PHAROL, SGPS, S.A.

Capital/Financing Update • May 17, 2016

Announcement | Lisbon 17 May 2016

Notice to the Market disclosed by Oi

PHAROL, SGPS S.A. hereby informs on the Notice to the Market disclosed by Oi, S.A., "Board approval for negotiations with certain financial creditors", according to the company's announcement attached hereto.

PHAROL, SGPS S.A.

Public company Share capital Euro 26,895,375 Registered in the Commercial Registry Office of Lisbon and Corporation no. 503 215 058 PHAROL is listed on the Euronext (PHR). Information may be accessed on Bloomberg under the symbol PHR PL.

Luis Sousa de Macedo Investor Relations Director ir@pharol.pt Tel.: +351 212 697 698 Fax: +351 212 697 949

OI S.A.

CORPORATE TAXPAYERS' REGISTRY (CNPJ/MF) NO. 76.535.764/0001-43 BOARD OF TRADE (NIRE) NO. 33.300.29520-8 PUBLIC-HELD COMPANY

NOTICE TO THE MARKET

OI S.A. ANNOUNCES BOARD APPROVAL FOR NEGOTIATIONS WITH CERTAIN FINANCIAL CREDITORS

RIO DE JANEIRO – MAY 16, 2016 – Oi S.A. ("Oi") announced today that its Board of Directors approved the start of negotiations by Oi's management in relation to the financial indebtedness of Oi and of its affiliated companies.

Oi and its advisors have scheduled meetings this week in New York to begin formal discussions with Moelis & Company, who acts as advisor for a diverse Ad Hoc Committee of holders of bonds issued by Oi and its subsidiaries, Portugal Telecom International Finance B.V. and Oi Brasil Holdings Coöpertief U.A. Oi requests holders of these bonds that are not currently members of the Ad Hoc Committee to contact Moelis & Company and to join the Ad Hoc Committee.

Flavio Nicolay Guimarães Chief Financial Officer and Investor Relations Officer Oi S.A.