Oi S.A.

Bayard De Paoli Gontijo - Chief Financial Officer, Investor Relations Officer, Director of Treasury & Investor Relations and Member of Board of Executive Officers

Walter Piecyk - BTIG, LLC, Research Division Paul Marsch - Berenberg, Research Division Michel Morin - Morgan Stanley, Research Division Soomit Datta - New Street Research LLP Andrew T. Campbell - Crédit Suisse AG, Research Division Susana Salaru - Itaú Corretora de Valores S.A., Research Division Mauricio Fernandes - BofA Merrill Lynch, Research Division Jonathan Dann - RBC Capital Markets, LLC, Research Division Toby Hunston - RBS Research Maria Tereza Azevedo - UBS Investment Bank, Research Division Eric Guo - G.

Research, Inc. Mandeep Singh - Redburn Partners LLP, Research Division

Thank you. Good morning, everyone.

I have here with me Flavio Guimaraes, our Treasury Director; Nuno Cadima, our Controller; [indiscernible], Head of Accounting; Nuno Vieira, Marcelo Ferreira and the IR team. Many of you know me, but this is the first time that you'll hear me presenting our results as the Interim CEO.

Obviously, I'm taking over at a critical time. Oi and its shareholders have suffered an extraordinary damaging over in the last 9 months.

Unfortunately, our most recent set of results reflect the destruction caused by these events as well as the upfront investment associated with the transformation in a tough macroeconomic backdrop. I will not shrink from my responsibility regarding results.

We can and we'll do better. We had the inflection point of EBITDA, and we are committed to reducing the cash burn in 2015.

Meanwhile, the events of the last few weeks make it clear that globally, both industrial and financial peers, see significant value in our assets. In the past 2 weeks, we have had 2 offers for our Portuguese assets that both value the business, up to EUR 7.1 billion.

In addition, in the last few days, Terra Peregrin has made a bid for PT SGPS with the apparent intention of gaining a stake in Oi and presumably also in the hope of acquiring our African assets. I believe that these expressions of interest support our view that the assets of Oi, collectively, are worth considerably more than the market valuation of our equity currently implies.

I am committed to making views that maximize shareholder value, improving the balance sheet and paving the way to participation in Brazilian consolidation. Now let's move to Slide 3.

I want to outline here my 4 priorities as CEO of Oi: first, continue the turnaround plan but increase the focus on reducing cash burn, particularly focusing on cost reduction, which is well within our control. To that end, I want to reiterate that we will commit to reduce our cash burn going forward; second, improve the balance sheet profile by monetizing noncore assets; third, to improve corporate governance.

We have said many times that we are committed to move to Novo Mercado, but we recognize that we have not yet delivered on it. We hope to have further announcements for you on this topic in the coming weeks; fourth, we will ensure that Oi will participate as protagonist in the necessary consolidation of the Brazilian telecommunication market.

From here, I will spend some time discussing this quarter's results and our plan to reduce cash flow burn, and then I will discuss the other 3 priorities. On Slide 5, our revenues were weak this quarter, but we are seeing positive results of our investment in the last 2 months.

Our revenue performance this quarter reflects the weak gross adds that we suffered in the first 9 months of the year. However, I'm really encouraged by the more recent trends in net adds, particularly as a result of our very successful relaunch of Pay TV.

As you can see, our net add in September and October have been multi-promising with the Pay TV net adds reaching 90,000 in October. Moving to Slide 6.

Let's deep dive on the Residential business. This has been the year where Oi has established itself in the Pay TV market in Brazil through a distinctive offering, which -- with exclusive Globo HD channels in more than 2,000 municipalities and an entry-level offer with 18 HD channels.

In August, Oi reached 27.4% market share of net adds. Also, through our tiered pricing net adds approach to enhance 3P penetration, Oi has been able to bias its sales on its own customer base.

We are and will benefit greatly from increasing RGUs in Oi households through lower churn in our services. We observed a declining trend between 46% and 53% in our TV and fixed line services between 3P and 1P households.

Going forward, we believe that by leveraging Pay TV and multiple play bundles, higher acquisition and cross-sell rates and lower churn, we will be able to have positive broadband net adds. With our landline franchisee and distinctive TV offer, we are uniquely positioned in the Brazilian market.

Now going to Slide 7. In what relates to mobile, apart from focus on prepaid standalone, we see convergence as a unique opportunity for Oi going forward.

