SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

For the month of May 2015

Commission File Number 1-13758

PORTUGAL TELECOM, SGPS, S.A.

(Exact name of registrant as specified in its charter)

Av. Fontes Pereira de Melo, 40
1069 - 300 Lisboa, Portugal

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F   x   Form 40-F   o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes   o   No   x

Announcement  |  Lisbon  |  7 May 2015

OI discloses the 2015 first quarter results

PT SGPS, S.A. hereby informs on the material fact disclosed by Oi, S.A. on the 2015 first quarter results, as detailed in the company’s document attached hereto.

www.ptsgps.pt

QUARTERLY REPORT

Consolidated Information and Earnings Release (Unaudited)

This report contains the operating and
financial performance of Oi S.A. and its
direct and indirect subsidiaries for the
first quarter of 2015.

Oi S.A. | www.oi.com.br/ir

1Q15 RESULTS ON TRACK TO DELIVER 2015 GUIDANCE

·                  Oi delivered significantly better results in 1Q15 with improvement in virtually all trends. We are reiterating our guidance for 2015 (routine EBITDA of R$ 7.0 to 7.4 billion and OCF improvement of R$ 1.2 to 1.8 billion).

·                  In 1Q15, Oi delivered routine EBITDA from Brazilian operations at R$ 1,928 million (+12.8% y.o.y and +14.2% q.o.q) as a result of lower operating costs and expenses, which reached R$ 4,912 million in 1Q15, -4.9% y.o.y and -8.6% q.o.q. There were no non-routine items in this quarter. EBITDA margin improved 3.3 p.p., reaching 28.2% in 1Q15.

·                  In Brazil, routine EBITDA minus Capex reached R$ 944 million in the quarter, an increase of 88.3% y.o.y and 49.0% q.o.q. (with roughly half of the improvement from EBITDA growth and the rest from more efficient Capex). Capex in Brazil fell to R$ 984 million (-18.5% y.o.y and -6.8% q.o.q), as we have focused on increasing the efficiency of our capital expenditure. Almost all of our capex (84.3%) was spent on the network this quarter; reductions come from optimization of the existing infrastructure, more careful assessments of investments, reformulations in the supplier contract models and the sharing of infrastructure.

·                  The positive trend in Brazilian revenues has continued this quarter. Net revenues were R$ 6,841 million, a y.o.y decline of just 0.5%, versus -2.0% y.o.y in the fourth quarter of 2014. Oi is focused on the profitability of its customer base, and as a result, ARPUs have increased in all customer products. We have benefitted from the simplification of our portfolio, a consistent improvement in the mix of customers and a better pricing environment.

·                  Residential trends have improved again this quarter as we have seen higher ARPU in broadband, TV and fixed line. Residental net revenues reached R$ 2,491 million, -2.4% y.o.y and +0.7% q.o.q, driven by the improvement of broadband and pay TV revenues as a result of the repositioning of offers and the improved sales mix, in addition to the focus on bundled offers and the upselling strategy. Residential customer base showed profitability improvement in all services, reaching an ARPU of R$ 77.6, up 5.4% y.o.y and 3.1% q.o.q.

·                  Wireless trends have improved substantially as recharge volumes and data uptake have accelerated. Net revenues in the Personal Mobility segment totaled R$ 2,259 million, +4.3% y.o.y, due to the annual increase of 7.6% in prepaid recharges volume, the substantial data revenues growth of 56.1% y.o.y, and the 75.3% upturn in handset sales. Customer revenues posted a substantial increase of 8.8% y.o.y and mobile ARPU, excluding interconnection revenues, increased 11.3% y.o.y and 1.4% q.o.q.

·                  Net revenues in Corporate/SMEs declined by -3.4% y.o.y in the quarter, a slight worsening of trend (from -1.5% y.o.y last quarter) as many businesses try to reduce expenses in Brazil’s difficult macroeconomic environment.

·                  Routine operational cash flow did not impact our net debt, improving from a cash burn of R$ 240 million in 1Q14. Net debt did increase to R$ 32,557 million, including the annual payment of Fistel maintenance fee (R$ 753 million), a non-recurring tax payment over intragroup interest on own capital, (R$ 155 million, most of which will revert to Oi as tax credit in the future) and financial expenses of R$ 1,080 million. Oi is continuing to work towards generating positive free cash flow in the medium term. Today´s results were a first step towards that medium term ambition.

05/07/2015

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Highlights

Note: (1) Other international assets, most of which were classified as held-for-sale assets on March 31, 2015 and presented in the balance sheet separately.

