United States

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 August 2015

Commission File Number 1-13758

PHAROL, SGPS S.A.

(Exact name of registrant as specified in its charter)

Rua Joshua Benoliel, 1, 2C, Edifício Amoreiras Square

1250 -133 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 | 13 August 2015

OI DISCLOSES THE 2015 SECOND QUARTER RESULTS

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

PHAROL, SGPS S.A.

pharol.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 second quarter of 2015.

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

2Q15 RESULTS IN LINE TO DELIVER 2015 GUIDANCE

·                  In a difficult macro-economic environment, once again Oi has delivered results consistent with its commitment to the market. The Company reiterates 2015 guidance of routine EBITDA of R$ 7.0 to 7.4 billion and OCF improvement of R$ 1.2 to 1.8 billion, both for Brazilian operations.

·                  In 2Q15, Oi grew the routine EBITDA of Brazilian operations by +10.7% y.o.y to deliver EBITDA of R$ 1,816 million. This result is the product of our ongoing business transformation. Despite inflation of 8.9% in Q2 (higher than the 8.1% in Q1) Oi reduced Brazilian operations opex by 10.5% y.o.y. in the quarter, an acceleration of cost reduction versus Q1. Operating costs and expenses reached R$ 4,739 million in 2Q15, resulting in an EBITDA margin of Brazilian operations of 27.7%, an expansion versus last year of 4.1 p.p. We are confident that we still have great opportunities ahead of us.

·                  In Brazil, routine EBITDA minus Capex reached R$ 775 million in the quarter, an increase of 198% over the same quarter last year, as a result of EBITDA growth, business transformation and increased focus on investment efficiency. In this quarter, Capex in Brazil was R$ 1,041 million (-24.5% y.o.y), of which 88% were allocated for improvement and expansion of the network. Our largest and most important infrastructure projects are coming in ahead of schedule and under budget despite current difficult conditions. As a result, we are not only reducing our capex but also delivering objective network improvements. In wireless, our data drop rates have declined by 1.3 p.p. y.o.y, while data traffic has increased by 20% in 2G and by 67% in 3G. In fixed broadband, our average delivered speeds have increased by 21.4% y.o.y. and this month we will launch a VDSL service.

·                  Total net revenues in Brazil reached R$ 6,555 million (-5.5% y.o.y), mainly impacted by the MTR decline and the reduction in handset revenues. In April, Oi outsourced its handset operations, generating a negative impact of approximately R$ 140 million in handset revenues in the mobility segment. It is important to highlight that, on the other hand, this change will lead to higher margins and better working capital.

·                  Net service revenues, which excludes handset revenues, reached R$ 6,486 million, a fall of 3.3%, mainly impacted by lower interconnection tariffs (MTR) in mobile and the more challenging macroeconomic environment, especially in the Corporate / SMEs segment.

·                  Net revenues in the Residential segment reached R$ 2,460 million, -2.4% y.o.y, a stable trend from the previous quarter, driven by broadband and pay TV revenues (+8.0% e +50.9%, respectivally) as a result of new offers, better sales mix, and a continued focus on bundled offers and upselling. This focus on profitability resulted in another quarter of ARPU growth in all products, making residential ARPU accelerate growth and reach R$ 78.5 (+ 6.2% y.o.y) in the quarter.

·                  In Personal Mobility, net customer revenues (excluding MTR and handset revenues) totaled R$ 1,757 million, +3.5% y.o.y, due to the 2.7% growth in prepaid recharges combined with the 7.4% annual increase in the postpaid ARPU (ex-MTR), both driven by the data usage growth. Data revenue growth of 51% continues to underpin our success. Oi has increased its smartphone penetration and the migration of customers to its 3G and 4G network, improving customers´ service and experience. As a result, data revenues now represent 40% of total mobile customer revenues.

·                  Net revenues in Corporate/SMEs reduced by 4.5% y.o.y in the quarter, mainly impacted by the macroeconomic environment in Brazil.

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·                  Routine operating cash flow remained stable in the quarter. Net debt increased to R$ 34,644 million, mainly affected by the annual 3G license payment, the bi-annual payment of the concession fee and financial expenses. In the second half we expect cash burn to be lower as one offs from 1H15 do not recur. The Company has begun its liability management program in the wake of the sale of PT and is focused on continuing asset sales, reduction of financial expenses, extension of maturities and strengthening the balance sheet.

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Summary

(1)         Pro-forma figures, except net earnings, net debt and available cash.