Through a distinctive offer in fixed services, which incentivizes higher share of wallet in Brazil households, we naturally simplify the life of families by offering them the option to simply add mobile, voice and data services. We have seen the growth in Oi Voz Total as a key leading indicator to pool -- to the -- of the pool we can generate from a sound and simple offer with unlimited on-net voice benefits and effective cost control, which is the preferred model for the Brazilian prepaid market.

Voz Total has a customer base in excess of 1.6 million households, a year-on-year growth of over 40%. Coupled with the Oi Conta Total, Oi has approximately 3 million convergent households with over 4 million SIM cards.

In order to improve the value proposition of the bundled product in October, we launched a new app Oi Fale Facil that allows Oi Conta Total clients to benefit from VoIP services through their fixed numbers when abroad without any charges. I am confident that we can track the path [indiscernible] in Portugal, which, on the back of an unlimited on-net offer and quality 3P offer, underpin the significant market share increase in mobile whilst further reinforcing loyalty of [indiscernible] households.

Moving to Slide 8. On B2B, we should distinguish among 2 realities.

In SMEs, we have built momentum in the last quarter through an increased focus in acquisition of convergence and mobile clients through bundled offers. This has resulted in an increase in convergence lines in our base will benefit from lower churn and a higher propensity for future up-sell and higher value-added services.

67% of our mobile sales are now convergent with other fixed services. In our base, 70% of our clients are convergent versus our internal benchmark in PT of 44%, showing a still significant cross-sell potential.

On corporate, we have continued to target greater share of wallet through growth in data revenues, increasing connectivity, cloud data center and ICT sales. We have been able to deliver on results with an increased quarter-on-quarter of over 100% in new contract in new -- in nontraditional services, driving an increased year-on-year of over 3 percentage points in the weight of non-voice revenues.

This strategy will allow to increase resilience in top line earnings in these segments, protecting our business franchisee from potential attacks from other players in the market. Now in Slide 9.

We see EBITDA penalized by revenue performance and commercial costs. We are at the inflection point, and we believe that 2015 quarterly results will improve.

Our routine EBITDA in the third quarter declined 20%. Of course, the disruption that we went through over the past few months has been a drag on the business.

But what we -- you can see is in this quarter is also the cost of transformation but not yet depicted in RGUs that we already seen in October and November. In addition, we are working hard to accelerate reduction in OpEx.

The decline in EBITDA this quarter is primarily explained by 3 factors. First, we had the revenue decline, which I discussed before, reflect the past evolution of gross adds and that penalized the trend of our net service margin, measured by service revenues minus interconnection costs.

Second, we have increased our commercial activity, as a result, commercial costs went up BRL 130 million in 3Q '14 versus the same period last year. This investment is now yielding results.

This is the OpEx that we want to protect. As regard, it is a good OpEx.

But to keep this level of investment in our turnaround, we'll have to accelerate cost cutting and transformation with a much stricter focus on G&A expenses. We have already launched a number of initiatives to tackle these issues.

I will discuss this in a moment. Third, we have additional costs, reflecting the latest on the assets we sold.

In 3Q '14, these costs have increased by BRL 1 million to BRL 131 million. I want to remind you that this financing operation allow us to extend maturity of our funding at attractive cost while also allowing us reduce our financial net debt.

Now moving to Slide 10. Declining EBITDA minus CapEx was primarily explained by the EBITDA performance, notwithstanding the effort on CapEx control.

We will continue to improve CapEx efficiency while ensuring the turnaround continues. I have outlined it to you a number of initiatives that we have been taking.

First, we will continue to focus on extracting more out of our relationship with our suppliers through rationalization, renegotiation of contracts and implementation of new models of buying. All of this will focus on optimizing the total cost of ownership.

Second, we will continue to look at ways to extract further synergies amongst our various networks, including the ability to use 2G sites to do 3G coverage, WiFi offload and leverage on multiple play. Finally, we will continue to pursue infrastructure-sharing opportunities with other players, as we are doing with TIM in the RAN sharing framework.

Now flipping to Slide 11. We're committing reducing cash burn.

In the first 9 months of 2014, we continued to burn cash at the rate we are not pleased. Routine cash flow was negative at BRL 3 billion.

This is top priority for the company. Of course, our cash flow was impacted by the revenue's slowdown, coupled with the investments in the initial turnaround of the business that we have been carrying out over the past 9 months.

However, against this backdrop, we must accelerate OpEx reduction and a more granular approach and efficient to CapEx [indiscernible]. Now in Slide 13.

CopEx at Oi accelerate. Operationally, cost reduction is one of my top priorities, as I have said, and I will accelerate actively.

