Oi S.A.

Bayard de Paoli Gontijo - CEO Jason Inacio - Transformation Officer Director

Jonathan Dann - the Royal Bank of Canada Richard Dineen - UBS Daniel Federle - Credit Suisse Soomit Datta - New Street Research Walter Piecyk - BTIG Mitchell Martin - Morgan Stanley Pedro Oliveira - BPI Investment

Good morning everyone. I have here with me [indiscernible] B2C Director, [indiscernible] B2B Director, [indiscernible] Engineering Director, Jason Inacio, Transformation Officer Director, [indiscernible] Network Operations Director and our finance team, with [indiscernible] Treasury Director, [indiscernible] Controller, [indiscernible] CFO of PT Portugal, Bruno [indiscernible] Head of Accounting PT Portugal and myself here and the IR team.

Good morning and thanks for joining the call. I'd like to start by making three broad points.

The first is that, we're making progress towards the priorities that we laid out at our last set of results. And the second is that, this is a better company than the market thinks and one, I'm proud to be part of it.

The third is, I appreciate the investors that have stood with us during these difficult times and I want you all to know that we'll work hard for all of you. We do not think that our current share price reflects our fair value of our business.

On the Slide 2, with regard to our four priorities we laid out at the beginning of the year, we are making substantial progress. We said that the third quarter would prove to be an inflection point and we'll reiterate that today as well as our guidance for 2015, routine EBITDA in a range of R$7 billion to R$7.4 billion and routine EBITDA minus CapEx improvement in a range of R$1.2 billion to R$1.8 billion.

This is well above analysts forecast for our company. Trends are getting better, practically all aspects of our business and we're confident that we'll deliver the results we have promised this year.

We said that we would work to lighten our balance sheet and while we still have a long way to go, our signed SPA with Altice regarding the sale of PT Portugal for €7.4 billion reduced the risk of the business and reduced our leverage substantially. Additionally, we conclude the negotiation of the covenant waivers for the next 12 months are continuing to work on other ways to increase our flexibility.

It is personally disappointing to me not being able to announce that we have moved to Novo Mercado, but approval of the Rio Forte exchange at the shareholder meeting, yesterday should allow us to explore other temporary alternatives. In that sense, as we disclose in the material fact yesterday, Oi's management has evaluated and suggested to TmarPart and its shareholders certain temporary share structures to be adopted prior to the listing of the share on the Novo Mercado, which would allow, among other things; one, providing the shareholders of Oi various rights to which they would be entitled if their shares were listed to Novo Mercado.

Two, adopting higher standards of corporate governance, including electing the slate of directors of TmarPart and the board of directors of Oi. Three, the diversification of Oi shareholder base, which would no longer have controlling shareholder.

Four, terminating the current shareholder's agreements applicable to both TmarPart and Oi and five, merging the controlling companies of Oi and TmarPart in a manner which will simplify the capital structure of Oi and allow it to benefit from the resulting financial synergies. One of the proposed temporary share structures recommended by Oi's management is the voluntary conversion of Oi's preferred shares into ordinary shares respecting the exchange ratio of [0.92 11] common shares for each preferred share.

We expect to announce evolution of this process soon. We have nothing to report with regard to consolidation, in our view there has been much talk about this issue.

Views are better than, than talked about, so I will simply say that we continue to think that consolidation would be beneficial to all operators in Brazil. But I would also note that as our business improves our ability to take the kind of role we want in the process we want to improve.

Before I get into the operation details, let me clarify some accounting matters on Slide 3. As we have disclosed to the market, in December we’ve settle a SPA with Altice for the sale of Portuguese business.

Closure of which is pending completion of the regulatory process in euro that we expect to be complete in the first half of 2015 with funds transferring expected until June. As a result PT Portugal results are presented in December 2014 financial statements as discontinued operations and I won’t be discussing those results in this call.

Moving out to Slide 4, the net income of Brazilian operations stood at R$8 million in 2014 however on an accounting basis and I shared that is on an accounting basis and that the cash we are expecting isn’t changed. The discontinuation of PT Portugal generated accounting provisions for losses estimated at R$4.2 billion.

The total amount related to the difference between the book value of the assets that are to be sold and the price we will receive. Important to explain that almost two thirds of the loss can be reversed in the future.

As we show in the chart part of this amount approximately R$1 billion refers to the exchange variation gains over PT Portugal book value since May 2014 when we acquired the asset. These gains are registered in the shareholders equity and will be reverted to the net income on the closing of the sale.

Therefore this part of the accounting loss will be reversed. Additionally, the price negotiated includes an earn out of €500 million or R$1.6 billion, that are to be received by the company in the future depending on revenues performance.