(2) Consolidated Net Earnings include the discontinuation of the operations of PT Portugal SGPS, S.A. (“PT Portugal”) since the asset has been available for sale. Net Earnings from Discontinued Operations include the results of PT Portugal since May 5 and a loss of R$ 4,164 million related to the recognition of these assets at their sales price.

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Net Revenues:

Table 1 — Breakdown of Net Revenues

In 1Q15, consolidated net revenues totaled R$ 7,040 million, -0.9% y.o.y and -3.9% q.o.q. Total revenues from operations in Brazil fell by 0.5% y.o.y, while revenues from other operations (Africa) declined by 11.4% y.o.y due to the discontinuation of the operations in Cabo Verde.

BRAZIL

Net revenues from the Brazilian operations (“Brazil”) totaled R$ 6,841 million in 1Q15, virtually in line with 1Q14 and 3.2% down from 4Q14. In the y.o.y comparison, the negative impact of the regulated cut of interconnection tariffs in mobile voice services (“MTR”), of approximately 25% in 2014, and the respective decline in fixed-to-mobile tariffs (“VC”) were offset by higher broadband and pay TV revenues in Residential, and  growth in Personal mobility from increased recharges, data usage, and higher handset sales. Excluding the impact of the regulatory tariff reduction, net revenues rose 1.8% y.o.y. Oi continues to show progress in annual revenues peformance compared to 4Q14 (-2.0% y.o.y) and to the 3Q14 (-5.1% y.o.y), confirming the inflexion point in 3Q14.

In the sequential comparison, revenues fell chiefly due to the 33.3% MTR cut in February 2015 and respective reduction in VC tariffs, and the seasonal decline in handset sales as a result of the Christmas season. As in the annual comparison, these effects were partially offset by the increase in revenues from Personal Mobility due to the solid growth of recharges and data, and greater revenues from broadband and pay TV in the Residential segment.

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In 1Q15, net revenues from the Residential segment totaled R$ 2,491 million, -2.4% y.o.y, an improvement on the revenue trends if compared to -5.1% y.o.y in the last quarter. Oi continued to suffer a negative impact from the decline in in fixed-to-mobile tariffs (VC) and the reduction in the wireline base. These were partially offset by the increase in broadband revenues and the 48.8% y.o.y pay TV customer base growth. In a sequential comparison, Residential net revenues grew 0.7%, also due to the increase in broadband and pay TV revenues, which in this case more than offset the decline in wireline revenues.

The annual and sequential improvement in broadband and pay TV revenues is a result of the repositioning of offerings and the improved sales mix, in addition to the focus on bundled offerings and the upselling strategy.

In this quarter, RGUs totaled 17,148 thousand in 1Q15 (-2.9% y.o.y), impacted by the 7.4% decline in fixed line RGUs, partially offset by the 48.8% increase in pay TV RGUs. In the sequential comparison, there was a decline in the RGUs of the three Residential products.

It is important to highlight the Company’s strategy on increasing the profitability of its base, bringing in new customers with a better acquisition mix, by selling multiple-play services and higher value offers, and adopting upselling and cross-selling strategies for its existing customer base. These measures, together with the repositioning of offers in the Residential segment, initiated in the end of 2014, resulted in an increase of the ARPU of each product (wireline, broadband and pay TV) and in the control of the churn rates in the quarter, due to greater customer loyalty.

Residential ARPU

Residential ARPU reached R$ 77.6 in 1Q15, +5.4% y.o.y and +3.1% q.o.q. This improvement was due to the repositioning of offers and to the Company’s focus on convergence through the offering of multiple-play services to new or existing customers, combined with upselling initiatives. The sale of bundled offerings leads to increased customer loyalty and, consequently, a churn rate significantly lower than that of standalone services. Additionally, the Company increased the penetration of bundled offerings in its base, with customers with more than one Oi product accounting for approximately 62% of the households (+3 p.p. y.o.y).

Wireline

Oi ended 1Q15 with 10,703 thousand wireline customers in the Residential segment, -7.4% y.o.y and -2.3% q.o.q, with net disconnections of 254 thousand fixed lines in this quarter. However, the volume of net

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disconnections was accompanied by an increase in ARPU from wireline services (+1.0% q.o.q), as a result of the Company’s current focus on improving the quality and profitability of its existing customer base. The net disconnections were caused by a reduction in gross additions, given the elasticity with the repositioning of offers and the decline in the sales of standalone wireline services. We are encouraged by the significant decline of low-end offers in the mix of gross additions (-42 p.p. from Oct/14 to Mar/15), as a result of a better quality of sales. All this results in improved profitability for our wireline business.