(2)         Consolidated Net Earnings include the discontinuation of the operations of PT Portugal SGPS, S.A. (“PT Portugal”). Net Earnings from Discontinued Operations include the positive effect related to exchange variation gains over PT Portugal book value, which was registered on the shareholders’ equity in 4Q14. With the completion of PT Portugal sale in 2Q15, this amount was reclassified to net results from discontinued operations, together with expenses associated to the sale.

(3)         Excludes handset revenues. The handset operations outsourced in this quarter had a negative impact of approximately R$ 140 million in handset revenues in the Personal Mobility segment.

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

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Net Revenues:

Table 1 – Breakdown of Net Revenues

In 2Q15, consolidated net revenues totaled R$ 6,784 million, 5.2% down from 2Q14 and 3.6% lower than in the previous quarter. Total revenues from operations in Brazil fell by 5.5% y.o.y. (although R$140m of this reduction was as a result of outsourced operations), while revenues from other operations (Africa and East Timor) increased by 4.7% y.o.y. and 15.0% over the previous quarter, mainly due to the MTC performance and the exchange rate related to the operations in Namíbia.

BRAZIL

Total net service revenues, which excludes handset revenues, reached R$ 6,486 million in 2Q15, -3.3% y.o.y. Net revenues from the Brazilian operations (“Brazil”) totaled R$ 6,555 million in 2Q15, 5.5% lower than in 2Q14 and 4.2% down from 1Q15. In the y.o.y. comparison, the decline was due to (i) lower handset revenues, due to the outsourcing of the handset operation; (ii) lower revenues from network usage, mainly as a result of the 33.3% cut in the regulated interconnection tariffs of mobile services (“MTR”) as of February 24, 2015, with the respective decline in fixed-to-mobile tariffs (“VCs”); and (iii) the decline in fixed voice revenues due to the reduction in the customer base. This reduction was partially offset by 8.0% growth in broadband revenues and 50.9% growth in pay TV revenues, in the Residential segment, as well as the increase of 50.7% in data revenues, in the Personal Mobility segment.

In the comparison with 1Q15, the revenue decline was mainly impacted by the outsourcing of the handset operation (an impact of -R$140 million in revenues from the mobility segment) at the beginning of April and the MTR cut that impacted the three months of the second quarter, versus only one month in the first quarter.

In addition, the deterioration of the Brazilian macroeconomic scenario had a negative impact on the revenues, especially, the Corporate/SME segment.

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Net revenues from the Residential segment totaled R$ 2,460 million in 2Q15 (-2.4% y.o.y.), and it was flat compared to the variation of 1Q15 (vs. 1Q14). The segment is still being negatively impacted by the reduction in VC tariffs and the wireline base. However, it is important to highlight the increase in broadband and pay TV revenues in the period, partially offsetting the decline in wireline revenues. The y.o.y. upturn in revenues from these services reflects the Company’s efforts to improve the sales mix through higher value offerings combined with the bundle strategy. The focus on improving sales quality and the actions to upgrade the speed of broadband and upselling the TV has been consistently showingprofitability improvement, with a better revenue performance compared to the performance of RGUs, which is directly reflected in a higher ARPU.

In the sequential comparison, Residential net revenues fell by 1.2%, basically due to the fixed line service, given the decline in the customer base and VC tariffs. RGUs reached 16,791 thousand this quarter (-4.1% y.o.y.), impacted by the 8.1% reduction in fixed line RGUs and partially offset by the 33.5% increase in pay TV RGUs. In sequential terms, there was a 2.1% decline in RGUs, due to Oi’s focus on the profitability of the existing customer base and sales quality.

The strategies defined by the Company at the end of 2014 of increasing the existing base’s profitability through upselling and cross-selling initiatives, seeking new customers with a better acquisition mix through the sale of multiple-play services, and repositioning Residential offers have had a positive result, as demonstrated by the trajectory of average revenues per client in the period. The individual ARPU of each product (fixed line, broadband and pay TV) continued to improve over the previous quarter, underlining the success of the strategy of increasing the existing customer base’s profitability.

Residential ARPU

In 2Q15, residential ARPU came to R$ 78.5, +6.2% y.o.y and 1.2% higher than in 1Q15. The main driver behind this increase was the Company’s focus on offering more and higher value added services to new and existing customers by combining upselling and cross selling initiatives. As a result, the penetration of bundled offerings in the Company’s base increased and customers with more than one Oi product now represent 62.5% of the households (+2.4 p.p. y.o.y.). With more products per customer, the Company is able to increase customer loyalty and, consequently, stabilize churn rates.