This amount was excluded from the price therefore this part of the accounting loss can also be reversed in the future. Finally, we had a loss of R$1.4 billion in the asset which is associated to the increase in PT employees’ pension fund liabilities and other adjustments usually considered in this nature of transactions.

Therefore despite the operational net income of R$8 million on Brazilian operations after the accounting impact from PT Portugal discontinuation and the operational losses from PT Portugal business since May 2014 the consolidated net loss in 2014 stood at R$4.4 billion. Now let’s move to Slide 6, and I will discuss the Brazilian results in detail.

We have had disclosed already the EBITDA of October and November and obviously December was better again in line with our expectations and generally improving trends in the business. On this slide you can see sequential improvement across the board as well as improving year-over-year trends.

Total revenues improved 4.8% sequentially reaching R$7 billion [indiscernible] year-on-year but much better than the third quarter decline of 5.1%. The biggest contributor to the improving trend was Personal Mobility in particular customer revenues in Personal Mobility which return to a positive ground increasing almost 10% sequentially.

Routine EBITDA, this is still falling too fast but improved 7.4% sequentially. At our last results we said that the third quarter was inflection point these results are a small step towards that.

We expect the first quarter to confirm the trend. Routine EBITDA minus CapEx also improved significantly on a sequential basis underpinned by the EBITDA improvement and the first initiatives to control CapEx.

On Slide 7, you can see that the customer base is stabilizing as we focus on quality and profitability. Our TV product continues to post strong net adds and improving mix, supporting our convergence strategy in the residential and contributing to a lower churn.

I’d like to note that the only negative trend on this page is the reduction in prepaid customer as a result of a base cleanup in [indiscernible] paying taxes on inactive customers. Slide 9 shows a breakdown in our revenues by segment and I think makes the turning point in service revenue clear.

Wireless revenues are growing underpinned by improved recharges and data, residential revenues continue to decline but as we will show you later on we are confident that these too should start to improve. On Slide 10, we see that the focus on prepaid and data is delivering results, volume of recharges improved significantly in the quarter specially in December when we have our historical record in terms of revenues from recharges.

The performance lead to a 9.9% sequential increase in customer personal mobility revenues, which is above our peers. Data mix has also been increasing and today represents more than one-third of the mobile service revenues in line with all peers.

On Slide 11, I want to put some [sense] behind one of my first three points on this call that Oi is not as weak a company as the market and some of our competitors like to imagine, based on Anatel’s quality metrics we see that in terms of 3G data drop Oi has always been the operator with the best quality. Considering 3G data access we presented a substantial recovery in 2014 and today we are very close to the leaders.

These indicators are the best possible to access client experience since it measures the network quality end to end. In Slide 12, I want to take a moment to discuss the future of the wireless business in Brazil.

The Brazilian market is on its cusp of a material change. Oi has been significantly hurt by Brazil’s high end kiosk historically, while other players have benefitted from them and the network effect they create.

Today consumer spend $0.50 to $0.75 a day for on-net calling and R$1.20 a minute to call someone from another network. Last month, MTRs fell by 33% and next year they will fall a further 37.5% to just $0.10.

This change will erode the on-net payer advantage of large operators specially the ones more expose to pre-paid and that is precisely why one of our competitors approached to Anatel against their decision to reduce MTRs. We’re happy to see that this appeal was rejected by Anatel on Tuesday of this week as they specifically noted that the declining MTRs was intended to reduce this scale advantages and community effect of high MTRs.

On the last of this page, you can see the planned decline in MTR in Brazil and on the right you can see the effects of similar changes in Europe. The experience of euro shows us that smallest operators benefit while the largest give up market-share.

We think that Oi is well positioned to take advantage of this opportunity as value for money operator in a market of consumers that will be increasingly concerned about value and convergence. Moving to residential on Slide 13, I am very proud of our TV product that we think is the best in the market.

Clearly customers agree as we have been the market leader in market-share of net adds in the last half of 2014. Even better, first payment defaults have decline as we have grown reinforcing the high quality of our TV growth and our commitment to profitability.

Our TV is a key pillar on our convergence strategy, as it is very clear the benefits of the triple play on customer loyalty. RGUs per household improved three percentage points boosting year-over-year ARPU growth to 1.8%.

Additionally, as you can see on the bottom right of this page, we have repositioned our offers and sales strategy improving the mix of process in line with our focus on profitability to deliver our guidance for 2015. Moving to Slide 14, we see that our major competitors are slowing their footprint extension as they will increasingly have to consider overdue in lower and lower density areas.