The Company’s sales strategy remains focused on service convergence, in which pay TV figures as a key product in multiple-play offerings that combine wireline, broadband, pay TV and mobile services, as well as plans in the Personal Mobility segment that promote fixed-to-mobile convergence. These bundled offers have churn rates significantly lower than those of standalone products, building customer loyalty and positively impacting the ARPU of the Residential segment.

Oi Conta Total (“OCT”) is a triple-play postpaid offer that combines wireline, broadband and postpaid mobile, which can also be combined with pay TV (quadruple-play) and mobile data packages. In 1Q15, this offer constituted approximately 10.4% of the Residential wireline base, 1.4 p.p. up from 1Q14. In 1Q15, OCT churn rate is 19% lower than churn on standalone wireline, reinforcing the benefit of Oi’s position as an integrated player able to offer triple play products. OCT also represented a substantial improvement in the share of low-end offerings in the gross additions, down by 22 p.p. between October 2014 and March 2015.

Oi Voz Total (“OVT”) is a double-play offer combining wireline and prepaid mobile designed to promote fixed-to-mobile convergence and increase customer loyalty. This offer constitutes approximately 14.8% of the Residential wireline base in 1Q15, 3.9 p.p. y.o.y. Additionally, the average penetration of SIM cards per OVT customer increased from 1.4 in 1Q14 to 1.6 in 1Q15. OVT also recorded a lower churn rate than the standard wireline churn rate (-0.3 p.p.).

Oi has been working to increase product penetration per households, in particular those with only wireline, to reduce exposure to competition and protect our customer base. The percentage of those with only Oi Fixo has been dropping every quarter. As mentioned earlier, besides increasing ARPU per household, product convergence produces an important loyalty effect, with lower churn rates than unbundled service offerings.

Broadband

In 1Q15, Oi had 5,213 thousand fixed broadband RGUs in the Residential segment (-1.2% y.o.y and -0.9% q.o.q). In broadband as in the other services, we are focusing on quality and profitability of our customer base. As a result, broadband ARPU increased more than 6% versus last quarter. Broadband also saw an improvement in mix, with low-end offers in the gross additions down 10 p.p. from Oct/14 to Mar/15. Gross additions fell and net disconnections totaled 46,000 in this quarter.

The penetration of Oi’s fixed broadband reached 48.7% of households with Oi services (+3.0 p.p. y.o.y). This consistent growth is mainly explained by the Company’s investments in the expansion and capacity of its broadband network, as well as by the initiatives on customer profitability and retention. Fixed broadband, together with pay TV, plays a key role in increasing profitability and improving the share of wallet through cross-selling and upselling initiatives, in addition to improving customer loyalty.

In 1Q15, the average speed for Residential broadband RGUs increased by 18.6% y.o.y to 4.6 Mbps. Also, the share of RGUs with speeds equal to or greater than 5 Mbps and 10 Mbps improved annually by 11.0 p.p. to 51.5% and 5.0 p.p. to 24.0%, respectively. In terms of gross additions, the contracted average speed was 6.7 Mbps (+55.7% y.o.y and +24.0% q.o.q). Currently, around 71.2% of gross additions have speeds equal to or greater

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than 5 Mbps and 47.0% have speeds equal to or greater than 10 Mbps, a significant increase over the previous quarters.

Pay TV

Oi had another good quarter in pay TV, a small sequential decline in customers more than offset by the 6.5% growth in pay TV ARPU in the same period. Oi ended 1Q15 with 1,232 thousand pay TV RGUs (+48.8% y.o.y and -1.2% q.o.q). The pay TV churn rate was 3.5 p.p. lower in households with three Oi products (3P) than in households with only Oi TV.

Oi TV’s penetration reached 11.5% of the households with Oi services in 1Q15, a 4.3 p.p. y.o.y increase. Focused on customer profitability, the Company repositioned Oi TV offers, maintaining them in line with those of the competition and still very competitive thanks to their HD content differential.  Among other initiatives, Oi has been seeking to increase the profitability of its base by improving its sales mix, adopting the cross-selling strategy, reducing product payback and improving after-sales processes (billing and collection).

Oi TV is a differentiated product that provides regional content in high definition and offers a large number of channels, including open channels in high definition in all the offers, a range of regional channels, new pay-per-view services and digital video recording. In recognition of this value, Oi TV was one of the winners in the pay TV category of the 2014 Brazilian Customer Satisfaction Index — BCSI. The index, the result of a partnership between renowned global academic institutions (University of São Paulo, University of Michigan and Universidade Nova de Lisboa), is a management tool that identifies, understands and analyzes the factors that determine Brazilian customers’ loyalty. Oi TV’s repeated excellent results and recognition are the outcome of a successful strategy of investing in product, content and quality and service, combined with the market’s most competitive offerings.

