31, 2015, the number of fixed lines in service (including the number fixed lines provided to our SME and Corporate Services customers) in our service areas (all of Brazil other than the state of São Paulo) declined from 27.7 million to 27.2 million. As of December 31, 2015, based on information available from ANATEL, (1) we had a market share of 56.4% of the total fixed lines in service in Region I of Brazil and a market share of 52.9% of the total fixed lines in service in Region II of Brazil (in each case, including the fixed lines provided to our SME and Corporate Services customers); (2) Embratel had a market share of 25.3% of the total fixed lines in service in Region I and a market share of 18.4% of the total fixed lines in service in Region II; and (3) GVT had a market share of 9.9% of the total fixed lines in service in Region I and a market share of 23.4% of the total fixed lines in service in Region II.

As a result of competition from mobile services, we expect (1) the number of our fixed lines in service to experience a slow decline, as some of our customers eliminate their fixed-line services in favor of mobile services, and (2) the use of existing fixed lines for making voice calls to decline, as customers replace fixed-line calls in favor of calls on mobile phones as a result of the emergence of “all-net” plans, which allow a customer to make calls to any fixed-line or mobile device of any operator for a flat monthly fee. The rate at which the number of fixed lines in service in our service areas, a large majority of which are used by our residential customers, may decline depends on many factors beyond our control, such as economic, social, technological and other developments in Brazil. Because we derive a significant portion of our net operating revenue from our Residential Services business, the reduction in the number of our fixed lines in service has negatively affected and is likely to continue to negatively affect our net operating revenue and margins.

Our broadband services in Brazil face strong competition from Embratel and Telefônica Brasil, which have market shares of 32.5% and 28.7% for broadband services in Brazil, respectively, according to data from ANATEL. As of January 2016, we had a market share of 25.1% for broadband services in Brazil, according to data from ANATEL. Embratel provides local fixed-line services to residential customers through Net’s cable network in the portions of Regions I and II where Net provides cable television service. Telefônica Brasil provides local fixed-line services through its own network and through its subsidiary GVT’s network. The primary drivers of competition in the broadband industry are speed and price, with discounts typically offered in the form of bundled services. Net and Telefônica Brasil each offer broadband services at higher speeds than ours and both offer integrated voice, broadband and subscription television services, typically as bundles, to the residential services market through a

single network infrastructure. Future offerings by our competitors that are aggressively priced or that offer additional services could have an adverse effect on our net operating revenue and our results of operations.

The primary providers of Pay-TV services in the regions in which we provide residential services are, SKY, which provides direct-to-home, or DTH, service, and América Móvil, which provides DTH service through Embratel under the “Claro TV” brand and Pay-TV services using coaxial cable through Net. We offer DTH services throughout the regions in which we provide residential services. Future changes in satellite technology may result in one of our competitors utilizing new satellites for DTH services that have higher capacities or better quality of service, which could adversely affect our net operating revenue and may adversely affect our results of operations.

Our primary competitors for residential services, Embratel and Telefônica Brasil, are each controlled by multinational companies that may have more significant financial and marketing resources, and greater abilities to access capital on a timely basis and on more favorable terms, than our company. In addition, we compete in our service areas with smaller companies that have been authorized by ANATEL to provide local fixed-line services. Increased competition from these small, regional companies may require us to increase our marketing expenses and our capital expenditures, which would lead to a decrease in our profitability. For a detailed description of our competition in the residential services market in Brazil, see “Item 4: Information on the Company—Competition—Residential Services.”

Our Personal Mobility Services business faces strong competition from fixed-line service providers other mobile services providers and internet data providers, which may adversely affect our revenues and margins.

The mobile services market in Brazil is extremely competitive. Our Personal Mobility Services business, which provides post-paid and pre-paid mobile voice services and post-paid and pre-paid mobile data communications services, faces competition from large competitors such as (1) TIM Participações S.A., or TIM, (2) Telefônica Brasil, which markets its mobile services under the brand name “Vivo,” and (3) Claro S.A., a subsidiary of América Móvil, or Claro. As of December 31, 2015, based on information regarding the total number of subscribers as of that date available from ANATEL, we had a market share of 18.6% of the total number of mobile subscribers (including subscribers in our SME and Corporate Services), ranking behind Telefônica Brasil with 28.4%, TIM with 25.7% and Claro with 25.6%. Telefônica Brasil, TIM and Claro are each controlled by multinational companies that may have more significant financial and marketing resources, and greater abilities to access capital on a timely basis and on more favorable terms, than our company.