Oi what has until now be a negative of vast footprint in lower density areas will start to become positive. As you can see on the right hand side of this slide, we enjoy broadband growth of 6% in areas without our major competitors.

We should know that there are many small scale competitors in these areas too. This area should enjoy faster household growth going forward, but they should also enjoy faster broadband growth as broadband penetration in these areas is just 14% versus nearly 50% in the denser more competitive regions of the country.

As a result, Oi is the only major competitor that will be exposed to what will likely be the fastest growing part of the broadband market in the next decade. Going forward, we believe that by leveraging Pay TV and [mood] per pay bundles, higher cost sell rates with lower churn; we will be able to have positive broadband net adds revolve Oi landline franchise and distinctive TV offering we are uniquely positioned in the Brazilian market.

Turning now to Slide 15, we have two quite distinct businesses in B2B. In corporate we have continued to target greater share wallet through growth in data revenues increasing connectivity, cloud, data center and ICT sales.

We have increased our non-voice revenues mix by 3.9 percentage points improving profitability and protecting the business from potential attacks from other players in the market. In SMEs we continue focusing on conversions and cross-selling over our fixed line customers as well as the focus on mobile customer acquisition.

Moving to Slide 17, we see that cost increased 2.4% sequentially in the fourth quarter specially reflecting electricity tariff adjustments as well as TV content and sales commissions related to the improved TV gross ads. However, in the full year of 2014 cost directly associated with the business declined 1.2% despite inflation of 6.4% in the period.

Despite this good result, we believe we can deliver more and I reinforce that the management is fully committed to an aggressive cost reduction process in 2015 based on improving efficiency and productivity. This will not be easy but the benefits of these changes should become more obvious in 2015 starting on the first quarter.

On Slide 18, EBITDA from Brazil improved 7.4% sequentially turning the trend and confirming that third quarter was the inflection point. EBITDA minus CapEx improved significantly on the back of the improved EBITDA and the control of CapEx with the focus on efficiency and capital allocation.

I’d like to take the opportunity to reiterate our commitment to reduce cash burn going forward based on the operational transformation that we’ll explore a little more in the next slide. However, I also want to make it clear that we are not starting the business of necessary investment, we are focused on efficiency and on getting everything we can out of our integrated infrastructure advantage.

Slide 19, in order to deliver the plan on for 2015, we set up a transformation program focused on cash generation built around the four main areas of improvement, reduce spent of OpEx and CapEx, improved working capital, improved customer profitability and optimized organization structure. Within each of these areas, we have identified key levers to drive savings, each of which has a working team responsible for generating and executing initiatives that will produce cash impact in 2015 and beyond.

To-date around 250 such initiatives have been identified and are in the process of being executed. The transformation office goals are drive the generation of new initiatives, ensure that existing initiatives are pushed as quickly as possible through to execution.

The transformation office does this through a running and rigorous weekly routine of meeting, assessing execution and risk. Additionally, we implemented weekly multi-disciplined committees to control all spending.

This process is supported by [tag-team] of internal and external experts. RTS, with [crews] and methodologies focused on execution and cash generation.

Moving on to Slide 20, net debt has risen but again as I have laid out about we’re committed to our EBITDA guidance and to reduce cash burn going forward. We continue to work on improving working capital and on find ways to reduce our financial and other cash expenses.

These efforts will start to show up in 2015. On the Slide 21, you see that leverage remained under control with a healthy average maturity of four years.

Net debt of Brazilian operations through the R$30.5 billion and gross debt to EBITDA ratio 3.21 times. Despite the high debt, we have solid liquidity of R$12.8 billion which is comfortable to address the funding requirements for at least the next two years.

Going forward on the Slide 22, we show that the conclusion of PT sale will improve significantly our financial flexibility for the next years with the pro-forma liquidity reaching R$32.5 billion. Going to Slide 24, as you know improving Oi’s balance sheet is one of our priorities, to that end progress on the sale of PT assets was an important accomplishment that will improve significantly our liquidity allowing the Company to focus on delivering the turnaround plan.

To recap, we have agreed to sell PT Portugal to Altice for €7.4 billion including an earn-out of €500 million. This is a transaction multiple of more than 7 times EBITDA versus a trading multiple of less than 5 times EBITDA.

All corporate approvals have already been concluded and we expect to close the transaction in the second quarter of 2015 when we expect to receive the cash. As we have already said, the use of proceeds will be limited to deleverage our company and participating in a potential consolidation in Brazil.