[ph] We have identified additional initiatives that will deliver on OpEx and CapEx reduction while still enabling us to continue the work on the turnaround. The slide outlines the range of EBITDA minus CapEx improvement in 2015 of BRL 1.2 billion to BRL 1.8 billion.

Most of the initiatives to deliver on EBITDA and CapEx savings come on the back of the transformation that we have been working on for the last year. In both operations and channels, we expect to see benefits, a lot of work, and investments so far came through in 2015.

Moving now to Slide 14. We see operational transformation already under way to deliver cost reductions.

In operations, we have put in place, in 2014 a new workforce management system, new technician incentives and revised front to back offices processes to reduce the number of nonperforming technicians' visits. As a result, we already see a 10% improvement in productivity, which should significantly increase over time.

In sales, we have been restructuring our sales channels, getting rid of nonperforming partners and streamline performance management and back offices processes to reduce missed sales and improve its ratios. Again, we are still in early stages, but we are already seeing 15% increase in product sales, which we expect to further improve over time.

We now turn to Portugal in Slide 15. We see the Portugal operations as being -- showing consistent improvement along with the best of its peers in Europe.

While I won't be spending much time here, I want to underline that we believe this operation -- these operating trends are representative of reduced future and they emphasize the potential value of the assets to any buyer. Many industrial and investment vehicles around the world are investing in Europe's telecom revival.

In that context, there are no other assets like PT Portugal that are available. Moving to Slide 17.

As you can see, in third quarter, our net debt stood at BRL 47.8 billion while our gross debt stood at BRL 51.6 billion. Our gross debt through last 12 months' reported EBITDA ratio stands at 3.76x.

As you know, the gross debt-to-EBITDA ratio is the most important term -- in terms of our financial debt covenants. In this context, I want to make it clear that we will not breech any financial covenants.

I'd like to highlight that while I recognize that our leverage is high and needs to be addressed, our equity is solid and we have no funding requirements up to the beginning of 2016. As at the end of September, we had BRL 12.3 billion in available and committed liquidity, and the average maturity of our gross debt is 4 years.

Now in Slide 18. I will now focus on our ability to deleverage our balance sheet.

We have sold assets representing a cash inflow of BRL 5.3 billion and generating a nonrecurring deduction of BRL 3 billion. This include 2 tranches of fixed towers in April and June, a tranche of mobile towers in July 2013 and GlobeNet, a submarine cable company, in December '13.

The sale of a second tranche of mobile towers announced in June '14 is pending. This will generate cash inflow and nonrecurring capital gain of BRL 1.2 billion and BRL 1 billion, respectively.

And I'll be pragmatic with respect to other assets. In the last few weeks, we received 2 offers for our Portuguese operations.

They both value the business over EUR 7 billion. We continue to be convicted that our African assets have buyers and that eventually it will crystallize in our balance sheet the value of these properties.

In that case, and given our commitment to migrate to Novo Mercado and our hope to improve the Brazilian market structure, it would be reasonable to think about Oi's debt levels in a different way. In Slide 19, all of Oi's shareholders are committed to moving towards Novo Mercado.

This process has been delayed, primarily due to regulatory approvals. I will work to lead a company that becomes an example of the best corporate governance in Brazil, meeting the highest standards of governance globally.

Now on to Slide 20. It is clear that the current market structure of Brazil is unbalanced and unsustainable.

There's an equation here that it's not working well. There's a huge demand for data traffic in Brazil as in everywhere in the world.

There's an increase in terms of CapEx needs. Competition in Brazil is hard.

We have important players here, and competition is becoming harder and harder. And on top of that, we have regulation.

We normally have either competition or regulation. In Brazil, we have both.

To fix that equation, that is reducing returns to investors and shareholders, there's one way that we believe market is demanding in Brazil right now, which is consolidation. We do have integrated players, 3 integrated players in Brazil, 2 of them with more scale, and we have players that offer only specific services.

In that sense, it makes all the sense, the consolidation that will, in fact, improve the quality of services and increase investments and benefit the society after all. Then in Slide 21, those are my 4 top priorities.

First, continue the turnaround, controlling CapEx, making sure we do a granular and efficient approach to CapEx and reducing OpEx. In that sense, reducing the cash burn, it is one of our top priorities.

And we have guided you today that we're going to improve the top EBITDA minus CapEx in a range of BRL 1.2 billion to BRL 1.8 billion in 2015. Second, it is also our priority to improve the balance sheet profile.