In addition, thanks to product quality and offer, Oi TV has increased the upselling potential of Oi’s portfolio, therefore playing a strategic role in retaining and increasing the loyalty of residential customers. There was also a substantial decline in the share of low-end offerings in gross adds (-29 p.p. from Oct/14 to Mar/15), underlining the focus on profitability.

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Note: (1) Includes: subscriptions, outgoing calls, mobile long distance, roaming and value added services.

(2) Includes: high-end postpaid plans, Oi Controle, bundled mobile services (Oi Conta Total and Oi Internet Total) and 3G (mini-modem).

In 1Q15, Oi delivered excellent results in Personal Mobility. Net revenues from Personal Mobility reached R$ 2,259 million (+4.3% y.o.y), chiefly due to the increase of 8.8% in customer revenues and of 75.3% in sales of handsets, sim cards and others, partially offset by the decline in network usage related to the MTR cuts. Sequentially, net revenues from Personal Mobility fell by 7.2%, mostly due to seasonality.

Customer revenues amounted to R$ 1,799 million in 1Q15, 8.8% up y.o.y, as a result of the 7.6% increase in recharge volume, 5.8% growth of the postpaid base, and the 56.1% upturn in data revenues to R$ 686 million or 38.1% of total customer revenues (+11.5 p.p. y.o.y). These results deserve particular notice as they stand in stark contrast to the criticisms that are most often leveled against our business — that we cannot offer data services and that we have no pricing power.

Revenues from network usage fell by 34.8% from 1Q14 to R$ 260 million as a result of the MTR cuts implemented in 2014 and 2015 and the reduction in off-net traffic. In February 2014, interconnection tariffs (MTR) declined by 25% to R$ 0.23275, R$ 0.23961 and R$ 0.23227 in Regions I, II and III, respectively. On February 24, 2015, these tariffs fell to R$ 0.15517, R$ 0.15974 and R$ 0.15485 in Regions I, II and III, respectively, an additional 33.3% down from the tariffs established in February last year.

In 2014, ANATEL approved additional MTR cuts in Regions I, II and III, respectively, as follows: (i) in 2016: R$ 0.09317, R$ 0.10309 and R$ 0.11218; (ii) in 2017: R$ 0.04928, R$ 0.05387 and R$ 0.06816; (iii) in 2018: R$ 0.02606, R$ 0.02815 and R$ 0.04141; and (iv) in 2019: R$ 0.01379, R$ 0.01471 and R$ 0.02517.

Handset sales totaled R$ 199 million in 1Q15, 75.3% up on 1Q14,  due to an increase in smartphone sales, 84% of total sales (versus 78% in 1Q14). The penetration of 3G/4G handsets reached 49% of the total base, 21 p.p. up on 1Q14 and 10 p.p. higher than in 4Q14. Growth was concentrated in retailers, reinforcing the strategy of improving the profitability of the customer base and increasing the 3G/4G smartphone penetration. This increases revenue-generating opportunities at Oi, but also eases network congestion as we move customers from 2G to 3G, thence reducing required capex in the network. The Company stopped subsidizing handsets at the end of last year in order to improve margins, as a result this increase in handset sales is entirely accretive.

Oi ended 1Q15 with 47,940 thousand RGUs in the Personal Mobility segment (-0.4% y.o.y). Net disconnections

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totaled 205 thousand in the last 12 months, of which 593 thousand were prepaid and 387 thousand were postpaid. The negative performance of the prepaid segment was explained by the disconnections in 1Q15 (-498 thousand) and 4Q14 (-668 thousand), driven by a more stringent prepaid cleanup policy, one of the several initiatives to increase the business profitabilty launched at the end of 2014.

At the end of 1Q15, Oi’s mobile customer base (Personal Mobility + Corporate / SMEs) totaled 50,410 thousand RGUs, 47,940 thousand of which in Personal Mobility and 2,470 thousand in Corporate / SMEs. Gross additions and net disconnections came to 5.6 million and 530 thousand, respectively, in 1Q15.

Oi has changed its retail handset sale and distribution model, with four objectives: (i) further accelerate sales and the migration of the base to 3G/4G smartphones; (ii) increase logistics efficiency and improve the supply of handsets to the sales channels; (iii) reduce logistics costs and COGS; and (iv) reduce the working capital employed in the handset operation. In the new distribution model, handset logistics and finances (purchase, distribution and sale) were outsourced to a partner, the largest distributor currently in operation in Brazil. Oi remains responsible for the strategic management of the handset chain, for the relationship with sales channels and for the definition of the handset portfolio. This model of outsourcing handset logistics and finances, while maintaining the strategic management is a global trend among telecom operators and Oi is the first company to implement it in Brazil. The impacts of the change in the model will be perceived as of the second quarter.