Wireline

The Company ended 2Q15 with 10,440 thousand wireline customers in the Residential segment (-8.1% y.o.y. and -2.5% q.o.q.). Net disconnections totaled 263 thousand fixed lines in this quarter, impacted by the increaseof bad debt, which affects involuntary disconnections. On the other hand, wireline ARPU edged up by 0.4% over 1Q15. By offering and selling more products to the existing base, the Company reinforces customer loyalty, increasing the segment’s ARPU and reducing the churn rates. This can be verified through the

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comparison between the churn rates of stand-alone products and bundled offerings, with the latter presenting rates substantially lower than the former. In this context of service convergence, pay TV and broadband figure as key products in multiple-play offerings that combine wireline, broadband, pay TV and mobile services.

The existing bundled offers, Oi Conta Total (“OCT”) and Oi Voz Total (“OVT”), have successfully increased ARPU and reduced the segment’s churn. In 2Q15, OCT corresponded to 10.7% of the Residential wireline base, +1.4 p.p. y.o.y, with a churn rate of 11.4%, lower than the standalone wireline churn rate. In the same period, the share of low-end offerings in the gross additions improved substantially, falling by 23.6 p.p.. The OVT offer, which combines wireline and mobile, corresponded to 15.0% of the Residential wireline base in 2Q15, 2.5 p.p. up y.o.y. Additionally, the average penetration of SIM cards per OVT customer stood at 1.6 in 2Q15. OVT recorded a churn rate 24.4% lower than the stand-alone wireline offering.

In line with the business turnaround process, the strengthening of the bundled strategy and base quality improvement, Oi began the soft launch of new bundled packages, Oi Total, combining exclusive wireline, broadband, pay TV and mobility offerings. This model envisages the joint installation of wireline and broadband, and posteriorly, of TV service, as well as integrated billing in a single bill, in addition to providing a single customer service, generating a positive impact throughout the value chain.

In the quarter, Oi presents y.o.y reduction in gross adds, due to the offering repositioning and the focus on sales quality in order to reduce selling costs and improve operating efficiency. The reduction in gross adds was accompanied by a virtually stable churn rate. In the period, it is worth noting the 47.4 p.p. decline in the share of low-end offerings in wireline gross adds.

Broadband

Oi had 5,167 thousand fixed broadband RGUs in the Residential segment at the end of June 2015, 1.9% lower than in 2Q14 and 0.9% down from 1Q15. However, similarly to wireline service, broadband ARPU increased by 1.8% over 1Q15, highlighting the 9.9% of growth comparing to 2Q14, thanks to the Company’s current focus on improving the quality and increasing the profitability of its customer base.

This ARPU increase is mainly associated with the improvement in broadband speed, enabled by the Company’s focus on infrastructure investment in recent quarters. In 2Q15, broadband also presented a significant improvement in the gross add mix, with a 19.3 p.p. y.o.y. decline in the share of low-end offerings. It is worth noting the performance of the average speed for Residential broadband RGUs, which increased by 21.4% y.o.y. to 4.9 Mbps. Also, the share of RGUs with speeds equal to or greater than 5 Mbps and 10 Mbps improved by 11.6 p.p. y.o.y. to 54.5% and 6.8 p.p. to 26.6%, respectively. The average speed of gross adds was 7.1 Mbps (+57.9% y.o.y. and +6.6% q.o.q.). Currently, around 74.5% of gross adds have speeds equal to or greater than 5 Mbps and 52.1% have speeds equal to or greater than 10 Mbps.

In 2Q15, there was a decline in gross adds, as a result of the strategy of focusing on sales quality and price repositioning, occurred at the end of 2014, with a respective stable churn rate, resulting in 47,000 net disconnections in the quarter. Broadband penetration in the households that have Oi services reached 49.5%, 3.1 p.p. higher than in 2Q14 and +0.8 p.p. comparing to 1Q15.

Pay TV

Oi ended the quarter with a pay TV base of 1,184 thousand RGUs (33.5% higher than in 2Q14 and 3.9% lower than in 1Q15). The customer base reduction in the quarter was due to the repositioning of Oi TV’s offering and the increased focus on the profitability of the existing customer base, linked to the gross adds quality. Pay TV

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ARPU increased by 6.7% over 2Q14 and 4.7% over 1Q15, while the churn rate remained stable, reflecting an improvement in the sales mix and after-sales processes, a reduction in product payback, and cross selling initiatives. Pay TV presented a substantial reduction in the share of low-end offerings in the gross add mix (-28.4 p.p. y.o.y.).