We'll do that through our asset sales. As I have mentioned during the call, we are in a process of analyzing proposals for our Portuguese operations over EUR 7 billion.

That shows the quality of assets we have, and this is the way we're going to fix the balance sheet. In terms of corporate governance, I am committed to improve corporate governance of this company.

I think we have a different approach in this call, being very transparent, dealing with the results the way they were. Those were poor results, and we are talking openly about this.

And we think this is the right way to manage and to make a good relationship with the market. I am committed to bring this company to the Novo Mercado.

And as a proof of our respect for shareholders, we decided to change the order of our conference calls, and this time, we've done the -- we're doing the English call before since 70% of our investors speak English. So this is one, I think, a single -- a small proof that we are changing and that we would like to establish a new relationship with the market.

Finally, we will be protagonist in the consolidation in Brazil. In fact, we already been a protagonist in the process.

As I mentioned, we have to fix the equation of return in Brazil, high yields of investments to address the demand in terms of data traffic, hard competition, on top of that, again, regulations. And the best way to repair this is throughout consolidation.

We think it's the right time for that in Brazil. We're ready to lead the process, and we have no prejudice in how this is going to happen.

What we want here is to create or generate the maximum shareholder value as possible in that process. So I now turn back to the operator, and I'm available for questions.

Can you give any update on when you expect to make a decision on the 2 offers that were made for the Portuguese assets?

Well, it is -- we are in the process. The good thing is that we have 2 proposals, and -- I mean, we are in the process of negotiating.

I don't want to put here a deadline. I think we have to do the best deal for our shareholders.

So I'm not concerned about timing. I'm concerning in -- concerned about delivering a good deal to the shareholders, and that's our main goal here.

But you also had mentioned, I guess, on the prepared remarks that consolidation is obviously very important. So wouldn't that be a key component of moving forward with consolidation?

And wouldn't that mean that it probably makes sense to move forward with that -- whatever the -- your accepted offers going to be as soon as possible?

It is an important component for the consolidation in Brazil, definitely. We can't deny that.

But of course, we're going to do a deal that it is accretive to our shareholders. And in that sense, I think we have 2 proposals, as I have mentioned, and we have good room here to deliver on a good deal.

And then just one other question. There's been a lot of discussion in the market that there's been some -- there's some other liability.

I think in your quarterly financial filings, you referenced a large number and then there's reserves against the large number that's related to, I guess, some regulatory fees or fines or whatever it is. There's been discussion about this in the market and how that may affect consolidation.

I'm not sure that that's reflecting your net debt number. I think there's also been conversation that some of these numbers can be offset if you commit to investing in fiber projects throughout the country.

Can you just give us your view on what those -- what the amounts of those fines are? Where they show on the balance sheet and if they don't?

And is there an opportunity for regulators to offer you a way to invest in fiber as opposed to having to pay those?

Okay, let's see. This is a public company, listed company, we do not have any off-balance sheet liabilities.

We opened all the liabilities in our balance sheet. This is an important question.

I'd like to thank you for the question because I'd like to make it clear to all of the investors and shareholders of Oi. This is a listed company and we open everything in our financials and you can see everything there is in there.

So I think this end this question. And of course, we are in the middle of a process of consolidation in Brazil, and this could be good for some, but definitely, it's not true.

I just want to talk again about the Oi-PT merger and the original intention being to create a specialist telco targeting the Portuguese-speaking markets. And obviously, if you sell the PT Portugal assets, then that objective is clearly no longer relevant.

And I think that idea has not gone unnoticed by other players, who would like to be players in this situation, notably, Isabel Dos Santos, who's getting a lot of -- a big boost to her reputation in Portugal from her decision to try to come and -- become involved in this situation. So my question is, is there any circumstance under which you would accept the conditions in the offer for PT SGPS shares that are in the Terra Peregrin offer document?

I'm sure you know that there are many conditions in that document, which seemed, from where I sit, to be conditions that are unlikely to be accepted by Oi. But I'm asking you if there are any circumstances under which you might accept those conditions.

Thank you, Paul. First, well, we have already rejected all the conditions.

So it was already done. And we do not know if this OPA, or the tender offer, will continue or not, but we have already rejected all the conditions.

Not willing to change anything in the agreements we've done with PT SGPS. So this is one point here.

The second, way to see this is that -- I mean, there's definitely interest from our partners in Unitel, and you can see this in 3 different aspects. First, there might be an interest here in acquiring our stake in Unitel, which is welcome because we are selling the assets.