Additionally, in February 2015 we concluded the process of covenants and waivers from our local debenture holders for the next 12 months, with this wavier we have now enough time to access carefully the most efficient way to use the proceeds from PT sale maximizing shareholders value. On the Slide 26, my third priority; corporate governance.

Yesterday our shareholders approved the Rio Forte exchange; the execution of this transaction will happen in the next couple of days and put an end to speculation on this subject. As I said in the beginning I am personally disappointed to report that we have not made progress with regard to the migration to Novo Mercado which has been delayed as the approval of the PT SGPS 2013 20F is still pending and it is necessary in order to start the process of CorpCo’s share registration with SEC.

Since we have no visibility when this regulatory pending will be concluded management together with the board have been working on alternative temporary structures to deliver on the maximum as possible the benefits of the Novo Mercado to our shareholders. Now moving to Slide 27 to wrap up the four top priorities we announced on last quarter, first the turnaround of the business.

We like to reiterate our 2015 guidance, EBITDA from R$7 billion to R$7.4 billion and EBITDA minus CapEx improvement of R$1.2 billion to R$1.8 billion. Third quarter results were in fact the inflection point.

There were several results represented to date, shows evolution against the third quarter results and we expect the first quarter 2015 to continue that trend. On the second priority, improve our balance sheet profile.

The completion of the sale of PT Portugal will increase significantly our financial flexibility and together with the negotiation of our financial covenant waivers we are doing as promised the improvement of the balance sheet profile. On the third priority, the corporate governance, as we’ve done the press release yesterday we are doing our best efforts to achieve or to maximize the benefits of the Novo Mercado while we cannot in fact migrate to Novo Mercado for technical reasons.

Therefore, we’re improving on that sense as well although we are late on the migration we’re trying to at least promote the benefits to our shareholders in the way this is possible. And finally the last priority was the consolidation, in that sense I don’t want to say more than we continue to believe that this is positive and beneficial to the market in Brazil for other operators and we continue to work on that sense to promote consolidation in Brazil.

So I’d like to thank you all for being on the call.

In light of I guess delays in corporate and in consolidation are you looking at potentially repaying some of the debts earlier or perhaps alternatives, I mean, I think I’ve asked you in the past about some of your mobile footprint in say São Paulo must be loss making to you guys, but strategically valuable for others. Are you looking at sort of maybe would you improve the average interest by paying down debts or separately breakup Oi?

Well first we expect to receive the cash or the procedure of the disposal of PT until the end of the second quarter this year. What we still have in mind is to maintain the cash in our hands to take the decisions when it’s the right moment.

I think I have mentioned on the call already that the better we do in operations the better we’re going to be able to do in terms of consolidation if that’s the case. Therefore again we’d like to maintain the cash at least for the time being to take the right decisions but we are -- we think we are doing the right things in terms of the business and then to strengthen our position forwards consolidation if the market decides to do it.

So, for now we are going to maintain the cash, that’s our decision. On the second part of your question I mean if we are analyzing or discussing any breakup of the business, which we are not, we are a convergent player, we are now a national player and that’s how we see us in the future, therefore there isn’t any changes in terms of how we’re going to act in the country.

We are the national player in Brazil and we’ll maintain that position.

Can I ask a follow on? You alluded -- you mentioned falling into MTRs, one of the tariff changes that happened in Europe was that mobile operators going to call any unlimited nationwide voice and SMS tariffs regardless of the network.

Do you see that happening in the next -- is that sort of two, three years away or is that -- do you think that could come sooner?

What we have seen since third quarter in Brazil, it's a more rational market and I think that behavior will continue to at least for this year. We are facing difficult time here in terms of macroeconomic environment and I don’t see this change in the short-term, therefore what we do expect here is the market more as I mentioned rational and taking care of cash flow and profitability, therefore I do not expect this to happen in the short-term in Brazil.

Just two questions if I may; firstly, Bayard if you could just give us an update on the timing on the expected financial benefits of the tax being the adjustment of conducting scheme with Anatel specifically, what sort of difference you think that could make to your future effective CapEx? And second maybe, obviously you got a nice some boost from the tower sale in the fourth quarter, just wondering if you could give us an update on your thinking of any further Brazilian asset disposals?

Anything on that would be very helpful. Thank you very much.

First, regarding the impact, the term of adjustment of conduct to Anatel. We have until April to file all the projects that we are planning to deploy from 2016 onwards in four years.

The agency will start analyzing the projects in April, just after we file all of them and they have until October, if I am not wrong, to complete their analysis and to prove or reject our projects. We are doing all the effort to present the best projects that matches with our needs for the next four years.