In addition, in 2Q15, Oi TV’s penetration reached 11.3% of the households with Oi products, 3.5 p.p. more than in 2Q14. This increase reflects the participations of new TV acquisitions by customers with at least one other Oi product, and the Company’s continuous investment in the product, which offers complete content with the most attractive offering in the market. Oi TV provides differentiated high-definition content, with high definition in all the offers, in addition to 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. Strengthening the Oi’s TV innovation attributes, the Company recently launched “Oi Play”, which is the TV Everywhere service, where customers can watch the contents of several channels where and when they want, for any device (smartphone, tablet or PC) with an internet connection. The service has no additional cost to the customer and it offers live and on demand programming, offering flexibility and mobility compatible to the current customers’ demands.

Oi TV’s differentiated quality allows it to move forward with its upselling strategy and, consequently, increase Residential ARPU, while retaining the customer base. The churn rate in households with three Oi products (3P) was 3.0 p.p. lower than in households with only Oi TV.

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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).

Net revenues from Personal Mobility reached R$ 2,018 million in 2Q15, (-9.6% y.o.y. and -10.7% q.o.q.), chiefly due to the decline in network usage revenues related to the MTR cuts and the reduction in handset revenues as a result of the outsourcing of the majority of our handset business.

In 2Q15, customer revenues amounted to R$ 1,757 million, +3.5% y.o.y., as a result of the 50.7% upturn in data revenues reaching R$ 709 million in the quarter, equivalent to 40.4% of total customer revenues (+12.7 p.p. y.o.y.). The y.o.y. increase of 3.2% in the postpaid base and 2.7% in recharge volume also contributed to this positive performance. The 2.3% q.o.q. reduction in client revenues was chiefly due to the slowdown in recharge growth.

Revenues from network usage fell by 40.6% y.o.y. and 26.0% q.o.q., totaling R$ 193 million in 2Q15, explained by the MTR cuts implemented this year and the reduction in off-net traffic. On February 24, 2015, interconnection tariffs (MTR) declined to R$ 0.15517, R$ 0.15897 and R$ 0.15485 in Regions I, II and III, respectively, a 33.3% reduction from the tariffs established in February of the previous year.

In 2014, ANATEL approved additional MTR cuts, 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 in Regions I, II and III, respectively.

Handset sales totaled R$68 million in 2Q15, 67.4% lower than in 2Q14 and 65.9% down from 1Q15, due to the outsourcing of handset logistics and finances implemented in April this year. This reduction in handset revenues was followed by a corresponding decline in the cost of goods sold and had a positive impact on the EBITDA margin by reducing logistics and warehousing costs. Under this model, Oi remains responsible for the strategic management of the handset chain, the relationship with sales channels and the definition of the handset portfolio, while its partner Allied, the largest distributor currently in operation in Brazil, is responsible for the purchase, distribution and sale of handsets.

The change in the distribution model has the following main 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 sale channels; (iii) reduce logistics costs and COGS; and (iv) reduce the working capital employed in the handset operation.

Smartphone sales accounted for 77% of total sales. 3G/4G handset penetration reached 54% of the total base (+23 p.p. y.o.y and +5 p.p. q.o.q). Oi has been stimulating the migration of 2G technology to 3G, where the

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customer has a better data user experience. As will be discussed later, the Company has been investing significantly to improve its unique infrastructure of transportation and transmission to benefit from the migration movement from voice to data that has seen in the market.

The Personal Mobility customer base closed 2Q15 with 47,756 thousand RGUs, 1.8% less than in 2Q14 and 0.4% down from 1Q15. Net disconnections totaled 862 thousand in the last 12 months, of which 1,082 thousand were prepaid and 220 thousand were postpaid. The prepaid performance is a result of the stricter prepaid base cleanup policy focused on business profitability.

In 2Q15, Oi’s mobile customer base (Personal Mobility + Corporate/SMEs) reached 50,253 thousand RGUs, 47,756 thousand of which in the Personal Mobility segment and 2,497 thousand in the Corporate/SME segment. The Company recorded 5.4 million gross adds and 157 thousand net disconnections in 2Q15.

Prepaid

In 2Q15, the prepaid customer base reached 40,719 thousand RGUs in the Personal Mobility segment, 2.6% less than in 2Q14 due to the base cleanup policy. In the sequential comparison, there was a 0.3% decline, with 105 thousand net disconnections in the quarter.