Prepaid

Oi closed 1Q15 with 40,824 thousand prepaid RGUs in the Personal Mobility segment, 1.4% down from 1Q14 and 1.2% less than in 4Q14, with 498 thousand net disconnections in the quarter, due to the stricter base cleanup policy introduced in 4Q14, as mentioned above. Given the Company’s focus on reducing costs and improving the profitability of the customer base, the prepaid segment continues playing an essential role, as it has a favorable impact on working capital, low customer acquisition costs and no bad debt.

In order to improve customers’ experience, increase prepaid ARPU, control usage beyond the contracted minutes and stimulate consumption and recharges, Oi introduced a series of measures at the end of 2014, such as (i) repositioning of prepaid offerings; (ii) simplification of the recharge portfolio available at points of sale, increasing the average value of the top-ups; (iii) launch of new data packages: extras (which work as a top-up, both to resume navigation after  monthly volume is consumed and to increase data availability) and monthly packages with additional volume; and (iv) the end of navigation at slower speeds after consumption of the contracted volume in the weekly and monthly Internet packages.  As a direct result of these measures, recharges grew by a substantial 7.6% over the same period of the previous year.

Mobile internet revenues (excluding VAS and SMS revenues) in the prepaid segment grew by 61.9% over 1Q14, maintaining its accelerated growth rate. Prepaid data traffic grew by 52.8% over 1Q14, while the share of data usage in recharge consumption rose 41.7% in the same period.

VAS revenues from the prepaid segment increased by 104.3% over 1Q14. This performance continued to be underpinned by the results of services focused in smartphones and with high relevance to the customer, such as Oi Apps Club, Oi Conselheiro and Oi Para Aprender (M-Education), besides the increase of service sales channels.

Postpaid

In 1Q15, postpaid customers in Personal Mobility totaled 7,116 thousand RGUs (+5.8% y.o.y and -0.3% q.o.q),

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with a 14.8% share of the Personal Mobility base. The Oi Controle plan posted an annual increase of 12.9%, reaching a 43.1% of share of Oi’s postpaid base, an increase of 2.7 p.p. over 1Q14. Oi Controle has a strategic value for the Company since it combines the absence of bad debt and a favorable impact on working capital, advantages that are characteristic of prepaid offerings, with a heavier consumption profile intermediary to that of the postpaid segment. Thus, this hybrid plan presents a more attractive ARPU (approximately 2x) and a lower churn rate compared to prepaid plans.

In 1Q15, the Company maintained its focus on simplifying and reducing its portfolio of postpaid and Controle plans in order to reduce costs and improve the profitability of the customer base. By combining voice and data packages across the entire portfolio and reducing the offering of less profitable plan, ARPU of new customers improved and operating costs fell thanks to the simplification of the sales process. In addition, as a result of the Company’s focus on sales quality, the post-paid churn continued to improve despite the customer base increase.

Mobile Internet revenues in the postpaid segment were 21.9% higher in 1Q15 than in the same quarter of 2014, due to the increased penetration of 3G/4G smartphones and data packages.

2G, 3G and 4G LTE Coverage

Oi´s 2G coverage reached 3,387 municipalities, covering 93% of the country’s urban population. In 3G, the Company expanded its coverage to 143 new municipalities (+16.0% y.o.y), totaling 1,036 municipalities, or 78% of the Brazilian urban population. In order to meet the increasing demand for data usage and seize the opportunities in the mobile data segment, the Company has been improving its 3G network coverage quality and capacity. The Company also offers 4G LTE services in 45 municipalities, which represent 36% of the urban population.

Mobile ARPU

Mobile ARPU treats total mobile service revenues (Personal Mobility + Corporate / SMEs) as if they were generated by a separate mobile company, i.e. including revenues from traffic between Oi’s mobile and wireline divisions (intercompany), but excluding revenues from mobile long-distance calls that belong to the STFC license (fixed voice concession). This amount is then divided by the average customer base to calculate mobile ARPU.

Mobile ARPU reached R$ 17.7 (-4.1% y.o.y and -5.3% q.o.q) in 1Q15, impacted by the MTR cuts, but partially offset by the increase in data revenues and in the prepaid recharge volume. Excluding interconnection revenues, mobile ARPU grew by 11.3% over 1Q14 and 1.4% over 4Q14, due to the initiatives to increase the profitability of the customer base.