My first question related to the fix broadband, I see that you are selling a lot of broadband above these five megabits per second speed. I’d like to know in which technology how you -- are you delivering at such high speed to lift the covenant working if you are improving the network with some technology.

That is the first question. The second question is related to the EBITDA margin that was much better in December than in the first two months of the quarter, I would like to hear from you if those specific reason for that?

Thank you.

I don’t know if you could hear the answer, but I’ll repeat anyway for the benefit of all. The first [passion] was regarding timing for the attack, term of adjustment of conduct and then regarding the tax, we have until April to file all the projects with Anatel.

Then from April to October the agency will analyze and decide for the approval or the rejection of those projects. We think this is extremely positive movement here that we are seeing, it’s different dynamics from the past, it is definitely an opportunity for Oi to address tax issues with our clients and with the obligations of the regulatory exchanging possible contingencies -- future contingencies for investments.

Therefore we’re working very hard to present good projects in April and as soon as we do it we’re going to give more details about our plans to the market. So April we’ll file the projects, October the agents approves or reject the projects and then from 2016 onwards for the next four years we deploy the investments in exchange for any disputes or contingencies with the agency so that’s how we see the time table of the attack.

Regarding the disposal of assets in Brazil we still have towers to monetize in Brazil, a range of 500 to 1,000 towers that we could monetize, we’re evaluating if that’s the right time to do it or not but we do have those towers available here and we can monetize those. In addition to that we have several thousand properties that we’re working on, we see good value on those properties definitely this is something we have to get the green light of the regulator because there is always discussion of reverse [process] or not.

So we are talking to the agency to discuss in details what are the assets that are reversible, that belongs to the concession and what are the assets that do not belong to the concession and therefore we can monetize if we need. But I would say that for this quarter and for the first half of the year our huge makeover was the disposal of PT Portugal that is under its way, we got all the corporate approvals already, we’re pending only the regulatory approvals.

Our expectations to cash in the proceeds before the end of second quarter as I mentioned before. Important to mention as well that we’re still working on the disposal of the African assets and hopefully you’re going to have evolution on this on the second half of the year.

So this is pretty much about the disposal of the assets.

Sure, so I’ll repeat my question the first one was related to the fixed broadband business that you are selling a lot of plans above 5 megabits per second, 10 megabits per second. I’d like to understand in which technology are you offering this, such high speeds and if it’s possible to offer to all your clients?

And the second question related to EBITDA margin that was much higher in December than in the average of October and November. I’d like to understand if there is any specific reason for this good margin in December?

Thank you.

Let me start by the margin question and then I’ll pass here to [Pedro] [indiscernible] our Engineering Director to answer your broadband question, which I think it’s a very good question as well. So in regard to the margin I would say that since we announced the third quarter results we said this -- that was an inflection point and that we’re still working on cost control and to improve our offers in terms of the quality of the offers, simplifying the offers and trying to sell the most, I would say -- or the intermediate and the high value offers than the base of offers and I think is being off already.

The market is also more rationale so if you see all the lines of the revenues comparing third quarter to fourth quarter, we have evolved, we have improvements, and then the margin is impacted basically because of this improvement in terms of [indiscernible] and this trend back to continue for the quarter of 2015. So that’s pretty much why the margin was higher.

So now here to --.

Do you believe that those elements target the impact in December, so October and November you are not applying the same methodology, the same commercial approach, is that --?

I would say that it’s an evolution but definitely we have increased some of our prices late November beginning December before this has definitely a positive impact on the figures of December.

Good morning, with ADSL2+ Oi today can give more than 10 megabits to 40% of its clients. Today with ADSL2+ we can give more than 15 megabits to approximately 20% of our clients what we are doing today is improving our HDSL plan towards VDSL and we -- our calculation is that we can offer VDSL services to approximately 18% of our clients.

Two or three questions please, on the price increases which I think were prepaid mobile data, to what extent do you think the other operators have followed? I gather they have to some degree but they don’t appear to have the same revenue improvement which you saw in your numbers.

I just wondered have those prices are been followed and how sticky those prices been in Q1 or what has the volume impact been, has there been any negative volume impact in the first two or three months of the first quarter? And that’s a first question, secondly on mobile and is there any route for you to acquire the 700 megahertz spectrum which you passed on a few months back.

I just wondered whether that was -- whether it’s something you are considering or whether that is even an option, is there some sort of prevention from you doing that? And then just finally sorry to go on, but just on the cash flow again you touched on this the working capital and judicial deposit it was a weak number again in Q4.

I just wondered if you could give us any immediate insights as to how you’re looking to improve things, is there anything more specific? Thank you.

