Oi S.A. ADR. (OTC:OIBRQ) Q3 2019 Results Earnings Conference Call December 2, 2019 9:00 AM ET Company Participants Rodrigo Abreu - COO Camille Faria - CFO Antonio Rabelo - Legal Counsel Conference Call Participants Fred Mendes - Bradesco Susana Salaru - Itaú Soomit Datta - Newstreet Carlos Sequeira - BTG Pactual Andre Baggio - JPMorgan Operator Good morning, ladies and gentlemen. Thank you for standing by. And welcome to Oi S.A. Conference Call to discuss the Third Quarter of 2019 Results. This event is als ...

Financial Performance - Oi's total net revenue in Brazil decreased by 8.8% year-over-year, from R$5431 million in 3Q18 to R$4955 million in 3Q19[54] - Routine EBITDA decreased by 30.7% year-over-year, from R$1454 million in 3Q18 to R$1008 million in 3Q19[54] - Capex increased by 37.1% year-over-year, from R$1502 million in 3Q18 to R$2060 million in 3Q19[54] - Net loss was R$5521 million in 3Q19, compared to a net loss of R$1366 million in 3Q18[54] Operational Highlights - Homes passed with fiber reached 3.6 million at the end of September[12] - Homes connected (HC) over homes passed (HPs) with fiber was 11.4% in September[12] - Postpaid customer base increased by 22.8%, from 7355 thousand in 3Q18 to 9032 thousand in 3Q19[25] - IT contracted revenue grew by 192% year-on-year, contributing to the total Corporate segment revenue growth[13] Strategic Initiatives - The company is focusing on strategic initiatives such as great fiber acceleration, continuity of mobile's growth strategy, sale of non-strategic assets, fund raising, and simplification and cost reduction[10, 11] - The company aims for R$1 billion reduction in annual costs through structural cost reduction and digitalization programs[47]

Financial Data and Key Metrics Changes - The company reported a cash consumption of R$1.9 billion in the quarter, with R$700 million attributed to timely payments of Anatel fees [23] - EBITDA for the quarter was R$1.2 billion, aligning with the guidance for 2019 [19] - The company experienced a 30% decline in EBITDA year-over-year but expects a growth of 15% to 20% going forward [47] Business Line Data and Key Metrics Changes - In the mobile segment, the company achieved a 33% share of postpaid net adds, the largest in its history, leading to an 11.5% annual growth in postpaid revenues [4][5] - IT revenue in the corporate segment grew by 27% year-over-year, contributing to the stabilization of B2B revenue trends [5][16] - The residential segment saw a 1.2% quarter-over-quarter decline, indicating a slowdown in the annual decline primarily due to falling copper revenue [6] Market Data and Key Metrics Changes - The company ended July with 291,000 homes connected with FTTH, representing a 10.2% take-up rate [4] - The fiber deployment accelerated, reaching 2.8 million homes passed by July, with a target of 4.6 million by the end of 2019 [3][8] - The company aims for a take-up rate of 15.2% with 700,000 customers by the end of 2019 [9] Company Strategy and Development Direction - The core strategy focuses on fiber deployment, with significant investments aimed at expanding the fiber footprint to enhance competitive advantage [25][26] - The company plans to divest non-core assets to fund its strategy, targeting R$12.5 billion to R$14.5 billion in funding through various initiatives [30] - The transition from copper to fiber is expected to improve margins and reduce churn rates, supporting revenue growth in the long term [26][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth by 2021, despite current declines, due to the positive impact of fiber deployment [44] - The company is closely monitoring cash flow and exploring options such as secured debt issuance and capital raises to maintain CapEx investments [34][23] - Management acknowledged the challenges posed by competition in the fiber segment but emphasized the strength of their brand and network quality [38] Other Important Information - The company accelerated investments by 20% sequentially and 50% year-over-year, reaching a CapEx of R$7 billion to R$7.5 billion for the year [21][22] - Digital transformation initiatives are expected to enhance customer experience and operational efficiency, contributing to cost reductions [19][20] Q&A Session Summary Question: Does the company have an estimated date for the sale of Unitel? - The company expects to close the deal in the fourth quarter of this year and is in advanced negotiations [33] Question: What is the company's strategy regarding cash burn and maintaining CapEx investments? - The company anticipates cash burn as part of its investment strategy and is exploring alternatives like secured debt and capital raises to support investments [34] Question: What strategies are in place to accelerate FTTH take-up rates? - The company competes effectively against ISPs by leveraging brand strength and network quality, focusing on suburban areas for expansion [38] Question: What are the expected contributions to OpEx savings? - The company has an ambitious cost takeout program and expects to provide more details in the next quarter [40] Question: What is the guidance for CapEx and revenue trends? - The company expects CapEx to exceed R$7 billion this year, targeting around R$7.5 billion, and anticipates a stabilization and potential growth in revenues [43][44] Question: What gives confidence in achieving EBITDA growth? - The shift towards higher-margin business lines like FTTH and cost reduction initiatives are key drivers for expected EBITDA growth [48]

Aig Rio de Janeiro, August 14th, 2019 RESULTS 2Q19 IMPORTANT NOTICE 2 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 – under Judicial Reorganization ("Oi" or "Company"), business strategies, future synergies, cost savings, future costs and future liquidity are forward-lookin ...