Our ability to generate revenues from our Personal Mobility Services business depends on our ability to continue to maintain or increase the ARPU generated by our customer base, retain or increase the size of our customer base, improve the perception of the quality of our services and encourage the migration of our customers to our 3G and 4G networks through our offers of attractive data packages that take advantage of the structural shift from voice to data usage. The recent trend towards SIM card consolidation, reversing the trend of customers using multiple SIM cards to participate in on-net calling plans and the demand for more aggressive data packages in the pre-paid market may result in a decline in the size of our customer base. The increased use of instant internet messaging and Voice over Internet Protocol, or VoiP, services on smartphone applications such as WhatsApp may result in a migration from voice to data services, which could have an adverse effect on the size and profitability of our customer base. Acquiring each additional personal mobility customer entails costs, including sales commissions and marketing costs. Recovering these costs depends on our ability to retain such customers. Therefore, high rates of customer churn could have a material adverse effect on the profitability of our Personal Mobility Services business. During the year ended December 31, 2015, the average customer churn rate in our Personal Mobility Services business, representing the number of subscribers whose service was disconnected during each month, whether voluntarily or involuntarily, divided by the number of subscribers at the beginning of such month, was 12.4%.

We have experienced increased pressure to reduce our mobile rates in response to pricing competition. This pricing competition often takes the form of special promotional packages, which may include, among other things, mobile handset subsidies and traffic usage promotions. We no longer offer handset subsidies for new customers, and competing with the service plans and promotions offered by our competitors may cause an increase in our marketing expenses and customer-acquisition costs, which has adversely affected our result of operations during some periods in the past and could continue to adversely affect our results of operations. Our inability to compete effectively with these packages could result in our loss of market share and adversely affect our net operating revenue and

profitability. For a detailed description of our competition in the personal mobility services market in Brazil, see “Item 4: Information on the Company—Competition—Personal Mobility Services.”

Our SME and Corporate Services business faces strong competition from other mobile, fixed-line and information technology services providers, which may adversely affect our revenues and margins.

Our SME and Corporate Services business provides a la carte and bundled fixed-line voice and data services, mobile voice and data services and information technology services to our small- and medium-sized enterprise, or SME, and corporate customers, as well as interconnection, network usage and traffic transportation services to other telecommunications providers. The competition risks relating to the fixed-line and mobile services we provide to our SME and corporate customers are similar to those relating to the fixed-line and mobile services we provide to our residential and personal mobility customers, respectively.

The Brazilian recession has had a significant negative effect on our operating revenue and margins as SMEs generally, including our customers, have reduced the size of their businesses and in some cases ceased operations, and a number of our Corporate customers have reduced their telecommunications spending as part of their overall cost-cutting efforts. Because we derive a significant portion of our net operating revenue from our SME and Corporate Services business, the loss of a significant number of SME or corporate customers would adversely affect our net operating revenue and may adversely affect our results of operations. For a detailed description of our competition in the business and corporate market in Brazil, see “Item 4: Information on the Company—Operations in Brazil—Competition—SME and Corporate Services.”

Our long-distance services in Brazil face significant competition, which may adversely affect our revenues.

In Brazil, unlike in the United States and elsewhere, a caller chooses its preferred long-distance carrier for each long-distance call, whether originated from a fixed-line telephone or a mobile handset, by dialing such carrier’s long-distance carrier selection code (Código de Seleção de Prestadora). The long-distance services market in Brazil has become less competitive as a result of ongoing reductions in the interconnection rates, as mandated by ANATEL. The proliferation of all-net service plans, particularly for mobile services, offers unlimited long-distance calls and data combination plans that have reduced the relevance of long-distance services for mobile services. As a result, competition for long-distance services in Brazil is limited to fixed-line voice services. We compete with Telefônica Brasil, which is the incumbent fixed-line service provider in the State of São Paulo. Competition in the Brazilian fixed-line long-distance market may require us to increase our marketing expenses and/or provide services at lower rates than those we currently expect to charge for such services. Competition in the Brazilian fixed-line long-distance market has had and could continue to have a material adverse effect on our revenues and margins.

The Brazilian telecommunications industry is highly regulated. Changes in laws and regulations may adversely impact our business.