It is worth mentioning the Company’s success in improving the profile of its customer base, increasing its profitability and reducing its churn rate, despite Brazil’s current economic instability.

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Note: SMEs means small and medium enterprises.

In 1Q15, net revenues in the Corporate / SMEs segment amounted to R$ 2,021 million (-3.4% y.o.y and -3.1% q.o.q), chiefly due to the reduction in voice traffic and the cut in MTR and VC tariffs, partially offset by the increase in IT and data revenues, especially in the Corporate segment, and the EILD revenues growth. Oi closed 1Q15 with 7,836 thousand RGUs (-3.7% y.o.y) in the Corporate / SMEs segment.

The segment has faced the challenges related to the Brazilian macroeconomic environment but it has improved its revenues profile.

Corporate

The Corporate segment was impacted by the weakening macro-economic environment in Brazil as well as long term structural trends. Voice traffic volumes declined as usage migrates to data. On the other hand, IT and data communication services continued to grow in this segment, both due to higher traffic and new contracts in the quarter.

We continue to focus on reducing its dependence on voice services, offering its clients non-traditional services, known as value added services, such as network management and security, Smartoffice, Smartcloud, Anti-ddos and M2M (Machine-to-Machine), in order to increase customer loyalty and ensure greater revenue predictability. As a result, innovative services of data center, cloud and IT grew by 19.7% over 1Q14, helping increase the share of non-voice revenues to 63.1% in 1Q15 (+3.5 p.p. y.o.y and +11.6 q.o.q). These revenues increased 3.3% over the same quarter last year.

Currently, in addition to the offering of non-traditional services, the Company has been using the upselling strategy without the need for additional investments. The sales focus has then been redirected to the upgrade of services in existing contracts.

SMEs

The SME segment, which relies more on voice revenues, was negatively influenced by the decline in voice traffic. There was also an impact from the reduction in the MTR and VC tariffs, in addition to the effects of the slowdown in the economy as a whole

The segment has been going through certain structural measures designed to reduce costs, which resulted in better margins, including: (i) the use of franchises as the only physical sales channel; (ii) portfolio simplification in order to improve efficiency and quality in the product chain; (iii) revision of the after-sales structure,

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benefitting from the good practices adopted in the Corporate segment, in order to improve the management of delivery, repair and accounts; and (iv) the end of handset subsidies.

IT revenues increased by 55.7% over 1Q14, fuelled by data center, cloud and IT services, as a result of the strategy of reducing the segment’s dependence on voice services.

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Operating Costs and Expenses

Table 2 — Breakdown of Operating Costs and Expenses

In 1Q15, total consolidated routine Opex reached R$ 5,029 million, 4.7% down from 1Q14 and 8.3% down from 4Q14.

Regarding the Brazilian operations, costs and routine operating expenses were R$ 4,912 million, with an annual reduction of 4.9%, despite the 8.1% accumulated inflation in the last twelve months and the additional costs associated with the leasing of the assets disposed since 2013. This improvement already reflects the first results of the cost reduction plan for 2015, in line with the Company’s operational turnaround announced at the end of 3Q14.

In 2015, the Company prepared a plan based on cost reductions. In order to ensure that it will capture gains throughout the year, an executive area was created to monitor and support the execution of the plan’s initiatives for 2015, supported by external consultants specialized in this type of project.  Currently, there are around 290 mapped initiatives, most of which already in the implementation stage, designed to increase efficiency and improve operations, divided into four pillars: (i) OPEX/CAPEX reduction and optimization; (ii) customer profitability improvement; (iii) working capital improvement; and (iv) organizational structure optimization.

Personnel

Personnel costs and expenses in Brazil totaled R$ 592 million in 1Q15 (-10.3% y.o.y and -16.5% q.o.q). This performance was due to the fact that the Company adopted several human resources optimization measures, such as the reduction of the management team, greater control of overtime and on-call hours (with a more efficient distribution of working hours), a more restrictive hiring policy, among other initiatives to increase productivity and efficiency.

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Interconnection

Interconnection costs in Brazil closed 1Q15 at R$ 504 million, 33.4% down from 1Q14 and 18.9% down from 4Q14, basically explained by the MTR cuts in the country and lower voice and SMS off-net traffic.

Third-party Services

In 1Q15, costs and expenses related to third-party services in the Brazilian operations came to R$ 1,532 million, 2.7% up on 1Q14, due to higher expenses with TV content, thanks to Oi’s pay TV base growth, and VAS, related to the upturn in data traffic, in addition to the increase in electricity costs. These effects were partially offset by the renegotiation of certain contracts and the lower volume of commissions in the quarter.