Second, there might be an interest in acquiring our assets in Portugal, which is also good because we have already 2 potential candidates for the asset, having a third one would be nice. So I'm happy about it.

And finally, maybe they're willing to participate in the consolidation in Brazil, which, again, emphasizes that there is great opportunity and value creation in consolidation in Brazil. So again, we rejected all the conditions, but I think that's a good sign.

A sign of interest in our assets are sign of interest in the consolidation in Brazil.

And can I just follow up with that, maybe as a technical question about listing on the Novo Mercado? There's a 7.5% limit in the agreement with PT SGPS.

In the event that PT SGPS ends up being acquired by a single owner, even though in theory, that would give them 25.6% of Oi or CopCo, their voting power would actually be limited to 7.5%. But is it possible, technically speaking or theoretically speaking, that a single owner could end up owning 25%, 26% of CopCo and still a CopCo be migrated to the Novo Mercado?

Yes, definitely. I mean, we are migrating to Novo Mercado.

That's our goal. That's what we're going to deliver on.

And again, PT SGPS, in many circumstances, will be limited to 7.5%. It doesn't matter if it is with different controlling shareholder, with the current shareholders.

It's going to be always limited to 7.5%. That is exactly what we rejected in that tender offer.

We remain that limitation in terms of the ability to vote.

I was just wondering, Bayard, it's nice to see you've got competing offers for the Portuguese assets. But when we look at the results, clearly, you're still burning cash, and it looks like the Portuguese asset is actually performing better than the Brazilian asset at this point.

So I'm wondering if you can give your sense of how the Brazilian asset would continue to perform from a cash flow perspective -- from a cash burn perspective without the Portuguese assets, if you were to look at your objectives of improving the EBITDA less CapEx that you referenced earlier.

Well, you're right. We had the difficult year so far, as I have mentioned in the call.

We still have the cash burn. We are not pleased about this.

Portugal is doing better than Brazil. Yes, you're right as well.

But this is also an opportunity, right? It brings our turnaround plan here and opportunity of investment.

There's room here for improvements, and we think we have the right tools to do that. We have the right people, and we are doing the turnaround throughout structural changes in terms of the click, the management, workforce tool that we have for our field force.

We're doing this throughout engineering. We're doing this throughout IT.

And we think that if we sell the Portuguese operations, it will boost our ability to turn around the business and it will allow us to participate in the consolidation in Brazil. And for -- again, I think that the situation we face today in Brazil gives us, in fact, an opportunity to improve and deliver on results.

Couple of questions, please. One, just on the operating free cash flow guidance increase, BRL 1.2 billion to BRL 1.8 billion.

Can I just double check, please? That is all Brazil, is it?

Or is it the group? And can I also check, is that routine EBITDA?

Or does that include the BRL 1 billion gain from one of the asset sales? And then just finally, can you give any sense of the split of EBITDA versus CapEx, please?

And then I've got a follow-up question as well, please.

Okay, Soomit. First, the guidance of BRL 1.2 billion to BRL 1.8 billion in EBITDA minus CapEx is Brazil only, okay?

That does not include any asset sales. This is our ambition.

This is what we are committing in this call here. We will reduce the cash burn, and this is a proof that we are confident that we can deliver on it, okay?

Your second question, I'm sorry, I won't be able to answer.

Okay. Can I follow up with just a different question, please?

There have been a couple of comments from the Communications Minister, I think, earlier this week, talking about the Broadband For All project going forward. BRL 40 billion has been mentioned in the press, I think.

I just wondered, did you have any early sense as to how Oi might fit into this whole process? Obviously, in theory, it sounds potentially supportive if there's some support for financing of infrastructure?

First of all, any universalization of broadband in Brazil without Oi is impossible because we have the largest footprint in terms of backbone, backhaul in Brazil. We have over 330,000 kilometers of infrastructure available in Brazil.

But in regard to that announcement of the Minister, we don't have yet the terms and conditions. We don't have any specific guidance of how this is going to be deployed, and we cannot say anything at this stage.

So we will participate in any circumstances in any universalization of broadband in Brazil. Of course, it has to be accretive to our shareholders.

But without Oi, it's simply not possible in Brazil. But I can't mention on that because we do not have the terms and conditions yet.

I was wondering if you have a preliminary figure for what you would expect CapEx to be for next year. I realize that it's quite early, but perhaps you have a range or a rough idea for where that might come in.

Andrew, we gave you guidance for EBITDA minus CapEx, and that's it for this call. I mean, we are not guiding for CapEx standalone at this moment.

Okay. And can I just clarify also the tower sale of the one that's pending?