OurThe Brazilian telecommunications industry is highly regulated by ANATEL. ANATEL regulates, among other things, rates, quality of service and universal service goals, as well as competition among telecommunications service providers. Changes in laws and regulations, grants of new concessions, authorizations or licenses or the imposition of additional universal service obligations, among other factors, may adversely affect our business, financial condition and results of operations.

For example, in July 2014 ANATEL has proposed new regulationsapproved rules under which itinterconnection rates charged by our company for the use of our fixed-line and mobile networks would modifybe reduced over a period of years until they were set at rates based on a long-run incremental cost methodology. As a result, the productivity discount factor, or Factor X, applicable to the determinationmobile interconnection rates for Regions I, II and III declined by 25% each in February 2014, 33.3% each in February 2015 and 40.0%, 35.2% and 27.6%, respectively, in February 2016, with additional cuts approved through 2019. In addition, ANATEL approved cuts for most of rate increases available to public concessionaires providing fixed-line services.our fixed interconnection rates ranging from 9.1% and 20.0% in February 2016, with additional cuts approved through 2019. These regulations were submitted for public consultation in July 2011 and the public consultation period ended on September 1, 2011. We expect these new regulations, as they may be modified as a result of ANATEL’s further analysis, to be adopted in 2014. We cannot predict when these regulations will be adopted or whether they will be adopted as proposed. Some of these regulations, if adopted, may have adverse effects on our revenues, although as a result of reductions in our costs and expenses for these services that we acquire from other telecommunications providers, we cannot predict with certainty the effects that these regulations will have on our results of operations or financial position.operations.

We cannot predict whether ANATEL, the Brazilian Ministry of Communications (Ministério das Comunicações) or the Brazilian government will adopt other telecommunications sector policies in the future or the consequences of such policies on our business andor the business of our competitors.

Our local fixed-line and domestic long-distance concession agreements in Brazil are subject to periodic modifications by ANATEL and expirewe cannot assure you that the modifications to these concession agreements will not have adverse effects on December 31, 2025. Our bids for new concessions upon the expiration of our existing concessions may not be successful.company.

We provide fixed-line telecommunications services in Regions I and IIour Brazilian service areas pursuant to concession agreements with the Brazilian government. OurThese concession agreements expire on December 31, 2025, and may be amended by the parties every five years prior to the expiration date. In connection with each five yearfive-year amendment, ANATEL has the right, following public consultations, to impose new terms and conditions in response to changes in technology, competition in the marketplace and domestic and international economic conditions.

Our obligations under theour concession agreements may be subject to revision in connection with each future amendment. On June 27, 2014, ANATEL opened a public comment period for the revision of the terms of our concession agreements. The comment period, which ended on December 26, 2014, was opened for comments on certain topics such as service universalization, rates and fees, among others. We submitted our comments during this period. Throughout 2015, ANATEL, the Brazilian Ministry of Communications and telecommunications service providers met regularly to discuss possible amendments to each of the concession agreements granted by ANATEL, including ours, and the implications of the developments and demands in the telecommunications sector in recent years. In September 2015, the Ministry of Communications created a working group, consisting of three members from each of ANATEL and the Ministry of Communications, to evaluate the status of the concessions and propose guidelines for the amendment of the concession agreements. In November 2015, the Ministry of Communications opened public consultation on the new regulatory framework for telecommunications. The Ministry of Communications has extended the deadline for contributions on multiple occasions. In April 2016, the Ministry of Communications, based on the working group’s findings, issued a decree addressing guidelines for the establishment of a new regulatory framework for telecommunications, which will be implemented by ANATEL through the conclusion of the concession amendments. The guidelines provide for, among other things, the expansion of broadband services (including in rural regions), the elimination of the reversibility of assets, and an extension of the term of our concessions, which are currently scheduled to expire in 2025. As a result of the publication of these guidelines, ANATEL requested a further postponement of the review of our concession agreements, which was granted. As a result of this extension, the review of our concession agreements is currently scheduled to occur by December 2016.

We cannot assure you that any future amendments to our concession agreements, including the amendments now expected to be made in 2016, will not impose requirements on our company that will require us to undertake significant capital expenditures or will not modify the rate-setting procedures applicable to us in a manner that will significantly reduce the net operating revenue that we generate from our Brazilian fixed-line businesses. If the amendments to our Brazilian concession agreements have these effects, our business, financial condition and results of operations could be materially adversely affected.

