PHAROL, SGPS, S.A.

Earnings Release • Aug 11, 2016

Announcement | Lisbon | 11 August 2016

OI DICLOSES THE SECOND QUARTER RESULTS

PHAROL, SGPS S.A. (PHAROL) hereby informs on the press release disclosed by Oi, S.A. on the 2016 second quarter results, according to the company's document attached hereto.

PHAROL, SGPS S.A.

Public company Share capital Euro26,895,375 Registered in theCommercial Registry Office ofLisbon and Corporation no. 503 215058

PHAROL is listed on the Euronext (PHR). Information may be accessed onBloomberg under the symbol PHRPL.

Luis Sousa de Macedo Investor Relations Director ir@pharol.pt Tel.: +351 212 697698 Fax: +351 212 697949

pharol.pt

2Q16 RESULTS

Rio de Janeiro, August 11, 2016

IMPORTANT NOTICE

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This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and the applicable Brazilian regulations. Statements that are not historical facts, including statements regarding the beliefs and expectations of Oi S.A. – Under Judicial Reorganization (the "Company" or "Oi"), business strategies, future synergies, cost savings, future costs and future liquidity are forward-looking statements.

The words "will", "may", "should", "could", "anticipates", "intends", "believes", "estimates", "expects", "forecasts", "plans," "aims" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. There is no guarantee that the expected events, tendencies or expected results will actually occur. Such statements reflect the current views of the Company's management and are subject to a number of risks and uncertainties. These statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, corporate approvals, operational factors and other factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations. All forward-looking statements attributable to the Company or its affiliates, or persons acting on their behalf, are expressly qualified in their entirety by the cautionary statements set forth in this notice. Undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made.

Except as required under the Brazilian and U.S. federal securities laws and the rules and regulations of the CVM, the SEC or other regulatory authorities in other applicable jurisdictions, the Company and its affiliates do not have any intention or obligation to update, revise or disclose any changes to any of the forward-looking statements herein in order to reflect current or future events or their developments, changes in assumptions or changes in other factors affecting the forward-looking statements herein. You are advised, however, to consult any further disclosures the Company makes on related subjects in reports and communications that the Company files with the CVM and the SEC.

QUARTER HIGHLIGHTS: OPERATIONAL IMPROVEMENTS AND FOCUS ON PROFITABILITY

• o Improving RGUs trends in all services, especially TV, broadband, and postpaid
• o Residential
• o Residential ARPU grew 4,5% y.o.y., reaching R\$ 82.1
• o Annual growth of ARPU for all services: +2.5% in wireline, +6.2% in broadband and +19.0 in pay TV
• o Reversal of the downward revenues trend, presenting a sequencial increase of +0,7%
• o Personal Mobility
• o Data revenues grew by 20.3% y.o.y., fueled by the launch of new plans (Oi Livre and Oi Mais), the increase in 3G/4G handset penetration, and investments in upgrading and expanding the capacity of the network
• o Service revenues presented the second best performance among competitors, confirming operational evolution in a difficult macro environment

o B2B

• o Corporate segment improved the quality of its revenues, by increasing the share of non-voice services (data, IT and VAS), which already corresponds to 67% of total Corporate revenues
• o Offer and app Oi Mais Empresas are well accepted by the market. App has 90% of customer satisfaction and 65% of customers recommend the services
• o Routine Opex in the Brazilian operations increased well below inflation in the period, totaling R\$ 4,878 million in 2Q16, thanks to cost control
• o Capex in Brazil totaled R\$ 1,215 million this quarter (+16.7% y.o.y.), concentrated in the modernization and capacity expansion of network and IT, allowing a consistent improvement in user quality and experience

Revenues still impacted by the macro environment. Cost control partially offsets inflationary PRESSURE and increase in commercial activity.

Financial highlights R\$ million	2Q16	2Q15	y.o.y.	1Q16	q.o.q.
Brazil
Net Service Revenues1	6,256	6,486	-3.5%	6,480	-3.5%
Residential	2,411	2,460	-2.0%	2,394	+0.7%
Personal Mobility	1,878	1,950	-3.7%	1,974	-4.9%
Customer2	1,740	1,757	-1.0%	1,784	-2.5%
Corporate/SMEs	1,908	2,001	-4.6%	2,065	-7.6%
Net Customer Revenues2	6,008	6,131	-2.0%	6,159	-2.4%
Routine OPEX	4,878	4,739	+2.9%	4,853	+0.5%
Routine EBITDA	1,444	1,816	-20.5%	1,686	-14.3%
Routine EBITDA margin	22.8%	27.7%	-4.9pp	25,8%	-2.9pp
CAPEX	1,215	1,041	+16.7%	1,204	+0.9%
Routine EBITDA – Capex	229	775	-70.4%	482	-52.5%
Consolidated
Reported EBITDA	1,435	1,899	-24.4%	1,766	-18.7%

1 - Excludes handset revenues; 2 - Excludes handset and network usage revenues.