Do you expect the proceeds -- do you expect that to close most likely in the fourth quarter still?

December. Closing-is going to happen in December.

I have 2 questions here. First, on the fines with ANATEL.

We believe that on March, it's going to be concluded, the TAC, the instrument that allows the swap of fines by -- for investments. So if you could just elaborate on -- if Oi is being part of it.

We believe it is. And what is the rough amount that's going to be -- that's been disclosed with [indiscernible] ANATEL to be swapped -- swap the fines for investments?

That'll be our first question. And the second question, in terms of cost controls.

Do you believe that in 2015, you're going to be able to subtract the most of it, so at the end of 2015, you should already be at that EBITDA level that would be recurrent EBITDA level in terms of cost or it should be an ongoing effort that should take longer than 2015?

Susana, first, on the TAC from ANATEL. We led that process.

It is an important process. The cycle we used to have here is a very, very -- it is a terrible cycle.

I mean, it is -- receiving fines. Receiving fines, it impacts our ability to invest.

If we do not invest that amount of money, then quality goes down. Then it's fines again, less CapEx, less quality, so it's a terrible cycle, right?

So we were the mentors and we led the discussion, together with ANATEL, because we want to create, again, a positive cycle for the society. So instead of fines, we can invest more, quality will go up, fines will reduce and then, I mean, it's going to be good for everyone.

In that sense, we're working hard here to present all of our initiatives for the TAC We will submit those until the deadline, but we cannot talk yet about the numbers and the initiatives because this is a work in progress. And it will avoid, in fact, any of the disputes that we still have with ANATEL become a liability in the future.

Before, it is an extremely important process for us, and we are focused to submit our initiatives by end of March. On the second question, cost control.

We have a list of initiatives that we'll deploy in 2015. The -- within the next 12 months, we believe we're going to be able to capture those synergies.

Of course, some of those initiatives we have to expand first to then collect later. Therefore, probably, you're going to see the recurring impact -- positive recurring impact more towards 2016.

But we are going to see a good impact still in 2015. And more than that, cost control and reduction is an ongoing process.

You not stop doing that. You do this frequently.

You do this every day. So we have those list for 2015.

We're going to have a set of initiatives going forward because we cannot stop controlling this, and it is in our top priority this year.

Two questions, please. Yesterday, we have some comments from TIM Brazil's CEO, commenting that in his view the potential breakup of TIM would be an absurd scenario.

And in terms of your stated goal of acquiring TIM, or at least have a stake in TIM, are you willing to bear with other scenarios and then just the acquisition of TIM, for instance, potential merger between the 2 companies? Secondly, on the potential sale of the African assets.

There were some news that there could be interest from MTN or Vodacom on your stake in Unitel. Can you just update us on that, if there has been any possible interest from a third party on those assets?

Okay, thank you for the question. Of course, I can't comment on what TIM said yesterday.

I mean, I respect them. I think, again, they have their view on the process.

So far, we have hired BTG to act as our comissário mercantil. But as I have mentioned to you, my objective here is to create shareholder value.

So I don't have, and will I repeat that, any prejudice in how we're going to do that, but we will do it. So I think that addresses the question of how we're going to do it.

What I am here saying is that consolidation in Brazil is key, and it's going to happen. Second, regarding our African assets.

We have started the process. We're working on the potential buyers, talking to us.

We are seeing interest in the asset. It is definitely a good asset, but nothing in terms of concrete proposal so far.

So it is, as we know, a long process, but it's moving forward, and we are confident we're going to crystallize this asset sale.

So Bayard, given the relevance of selling the Portuguese assets, it seems that the tender offer for PT SGPS -- even not being part of the conditions involved for the tender offer, it seems that it would hold if the tender offer is validated. It would hold the sale process for -- until the offer is concluded or if the offer is not validated.

So could you just explain why -- if that's true and why is that the case? And what are the next steps that we should expect in this process, please?

Mauricio, thank you for the question. Well, first of all, I will repeat what I have said.

I mean, we have rejected all the conditions of the tender offer. In that sense, waiting to see what the regulator is going to do regarding the offer in the next days.

Having said that, if the tender offer continues -- -- PT SGPS, it is one of our shareholders that sits in [indiscernible]. And it has -- in its shareholders' agreement, we have a process where controlling shareholders, they have to vote together, aligned.

And if one of them are conflicted, then either the other decide or we'll submit this to a General Shareholders' Meeting. Well, that's how we're going to deal with the situation.