On a sequential basis, these costs fell by 6.8% despite the 11.7% increase in the electricity tariff. This improvement was chiefly due to lower sales commissions and lower costs with consulting and advisory services, and gains on contracts renegotiations.

Network Maintenance Service

In this quarter, network maintenance service costs in Brazil reached R$ 451 million decreasing by 4.9% y.o.y and 12.2% q.o.q, in line with Oi’s commitment to improving efficiency and productivity.

Handset Costs/Other (COGS)

In 1Q15, handset costs totaled R$ 138 million in the Brazilian operations (+34.9% y.o.y), due to the adoption of initiatives in 2014 to expand handset sales volume through partnerships with large retailers in order to leverage prepaid chip activation and increase the penetration of smartphones in its customer base. The 46.0% decline from 4Q14 was due to the increased seasonal handset sales during the Christmas season.

Marketing

Marketing expenses fell 71.1% y.o.y and 78.7% q.o.q, totaling R$ 33 million in 1Q15. The annual comparison is impacted by atypical expenses volume due to the World Cup campaigns in 1Q14, while the sequential comparison reflects seasonal effects from Christmas in 4Q14. Besides, in line with the focus on cost reduction discipline, the Company adopted a more conservative approach to advertising campaigns in the quarter.

Rent and Insurance

In Brazil, rent and insurance expenses reached R$ 876 million (+12.8% y.o.y and 14.9% q.o.q) in this quarter. This performance was chiefly due to (i) higher costs with network infrastructure leasing, as a result of the sale of two lots of mobile towers in March and December 2014; (ii) the dollar variation, which impacted operational leasing contracts, especially those related to GlobeNet and the SES-6 satellite; and (iii) annual contractual adjustments.

Provision for Contingencies

The Brazilian operations’ expenses with provisions for contingencies reached R$ 223 million in 1Q15, 52.6% up on 1Q14, resulting mainly from the increase in the number of claims in the Special Civil Court (JEC) in the quarter. In the sequential comparison, provisions for contingencies fell by 21.8%, chiefly due to higher labor provisions in 4Q14.

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Provision for Bad Debt

In 1Q15, provisions for bad debt stood at R$ 146 million (-28.4% y.o.y), reflecting the measures adopted as of last year to restrict credit to new customers and improve the quality of sales processes. In the sequential comparison, there was a 29.9% upturn due to the seasonal increase in the first quarter. Provisions for bad debt represented 2.1% of net revenues in 1Q15, versus 3.0% in 1Q14.

EBITDA

Table 3 — EBITDA and EBITDA margin

In 1Q15, consolidated EBITDA totaled R$ 2,011 million, while EBITDA from Brazil stood at R$ 1,928 million and EBITDA from other operations (Africa) reached R$ 83 million. In 1Q15, there were no non-routine Opex items.

The Company’s routine EBITDA increased by 10.1% over 1Q14 and 9.5% over 4Q14. In Brazil, routine EBITDA grew by 12.8% over 1Q14 and 14.2% over 4Q14, fueled by the decline in costs and the increase in customer revenue (mobile, broadband and pay TV), partially offset by lower interconnection revenues (MTR and VC). The routine EBITDA margin of the Brazilian operations reached 28.2%, versus 24.9% in 1Q14 and 23.9% in 4Q14.

Routine EBITDA from other international operations (Africa) reached R$ 83 million (-29.3% y.o.y and -43.7% q.o.q) basically due to the discontinuation of the operations in Cape Verde.

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Capex

Table 4 — Capex

1Q15 investments stood at R$ 1,025 million (-19.5% y.o.y and -7.5% q.o.q) on a consolidated basis. Capex in Brazil reached R$ 984 million (-18.5% y.o.y and -6.8% q.o.q), given the Company’s continued commitment to financial discipline and increased efficiency in capital allocation, focusing on optimizing the existing infrastructure, more careful assessments of investments, reformulations in the supplier contract models and the sharing of infrastructure.

In the Brazilian operations, R$ 829 million (84.3% of total Capex) was allocated to the network in 1Q15, targeted at (i) improving the fixed network for pay TV and broadband services, (ii) improving the quality of the 3G mobile network, ensuring compliance with Anatel quality indicators, and (iii) expansion of the data infrastructure, and (iv) expansion of the 4G network.

It is important to note that investments in the expansion and improvement of the fiber optic network (backbone) increased both in the annual and in the sequential comparisons, reinforcing Oi’s commitment to continuously improving its infrastructure, which is unique in the country.