Starting by the price question, I think there is a mix of events here that helped us to improve the figures. First, one of this first things we decided to do back in October was to work on the simplification of the offers and I think we have done a good job here.

We have simplified the offers, it’s much clearer to our clients today. To our sales people to communicate to the market and I think this is helping us to achieve better results and we’ll continue to -- the offers doing this.

The second thing I think it helped us is the convergent package we have combining fixed with the prepaid and this is also paying off. I mean this is probably one of the only convergent packages combining fixed with the mobile in Brazil and it is a good product, so it is also has better performance.

Third, I mean we have increased prices, not only the mobile business but also in the broadband business and -- business and fixed business as I mentioned in the third quarter this year this is a year for profitability no market share, not growth in terms of RGUs. We are concerned about profitability and the price increases are completely aligned with our goals I don’t know what our competitors are doing, I mean I don’t want to mention what they are doing or not and we are doing constantly but we have said in the third quarter those due to 2015 and we started by the fourth quarter 2014.

And in regard to the pricing, I think those are the [technical difficulty]. Second question if I am not wrong about the 700 mega [technical difficulty] last year.

I will repeat what we said in the past, first I will recognize that it has [technical difficulty] that was the main reason for us to get out of that, not only that because the terms and conditions for the auction wasn’t -- not good and aim for an asset that we’ll only get revenues 2019 the right decision [technical difficulty], still not the right decision for us. In other terms and conditions we might be [technical difficulty], but we need to know what’s going to happen and what are those [additions], before it’s hard to say if we would willing to do an effort or not.

We recognize that this factor in the frequency is important but there are other opportunities in our view until 2019 to fulfill that gap. There are other frequencies that might come to the market; there are other ways to capture that frequency.

So, we believe that was the right decision at the auction and we’ll see how this is going to evolve from here. Finally, the third question, I think it was about cash flow.

Yes we recognize that we have to improve the cash flow. There is a huge effort within the company to transform the business, we have established a transformation office that I mentioned in my speech here to help us to improve that in all respects, not only in terms of judicial deposits, not only regarding the working capital, but in fact cutting cost and expenses.

You cannot see that yet in the figures of fourth quarter 2014, that work was planned during fourth quarter 2014 and it’s being executed in 2015. And I am confident that we’re going to present good figures in terms of cost control and reduction from the first quarter 2015 onwards.

So, we are focus on this, this is one of our top priorities and we will deliver on this and I reinforce our guidance for the routine EBITDA R$7 billion to R$7.4 billion based on cost reduction.

My questions have been answered. Thanks.

Just want to ask about the CapEx, I saw -- I don’t know, I may have miss this in the first question, but I see that it was down 30% in the fourth quarter. I was wondering if we’re going to, we should expect a similar type of reductions in the quarters in 2015?

And maybe you can talk about the areas that you reduced in the fourth quarter to deliver that 30% decline?

The reduction in the CapEx of fourth quarter is completely aligned with the guidance we gave to the -- for this full year EBITDA 2014. The guidance for the full year EBITDA, sorry, full year CapEx of 2014 was R$5 billion.

We delivered R$5 billion again; we’re delivering on the guidance we gave to the market. You see, we have done during 2014 all the projects we defined on the budget, when the budget was discussed.

We didn’t cut any of our initiatives during the course of the year, so again delivered on exactly the guidance to the market. Regarding 2015 and then I’ll pass to [Pedro] to discuss a little bit more and the details of what we are doing.

But in regard to 2015, we have not yet announced to the market guidance for CapEx. As you know and as I have announced this is a year where we’re going to focus on cash generation based on cost reductions and CapEx control.

What I can tell you is that the better we do in terms of cost cutting, the more we’re going to have to spend in investments. So this is the challenge I gave to the directors here, to the manager of Oi to let them have the projects we want for the company.

We need again to reduce cost and to execute well the plan we have to transform the business.

I assume that with your EBITDA outlook you’ll come up with a capital plan that would not require you to access the capital markets, but I am just curious if your operating cash flow maybe doesn’t meet your expectations would you ever consider an additional equity offering to put cash on the balance sheet or is that still something that you have ruled out to help to reduce the leverage of the company?

I reinforce that we are comfortable and we are confident that we’re going to deliver the R$7 billion to R$7.4 billion routine EBITDA; therefore we are not planning to do any equity issue, any access to the capital market at this moment. We are working to turnaround the business and to deliver on results.

And as mentioned I think fourth quarter numbers presents an evolution against third quarter numbers and the first quarter numbers 2015 will be even better. So, we are confident that we’re going to deliver on our plan and we do not expect to access a market in this year.