I mean, first, we have rejected all the conditions. So we'll see if we still have a tender offer or not.

If we do, again, shareholders should vote aligned within the shareholders agreement of Oi. If one of them is conflicted, then it is either a way where the others can decide or we'll submit this to a General Shareholders' Meeting.

It's actually Jonathan standing in for Gonzalo. Two questions, really.

The first one, in terms of selling the Portuguese assets, is there a particular reason why you retained the euro-denominated debt? I guess that would seem to present a sort of currency mismatch.

And then secondly, I think you mentioned October and November trading. I mean, is it fair to say that Pay TV additions have remained strong?

And do you think we -- in the fourth quarter, should we expect to see reduced line loss?

Thank you, Jonathan. First, maintaining the euro-denominated debt out of the disposal of the Portuguese operations.

We do that because it will create or it will give us the ability to participate in the consolidation in Brazil. And if consolidation does not happen, then what we're going to do with that cash is reduce leverage.

So there's only 2 things we're going to do with the cash out of the asset disposal. One, use it to participate in consolidation in Brazil or to pay down our leverage or debt.

So that's why we are bringing -- if we sell the Portuguese operations, we'll be bringing the leverage and bringing also the cash. In regard to the Pay TV, Jonathan, we can say -- I can say to you that performance in October and November is good performance.

We are increasing. We are increasing the gross adds, therefore, that's what we expect for the future.

I think it's -- I think we should step back here. If we go back, I think, 1 year ago, our Pay TV product was not a good product without a good content.

I mean technology was not good. We have changed that with the relaunch of the TV in April.

The new product is gaining momentum. It is now seen as one of the best DTH TV offers in the country.

We're leading net adds. We are adding gross adds.

The trend in October, November is improving, and this is going to be key to protect our Residential services. This is going to be how we're going to be seen in a market as a convergent player.

And we're happy we are having that -- those results, and we will maintain those results.

Can I ask a follow-on? On Slide 20, you basically, I think, very clearly lay out the existing 5 groupings.

What do you think happens to Sky, AT&T?

I can't answer that, Jonathan. You should call them.

Just to follow up on the previous question regarding gross leverage reduction. Assuming that the proceeds from the Portuguese and African assets top the EUR 7 billion, potentially EUR 8 billion or EUR 9 billion, would it be your view that you would use all of that or it will be necessary to use all of that in consolidation in Brazil?

Because my thinking is it would be a significant portion of that left over. And then on top of that, I appreciate any thoughts you have on a specific net debt target?

And then finally, I noticed that the liquidity position seems to have deteriorated a little bit, just based on the credit facilities available and cash on hand. So any comments around that would be appreciated, too.

Thank you for the question. Well, first -- I mean, in terms of the consolidation and the use of proceeds of any asset disposals, I mean, we're in a process of, first, negotiating the assets.

So I'm not in a position today to give you any specific numbers here. And second, the main -- consolidation in Brazil is, in fact, at early stages.

We are discussing how it's going to happen. Clearly, there is now a much more interest from, I think, the industry.

All of the players, they're willing to see this happening for a simple reason. We have to fix that equation of return in Brazil, and I think the conditions are together aligned for that to happen in the short term.

But I can't -- I'm sorry to discuss with you economics of this because, of course, we're negotiating in both sides.

Okay. And then on the liquidity position as well, that the -- I noticed that one of the credit facilities seemed to have declined by quite a sizable chunk, down to BRL 200 million.

I was just wondering. And also I think the CP [ph] facility had dropped quite a bit.

So I was just wondering if there's any comment you can make on that.

Sure. We disbursed that real revolving last quarter.

We disbursed because we have the -- a convertible coming due in Portugal, so we disbursed in reais. We send the money abroad.

We've paid that facility, and we've done this in reais for mainly hedging purposes. So when we do this, of course, reduce our exposure to euro as well, and that was the -- the was a reason for disbursing that facility to pay down the conversion -- convertible in euros, but that's why it reduced.

All the other facilities are available, committed. And again, we stand today in a very good position in terms of liquidity.

We're talking about over BRL 12 billion, so it is a comfortable situation. Since next year, we have coming due around BRL 4 billion, so it's more than enough to refinance everything that we have coming due in the next 12 months.

This is Maria Azevedo here. Can you please give us any indication on how the discussions about the concession anticipation are resolving with ANATEL?

Do you think there is any feasible chance that they are willing to reduce the incumbent CapEx burden on Oi as soon as 2015 now that this Broadband For All plan is coming out?