Our local fixed-line and domestic long-distance concession agreements expire on December 31, 2025 and we cannot assure you that our bids for new concessions upon the expiration of our existing concessions will be successful or that the pending expiration of these concessions will not have adverse effects on our ability to finance our operations.

Our concession agreements will expire on December 31, 2025. We expect the Brazilian government to offer new concessions in competitive auctions prior to the expiration of our existing concession agreements. We may participate in such auctions, but our existing fixed-line and domestic long-distance concession agreements will not entitle us to preferential treatment in these auctions. If we do not secure concessions for our existing service areas in any future auctions, or if such concessions are on less favorable terms than our current concessions, our business, financial condition and results of operations would be materially adversely affected. In addition, based on the current scheduled expiration of our concession agreements and the uncertainty that term of these concessions will be extended, investors may be unwilling to make investments in our company on terms that are attractive to our

company, or at all. Our inability to raise capital in the equity or debt markets on favorable terms, or at all, could have a materially adverse effect on our business, financial condition and results of operations.

Our local fixed-line and domestic long-distance concession agreements in Brazil, as well as our authorizations to provide personal mobile services in Brazil, contain certain obligations, and our failure to comply with these obligations may result in various fines and penalties being imposed on us by ANATEL.

Our local fixed-line and domestic long-distance concession agreements in Brazil contain terms reflecting the General Plan on Universal Service Goals (Plano Geral de Metas de Universalização), the General Plan on Quality Goals (Plano Geral de Metas de Qualidade) and other regulations adopted by ANATEL, the terms of which could affect our financial condition and results of operations. Our local fixed-line concession agreements in Brazil also require us to meet certain network expansion, quality of service and modernization obligations in each of the Brazilian states in Regions I and II.our service areas. In the event of noncompliance with ANATEL targets in any one of these states, ANATEL can establish a deadline for achieving the targeted level of such service, impose penalties and, in extreme situations, terminate the applicable concession agreement for noncompliance with itsour quality and universal service obligations. See “Item 4.4: Information on the Company—Regulation of the Brazilian Telecommunications Industry—Regulation of Fixed-Line Services.”

On an almost weekly basis, we receive inquiries from ANATEL requiring information from us on our compliance with the various service obligations imposed on us by our concession agreements. If we are unable to respond satisfactorily to those inquiries or comply with our service obligations under our concession agreements, ANATEL may commence administrative proceedings in connection with such noncompliance. We have received numerous notices of the commencement of administrative proceedings from ANATEL, mostly due to our inability to achieve certain targets established in the General Plan on Quality Goals and the General Plan on Universal Service Goals, among others. As of December 31, 2013,2015, we had recorded provisions in the amount of R$1,0451,149 million in connection with fines sought to be imposed by ANATEL.ANATEL, including fines which we are contesting through judicial proceedings. In the event that we are unsuccessful in obtaining final approval of the inclusion of the R$5 billion of fines and claims we have proposed to be included in the Terms of Adjustment of Conduct (“Termos de Ajuste de Conduta”) program, or the TAC program, we could be required to constitute an additional provision of the portion of these fines and claims for which we have not previously established a provision. Additional fines from ANATEL, the establishment of an additional provision or fines in excess of the provisioned amount could adversely impact our financial condition and results of operations. See “Item 4. Information on the Company—Regulation of the Brazilian Telecommunications Industry” and “Item 8. Financial Information—Legal Proceedings—Civil Claims—Claims Relating to Oi S.A. and Our Brazilian Operations—Administrative Proceedings.”

In addition, our authorizations to provide personal mobile services contain certain obligations requiring us to meet network scope and quality of service targets. If we fail to meet these obligations, we may be fined by ANATEL until we are in full compliance with our obligations and, in extreme circumstances, our authorizations could be revoked by ANATEL. For example, on July 23, 2012, ANATEL temporarily suspended our ability to accept new customers for our mobile services in the States of Amazonas, Amapá, Mato Grosso do Sul, Roraima and Rio Grande do Sul due to ANATEL’s perception of our failure to meet capital investment and quality of service commitments in those states. This suspension lasted for approximately two weeks until we were able to propose new quality of service goals to ANATEL. See “Item 4. Information on the Company—Regulation of the Brazilian Telecommunications Industry—Regulation of Mobile Services—Obligations of Personal Mobile Services Providers.”

We may be unable to implement our plans to expand and enhance our existing networks in Brazil in a timely manner or without unanticipated costs, which could hinder or prevent the successful implementation of our business plan and result in revenues and net income being less than expected.