Even better meaning that you're expecting EBITDA to be up sequentially in the first quarter relative to the fourth quarter?

We expect to improve. Let me pass here to Pedro and then he can add follow on what we have done during 2014 in terms of CapEx.

Since 2013 -- mid-2013 as to the end of 2014, we did an extensive contract renegotiation of all the network contracts that will allow us to reduce significantly the CapEx related with the transport network and related also with the mobile network. This allowed us during 2014 to accomplish and a complete swap of more than 20% of our mobile network increasing more than 260% 3G capacity and you're seeing the results of that action.

We are -- we also are during 2015 up to June completing new technology leapfrog of our transport, optical and IP network that will allow us to save more than 40% of the existing CapEx base per megabit in our transport network and this will allow us to do much more with less CapEx.

Okay thanks and just one other follow-up question, can you give us a sense -- maybe you’ve given us in the past, I don’t recall, of the mix of your service revenue or the data revenue that has exposure to the SMS or the messaging business and has there been any change in -- how that business may have eroded in the first quarter because of greater adoption of things like WhatsApp or maybe Facebook messenger and things like that?

This is going away, but not only away, but market right, SMS is decreasing rapidly and it’s on different in our case. The trends continue the same.

I don’t have the figures here on me.

But there wasn’t anything that was different in the first quarters as far as like acceleration in that, the adoption of those products. There was just the typical trends you saw in 2014?

Definitely the typical trend, but then IR can share with you this specific information.

Okay and then lastly, I don’t know if you can just kind of rehash on consolidation, if Telefonica is completing its acquisitions of GVT and they’re willing to participate with [Kamasaro]. I assume there still is interest that you have in consolidation and I am just curious what you can do further to try and pursue that and made that happen.

As I have mentioned already, it is beneficial to all of us and still what we think this is a positive thing if it happens. As you mentioned, Telefonica just concluded their deal with GVT, let’s see how things will hold.

We continue to think consolidation is -- its good for the market.

Do you suspect that they were held back in participating up to this point because of GVT?

That’s you have to ask them.

Hi, this is Mitchell Martin here at Morgan Stanley. So two questions to ask, the first is on the cost cutting, are there any plans to do a more significant cost cutting initiatives, I guess the question is, would you have the flexibility if you needed to do more substantial cost cutting in terms of personnel?

So that’s question one, and secondly, on your Slide 21 on the liquidity, you flagged there the BNDES about 2.1 billion as well as the revolver of about 5.2 billion, I am wondering if whether or not there are any strings attached to those two lines, do you have to be within a certain leverage ratios or liquidity ratios to be able to tap those lines or are you able to tap them right now basically? Thank you.

Well, regarding the first question which is related to the cost cutting, I mean, as I mentioned we have established a new division at Oi, which is a transformation office and within this division we have more than 214 initiatives in terms of cost reduction, so there are good opportunities there. The other hand we’re talking about 214 before, I’d say the major risk here is execution that’s why we have established this division and we’ve run weekly meeting here to make sure we are first analyzing all the lines of the cost and expenses and to improve in all respects here, personnel is one of those lines and we continues to analyze our corporate structure and our team to see how we can improve in that sense.

Therefore there are opportunities and again I would like reinforce that in all the lines of the cost and expenses and we’ll do this work going in 2015 and it will be a very clear to you investors and analysts that they are good opportunities, they are -- and that we are capturing them. On the second question, yes, we do have financial covenants is worth any facility here.

As we have announced to the market, we have renegotiated those financial covenants, it used to be ratio 4 times gross that to EBITDA, it is now before those was of PT, 4.5 times gross of the EBITDA and post the dispose of PT 6 times gross that with -- and we are in compliance with all the financial covenants we’ll maintain that situation and in that situation we are able to disperse any of those facilities.

Did you confirm that all companies’ approval for the corporate instruction has been concluded? My question is if you can complete to the corporate restructuring, even if you like change for commercial paper for shares is not concluded?

Thank you.

While yesterday we had an important event here which was a general shareholders meeting of Oi to approve the exchange of the Rio Forte securities by our own shares, that was the last step towards the execution, therefore we will execute the exchange until 31st of March so this is done. In terms of corporate approvals, in terms of regulatory approvals, it’s now a matter of bureaucracy to execute but we are done with this so therefore there isn’t any risk that we can’t exchange the security for shares from now onwards.

Regarding the corporate restructure for the Novo Mercado, we have announced yesterday that we, yes, we do have a technical problem there we cannot migrate to Novo Mercado because of the F4 situation with SEC, we cannot file the F4 if we do not have the green light of the auditors of Oi that we have and PT SGPS that we do not have. Therefore this is exactly what is going on, we have this technical issue and we could not yet migrate to Novo Mercado.