Financial Performance - Net operating revenue for the year ended December 31, 2018, was US$5,693 million, a decrease from R$23,790 million in 2017[47] - Gross profit for 2018 was US$1,610 million, down from R$8,114 million in 2017, reflecting a decline of approximately 80%[47] - Net income attributable to controlling shareholders for 2018 was US$7,063 million, compared to a loss of R$3,736 million in 2017[48] - Total assets as of December 31, 2018, were US$17,355 million, a decrease from US$70,987 million in 2017[51] - Cash and cash equivalents at the end of 2018 were US$1,132 million, down from R$6,863 million in 2017[51] - Total current liabilities increased to US$2,643 million in 2018 from US$9,831 million in 2017[51] Dividends and Shareholder Returns - The company has not paid any dividends since January 1, 2014[46] - Oi must pay at least 25% of its consolidated annual net income as dividends or interest on shareholders' equity, but this may not be available due to financial conditions[160] - Under the RJ Plan, Oi is prohibited from declaring or paying dividends until the sixth anniversary of the Judicial Ratification of the RJ Plan[161] Debt and Financing - The company may seek to raise up to R$2.5 billion in capital markets and borrow up to R$2 billion under new export credit facilities[83] - As of December 31, 2018, the company had total outstanding loans and financings of R$30,379 million, with R$16,450 million after fair value adjustments[80] - The company is subject to financial covenants that limit its ability to incur additional debt, which could affect its operational flexibility[79] - As of December 31, 2018, R$17,873 million, or 58.8%, of the total consolidated loans and financings were denominated in currencies other than the real[148] - As of December 31, 2018, the company had R$12,256 million of loans and financings subject to variable interest rates, which could increase financial expenses[156] Market and Competition - The company faces significant competition from over-the-top (OTT) providers, impacting its ability to compete effectively in the market[71] - The company faces significant competition in the Brazilian telecommunications market, particularly from Claro and Telefônica Brasil, which may adversely affect its results of operations[106] - The company expects a continued decline in the number of fixed lines in service due to customer preference for mobile services[108] - The company faces increased competition from OTT services, which may adversely affect the average revenue per unit (ARPU) generated by its mobile customer base[112] Regulatory Environment - The Brazilian telecommunications industry is highly regulated, with potential changes in regulations that could adversely affect the company’s operations[59] - The company must comply with regulations regarding radio frequency emissions, which could impact its network expansion and service quality[67] - The Brazilian federal government has significant influence over the economy, which could adversely affect the company's business and financial condition[137] - The company faces risks related to potential changes in government policies that could adversely impact the telecommunications sector and its operations[145] Legal and Compliance Issues - The company is subject to numerous legal proceedings, with claims against it totaling R$27,586 million in tax proceedings, R$771 million in labor proceedings, and R$1,723 million in civil proceedings classified as "possible" losses[91] - The company has identified a material weakness in its internal control over financial reporting, which may affect its ability to report results accurately[86] - The company must continue remediation activities to improve its operational and financial systems, as failure to do so could lead to additional material weaknesses[88] Operational Challenges - Cybersecurity risks pose a threat to the company’s operations, potentially leading to significant business losses and reputational damage[75] - The company’s ability to adapt to rapid technological changes is critical for maintaining competitiveness in the telecommunications industry[70] - The company is experiencing pressure to maintain and expand its telecommunications services network, which may require significant managerial and financial resources[114] - The company is reliant on a limited number of strategic suppliers for equipment and materials, which poses risks of disruptions and delays[118] Employee and Management Risks - The company is dependent on key personnel, and the loss of senior management could adversely affect its business and financial condition[99] Customer and Revenue Risks - The average monthly churn rate for the Personal Mobility Services business was 4.0% in 2018, indicating a significant customer turnover[110] - The company is exposed to credit risks from customer payment delinquencies, which could negatively impact its financial condition and results of operations[96] Pension and Benefits - The company recorded an aggregate deficit of R$579 million in its Brazilian pension benefit plans as of December 31, 2018, which may require additional contributions[125] - The company has recorded R$575 million as a liability for pension benefits, which may increase due to actuarial deficits or investment losses[125] Strategic Initiatives - An agreement was signed with Huawei to acquire equipment and services to modernize network technologies over the next five years[244] - The projects supported by the Huawei agreement aim to expand mobile telephone coverage and fiber optic broadband capacity[244] - The modernization will allow the gradual use of 2G and 3G frequencies to provide 4.5G services across all municipalities served by the mobile network[244] - The network upgrade is intended to prepare for the implementation of 5G technology and Internet of Things (IoT) solutions[244] Judicial Reorganization - The company filed for judicial reorganization in June 2016 due to financial challenges and has since been working on a recovery plan[178] - The RJ Plan was confirmed by the Brazilian court on January 8, 2018, and is binding on all parties involved[181] - The company has received recognition of its RJ Proceedings in the United States, England, and Portugal, facilitating its restructuring efforts[184][193] - The PTIF and Oi Coop Composition Plans were confirmed by the Dutch District Court on June 11, 2018, allowing for the restructuring of claims against these entities[192] Claims and Payments - The aggregate amount of claims for holders of Defaulted Bonds recognized by the RJ Court was R$32,314 million[201] - Holders of Defaulted Bonds could elect to receive a Qualified Recovery, which included approximately US$195.61 in New Notes and 38.57 Common ADSs per US$1,000 of Bondholder Credits[206] - The settlement of the Qualified Recovery resulted in the issuance of US$1,653.6 million principal amount of New Notes and 302,846,268 new Common ADSs[210] - Under the RJ Plan, Oi will pay creditors 100% of recognized claims in 24 semi-annual installments starting August 2023, with 2.0% for the first 10 installments and 5.7% for the next 13 installments[218]