2Q16 Results - Operational Highlights

Net addS TREND IMPROVEMENT in all services, supported by the resumption of our commercial activity associated with the launch of new offers

Operational highlights Thousand RGUs Total - Brazil Residential Fixed line Broadband Pay TV Residential ARPU Personal Mobility Prepaid Postpaid Corporate/SMEs Fixed lined Broadband Mobile Public phones y.o.y. q.o.q. 69,198 16,153 9,795 5,149 1,209 82.1 45,319 38,299 7,020 7,078 4,261 561 2,256 648 -5.2% -3.8% -6.2% -0.3% +2.1% +4.5% -5.1% -5.9% -0.2% -9.0% -8.9% -7.0% -9.7% -0.5% -0.4% -0.1% -0.8% +0.7% +2.4% +1.6% -0.5% -1.0% +1.9% -0.5% -1.7% -1.4% +2.0% -0.5% -2.5 2Q15 -3.9 -0.9 3Q15 -1.9 -0.5 -0.2 2.4 0.7 -0.8 4Q15 1Q16 2Q16 Residential % q.o.q. 2Q16 1.9 -1.0 2Q15 3Q15 -1.1 -0.3 0.4 -3.0 4Q15 1Q16 Personal Mobility % q.o.q. Corporate / SMEs % q.o.q. 1.1 2Q15 -2.3 -3.2 3Q15 -8.3 4Q15 1Q16 -1.6 -1.7 -1.4 2.0 -1.4 2Q16 q.o.q. - Trends Postpaid Prepaid Fixed line Broadband Pay TV Fixed line Broadband Mobile 2Q16

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2Q16 Results - Residential (Brazil)

RESUME OF COMMERCIAL ACTIVITY WITH HIGH-END CONVERGENT OFFERS SUSTAIN CHURN REDUCTION, GAIN IN NET ADDS AND HIGHER ARPU

oi total: the main convergent residential offer ACCELERATES PENETRATION IN WIRELINE BASE AND CONTRIBUTES to higher arpu and lower churn

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2Q16 Results - Personal Mobility (Brazil)

New offers and better acquisition mix promote growth of postpaid and data, supporting improvement in revenues trend. Recharger prepaid base start to pick up.

• Evolution of Oi Mais Oi Mais and Oi Mais Controle base % of total postpaid and control base

ARPU Oi Mais vs. other plans

Customers of other offers Oi Mais customers Oi Mais Controle customers Customers of other offers

• Evolution of Oi Livre

Oi Livre base % of total prepaid base

Before (other offers) After (Oi Livre por Semana)

• Sales of higher value offerings (bundles and high-end) trend of improvement in rechargers
• 63% penetration of 3G/4G handsets in total base

Recharger base (prepaid)

Indexed. Monthly variation.

Mar/16 Apr/16 May/16 Jun/16 Jul/16

• Postpaid + Control revenues grew by 17% y.o.y.

• Consistent growth in data revenues (+20.3% y.o.y.)
• Continuous evolution of the postpaid base in recent quarters
• Prepaid recharges impacted by the macro environment, correlated with the increase in unemployment rate, but with

2Q16 Results - B2B (Brazil)

B2B faces challenges in the macro environment, but revenues quality continues to improve, FOCUSED ON DIGITALIZATION and IT / DATA SERVICES

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Corporate: growth of data, IT and VAS services has been minimizing the impacts of the decline in voice revenues

• Focus on profitability through data and IT/IS services (VPN network, Cloud, ICTs, security and management VAS, etc.)
• Growth of IT and other non-traditional services in order to reduce dependence on voice services
• Improvement in customer experience through the simplification and automation of the delivery chain and convergence of post-sales services (IT and telecom)
• Non-voice revenues already amount to 67% of total Corporate revenues, however voice revenues decrease is yet superior to non-voice growth
• 1 IT = Cloud, ICT and Datacenter Services; VAS = Managed Services, Security Solutions and Special Projects
• 2 Includes fixed, broadband and mobile.
• 3 Includes fixed and mobile.
• 4 Month of the launch of offer Oi Mais Empresas

SMEs: offer and app Oi Mais Empresas are well accepted by the market and main KPIs show signs of improvement

2Q16 Results - Operational Expenditures (Brazil)

OPEX grows below inflation thanks to maintenance of cost control

Investments in infrastructure allow delivery of new offers with consistent improvement in user quality and experience

Investments in modernization and capacity expansion of network and IT ...

• Expansion and modernization of transport network:
• Optical backbone OTN 100G
• IP backbone
• IP network Single Edge
• Network sharing
• Migration of 2G customers to 3G and 4G
• Swap of fiber and capacity aiming to improve network resilience
• Consolidation of IT architecture

R\$ million – Brazilian operations

... allow the delivery of offers better suited to customers' current needs ...

... promoting more possibilities of use and consistent improvement in user quality and experience.

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Net debt and cash balance reflecting mainly payment movements prior to protection from judicial reorganization

STATUS OF THE JUDICIAL REORGANIZATION