But since this was on us to the market the management is working with the board to present other alternative as I have announced to extend the maximum as possible the benefits of the Novo Mercado to our shareholders. And in that sense we expect we’ll have news in the short-term.

So we’ll continue to work on that --.

But you think those two things could be [indiscernible] there could be an exchange even if there isn’t a clarification on the Novo Mercado issue on the delays in terms of government?

No, there won’t be any exchange, I mean what we are doing, we are trying to deliver the best as possible at this moment, again all the promises we’ve done in the capital increase and the Novo Mercado event will be done but for the time being we are working on alternative scenarios to benefit our shareholders from both in rights from [tagalong] and other things so we’re working on this and we expect to have news on a short notice.

I have two questions first obviously there is a lot on your plate for revenue, but I was wondering if you could tell us if you’ve mentioned any progress or if you have any important discussions with the regulator and the government with regards to your concession terms which obviously penalize you because of your future service -- universal service obligation and your big six players and also with regards to the renewal of the concessions from 25, I mean is that a topic at the moment for you? Second coming back to the CapEx issue and probably linking it to the comments made by Pedro about what you could have as VDSL coverage, I think I got 18%.

Could you roll out VDSL with those 18% within the existing CapEx envelop or would that require and increasing CapEx? And finally with regards to the devaluation of the Brazilian Real, I guess the U.S.

dollar and the Euro which obviously is depreciated. I mean that had an impact on your cost or CapEx in Real?

Thank you.

Thank you very much for the two question so I’ll answer the first one and the last one and then I will hand it over to Pedro, he’s here again to talk about the VDSL CapEx. On the concession -- on the renewal of the concession I think we are evolving on the discussions with Anatel, we have a full agenda with Anatel that we are working on a weekly basis.

We’ve been discussing with them regularly the attack which is our main goal at this moment. We have discussed with them the reversible assets as well this is really important to the company and we are discussing two other topics the renewal of the concession expires in 2025 therefore we are discussing if it’s positive and if we should engage to anticipate the renewal of the concession.

Of course we’re going to do this if we see value to our shareholders. And finally the new national broadband plan that government is willing to deploy in Brazil and that Oi is the -- I would say, the right player to do that together with the government, but of course in good terms and conditions for the business.

So this is how we are evolving in the regulatory agenda different topics constructive discussions I think we are evolving in terms of the trust of the agency in the company over those last months. And I think we are doing here a good job in that relationship and in the new terms and conditions we’re going to have to form the business, so let’s see how it evolves.

On the third question regarding the FX exposure, so let me start by the leverage. We are running new FX exposure, so if is there any concern or any questions about how the FX could impact on our balance sheet, it won’t impact in terms of leverage.

We are fully hedged in the Oi's foreign currency stats, fully hedged and on [PT] that on the euro denominated leverage from [PT] we are now fully hedged on the cashing, on the proceeds we’re going to get some royalties. Therefore no FX risk on the financial products equation.

On the CapEx, we normally negotiate with all suppliers based on Caps before we partially protected by the depreciation of Real and always, there is always the possibility to sit again with the suppliers to discuss terms of conditions in terms of our facts. So we see how it evolves, it is extremely volatile moment in Brazil now in terms of currency.

So we like to see how this growth for the next month and we are monitoring this situation. But again we have Caps established in all our contracts with those suppliers in terms of FX.

On the OpEx, the impact we had in terms of currency in the fourth quarter 2014 was roughly R$10 million. We are more exposed into TV content there; well TV content normally has FX impact, in the lease of the satellite and on the [global net] lease as well.

So those are the three lines in terms of OpEx that could be impacted by FX. But again the impact in fourth quarter of 2014 was only R$10 million, so we are monitoring this as well.

I’ll now pass to Pedro here to talk about the CapEx.

So the answer to your question is; no, there will not be a significant CapEx investment to do VDSL because we’re talking about surroundings of our central offices. So, we will not invest to do this 18% in terms of shortening the loop.

We will just take the advantage of these existing copper access networks surrounding our central offices. The other thing is, we have negotiated a price for VDSL port that is very close to the ADSL and we already have close to 10% of our plan with -- equipped with force that can be either to VDSL or ADSL.

Well, thank you again for joining us for the call. I like to thank also the team that is here with me today.

The senior executives of the company, some of the senior executives of the company and any further questions or doubts, our IR team is here ready to answer. Thank you very much and have a good day.