Thank you, Maria, for the question. As you can imagine, I mean, those discussions, they are private between the company and ANATEL.

Of course, we have discussions about what they're going to do in terms of the concession for the upcoming term, but I mean, we have to evolve on that. We are not in a stage to share with the market yet.

So -- I mean, as soon as we have news here, we'll let the market know throughout a press release or a conference call.

Okay, perfect. And as a follow-up question, do you have any indication on how the government is supporting or not the consolidation movement in Brazil?

As I have said, I think we are seeing now in Brazil things are aligned for that to happen. And again, we see consolidation as a good thing for the society, right?

It will strengthen the position of the operators. It will give them the ability to even increase investments and to deliver quality services to the clients.

That's how we see it. We cannot answer that for the regulator, of course, but we think there's here an opportunity to improve the industry and to benefit all the society out of this consolidation.

If I heard it right, you said the guidance for 1 -- it's -- for the EBITDA minus CapEx is for BRL 1.2 billion to BRL 1.8 billion for the next year for Brazil. Can you please explain what will be the drivers between the minimum and the maximum?

Because I see the range is quite broad. Is it more dependent upon your EBITDA performance?

Or is it more dependent on your CapEx control?

Thank you, Tony. As I mentioned before, I'm sorry, but I won't give you the breakdown of CapEx and EBITDA.

But as I mentioned during the whole presentation, one of our top priorities is to reduce costs. So you can figure out where we're going to be tighter.

Just a quick question on the reverse share split. I was just wondering if you could shed some light on the timing of the share split.

And also, will the existing Telemar Participações shareholders be subject to the split as well?

Eric, we are planning to finalize the whole process of the share split by mid-December. Well, that's the plan.

I don't know if I got your second question.

My second question was if the existing shareholders of Telemar Participações will be subject to the reverse split as well?

All shareholders, all shareholders. This is the same for everybody.

So I have 2 questions, please. The first one is, if you are successful in selling the Portuguese assets, do you have the balance sheet capacity to participate in a joint bid for TIM without resorting to a rights issue?

That's the first question. The second question is, is it necessary to get the renegotiation on the concessions prior to engaging in a Brazilian consolidation?

Or can you start that process before the concessions have been renegotiated?

Thank you for the questions. Before I get into the answers, let me clarify something.

The guidance we're giving in terms of EBITDA minus CapEx is improvement in terms of -- in comparison to 2014. So it is an improvement of BRL 1.2 billion to BRL 1.8 billion of EBITDA minus CapEx.

Just to make it clear, okay? Now going to your questions.

I'm going to be very straight to the point here. First one is, yes.

The second one is, no. Well, let me elaborate on the second one.

We -- I think there are different things. One is the consolidation, and we're moving forward with the consolidation.

And it does not have anything to do with the concession here. We're going to be discussing concession with ANATEL as of our current business.

I mean, we got to do that. This is what we need to do to run our business, and it won't be affected by any possibility of consolidation in the meantime.

On the first one, yes, if we do sell the assets, we will not raise any additional capital to do it. We'll sell the assets to be able to participate in a consolidation without accessing the equity market.

Can I just follow up? Does that mean just the PT domestic assets?

Or would you also need to sell Africa?

We -- Africa is available. We said that it is for sale, and we will -- we'll continue to pursue that monetization, okay?

We are selling Portugal operations. As you saw, we have 2 proposals in front of us.

This is key for participation in the consolidation process. We are also selling assets, as we've been doing in Brazil, in terms of towers.

We still have the second tranche of the mobile towers to happen still December. We still have a tranche of towers to be done in 2015.

Before -- with the assets we have, we are able to participate in consolidation without accessing the equity market.

I just had a quick follow-up. I just wanted to clarify with regard to options of TIM Brazil.

You said that you wouldn't raise any more equity. So that also rules out any additional debt issuance.

So it would literally just be proceeds from asset sale that would be used for facilitating consolidation.

That's exactly it. Correct.

We're going to sell assets, and this is going to give us the ability to participate.

Well, thank you very much for attending the call. It was a pleasure having this first call as an Interim CEO with you.

I hope we are starting a new era of this company. And again, I'd like to just reinforce our priorities here: first, control and reduce cash burn; second, improve corporate governance.

We will do that; then improve the balance sheet profile through our asset sales. We are doing this.

We have proposals in our hands, working to repair the balance sheet as well; and again, being protagonist in the consolidation of Brazil. So those are our top priorities here, and I'm committed to delivering all of them.

Thank you very much for being with us today, and hopefully, we'll see you soon.