Operational Cash Flow (EBITDA —Capex)

Table 5 — Operational Cash Flow

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Table 6 - Operational Cash Flow of Brazilian Operations

Routine operational cash flow (routine EBITDA minus Capex) improved by 78.3% over 1Q14 and 35.5% over 4Q14, reaching R$ 986 million in 1Q15. In Brazil, routine EBITDA minus Capex totaled R$ 944 million in 1Q15 (+88.3% y.o.y and +49.0% q.o.q). This performance was explained by a substantially higher routine EBITDA in 1Q15, combined with more efficient capital allocation, as previously explained. This result strengthens the Company’s confidence in delivering the guidance of operating cash flow improvement in the range of R$ 1.2 billion and R$ 1.8 billion.

Depreciation / Amortization

In 1Q15, the Company reported depreciation and amortization expenses of R$ 1,218 million (+1.2% y.o.y and +2.0% q.o.q).

Table 7 — Depreciation and Amortization

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Financial Results

Table 8 - Financial Results (Oi S.A. Consolidated)

Oi S.A. posted net financial expenses of R$ 1,269 million in 1Q15, a sequential decline of 3.9% and an annual increase of 6.3%.

The sequential performance was explained both by the R$ 65 million decline in other financial expenses and by the R$ 121 million reduction in the net foreign exchange result, despite the increase in net interest. The first factor was chiefly due to lower expenses with taxes and interest on other liabilities, while the second factor reflected the maintenance of almost no foreign currency exposure in the quarter and the effectiveness of the current hedge policy, even in a scenario of high exchange rate volatility. On the other hand, the increase in net interest was the result of the Company’s average debt and higher CDI, IPCA and TJLP rates in the last three months.

Net Earnings (Loss)

Table 9 — Net Earnings (Loss) (Oi S.A. Consolidated)

Oi S.A. recorded earnings before interest and taxes (EBIT) of R$ 793 million (-56.2% y.o.y and -60.4 q.o.q). The financial results increased by 6.3% in 1Q15 chiefly due to the CDI rate increase. Consequently, Oi S.A. recorded net earnings from continuing operations of R$ 414 million in 1Q15.

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In the consolidated earnings’ view, the Company recorded net loss of R$ 447 million in 1Q15, including the accounting impacts of R$ 32 million related to the results from the discontinuing operations of PT Portugal that are part of the sale agreement with Altice S.A.

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Debt & Liquidity

Table 10 - Debt

The Company’s consolidated gross debt ended 1Q15 at R$ 34,637 million, a 4.0% sequential increase and a 0.5% annual increase.

In the quarter, the Company raised funds with Export Credit Agencies — ECAs to finance its investments. A total of US$184 million was disbursed by the Belgian agency ONDD and the Finnish agency Finnvera. The Company also carried out a derivative recouponing transaction, whose accounting and cash flow effects are identical to those of new funding totaling around R$ 550 million. The funding and recouponing were partially offset by amortizations totaling R$ 1.1 billion, led by (i) the payment of principal and interest to the BNDES;  (ii) the payment of interest on bonds (US$: 5.75% and R$: 9.75%); and (iii) payment of interest on Oi S.A.’s debentures (10th issue, 9th issue 1st and 2nd and series).

The debt denominated in foreign currency represented 51.8% of the total debt at the end of 1Q15 (versus 44.4% in 4Q14), with virtually no exposure to exchange rate fluctuations (below 0.1%). The average debt maturity stood at 3.7 years at the end of 1Q15.

As mentioned in the last quarter, the shareholders of Oi S.A. and Portugal Telecom SGPS approved the sale of PT Portugal. Therefore, until the sale is completed, the assets and liabilities of PT Portugal are classified as Held-for-Sale Assets and Liabilities Associated to Held-for-Sale Assets, respectively, thus not integrating Oi’s consolidated debt as of March 31, 2015.

The Company ended 1Q15 with a cash balance of R$ 2,079 million, resulting in net debt of R$ 32,557 million.

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Table 11 — Net Debt Variation

(1)         Excludes assets disposals

(2)         Economic capex in the period

(3)         Includes de difference in capex disbursement and economic capex

In 1Q15, the Company’s net debt reached R$ 32,557 million, a 6.5% increase compared to 4Q14, mainly due to the annual payment of Fistel maintenance fee, a non-recurring tax payment over intragroup interest on own capital, most of which will revert to Oi as tax credit in the future, and the financial results. Additionally, working capital increased, impacted by adverse current macroeconomic environment.

Table 12 — Gross Debt Amortization Schedule