Despite the impact of the economic slowdown, recharges increased by 2.7% over 2Q14, due to the measures launched at the end of 2014, such as the repositioning of offerings, the simplification of the recharge portfolio (increasing the average value of top-ups) and the end of navigation at slower speeds after consumption of the contracted volume in the weekly and monthly internet packages.

Prepaid mobile internet revenues (excluding VAS and SMS revenues) grew by 43.1% y.o.y. Prepaid data traffic grew by 64.2%, while the share of data usage in recharge consumption rose 38.3% in the same period. In the y.o.y. comparison, VAS revenues from the prepaid segment increased by 62.3%, due to the offering of services focusing on smartphones with high relevance for customers, in addition to the increase in service sales channels.

Given the Brazilian current scenario of higher default levels and high cost of capital, the prepaid segment plays an even more essential role, as it has a favorable impact on working capital, low customer acquisition costs and no bad debt.

Postpaid

Postpaid customers in Personal Mobility totaled 7,037 thousand RGUs in the quarter (+3.2% y.o.y. and -1.1% q.o.q), with a 14.7% share of the total Personal Mobility base. The Oi Controle plan reached a 43.1% of share of Oi’s postpaid base (+2.0 p.p. y.o.y), an annual increase of 8.1%. Oi Controle has strategic value for the Company, since it combines advantages that are characteristic of prepaid offerings, such as the absence of bad debt and a favorable impact on working capital, with advantages that are characteristic of postpaid offerings, such as a heavier consumption profile. Thus, this plan presents a lower churn rate and a more attractive ARPU compared to prepaid plans.

Mobile internet revenues in the postpaid segment were 24.6% higher in 2Q15 than in the same quarter of 2014, due to the increased penetration of 3G/4G smartphones and data packages.

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2G, 3G and 4G LTE Coverage

Oi´s 2G coverage reached 3,399 municipalities in 2Q15, covering 93% of the country’s urban population. 3G coverage was expanded to 248 new municipalities (+26.0% y.o.y), totaling 1,185 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 coverage quality and 3G network capacity. The Company offers 4G LTE access 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$16.3 (-8.0% y.o.y. and -8.0% q.o.q.) in 2Q15, mainly impacted by the MTR cuts, partially offset by the increase in data revenues and prepaid recharge volume.

Excluding interconnection revenues, mobile ARPU increased by 7.0% over 2Q14, as a result of the Company’s efforts to increase the profitability of its customer base. Due to the focus on the simplification of its portfolio, the reduction in the number of less profitable plan and recharge offerings and the combination of voice and data packages across the entire portfolio, ARPU of new customers improved and operating costs fell thanks to the simplification of the sales process.

In the sequential comparison, ARPU remained stable, as a result of the increase in M2M (Machine-to-Machine) SIM cards in the Corporate segment, which have lower ARPU.

It is important to highlight the ARPU performance and the lower churn in the quarter. This behaviour is a result of the efforts introduced at the end of 2014, designed to improve the profile of Oi’s customer base, increasing profitability and reducing churn rate.

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Note: SMEs means small and medium enterprises.

Net revenues in the Corporate / SMEs segment amounted to R$2,001 million (-4.5% y.o.y. and -1.0% q.o.q.) in 2Q15, due to the cut in MTR and VC tariffs, the reduction in voice traffic, in addition to the more fragile economic scenario, which has impacted companies and governments. In the y.o.y. comparison, it is important to note the stronger comparison basis in 2Q14 due to Corporate revenues related to the FIFA contract in the period. In line with the focus on business profitability, Oi does not offer handset subsidies for contracts in the Corporate/SME segment.

Oi closed 2Q15 with 7,778 thousand RGUs (-4.1% y.o.y. and -0.7% q.o.q.) in the Corporate / SMEs segment. This decline was the result of the reduction in wireline and broadband RGUs, partially offset by the increase in mobile RGUs, related to the high volume of M2M SIM card sales in the quarter. The data circuit plant also grew in the period, while the advanced voice base remained stable.

Corporate

In addition to the macro scenario, the Corporate segment was impacted by the global trend of reduction in voice volume. The Company has successfully reduced its dependence on voice services through the more intense offering of data, IT and value-added services, such as management services, security solutions, Cloud services, ICT and Datacenter, and M2M (Machine-to-Machine). As a result, the share of non-voice services increased by 1.7 p.p. over the same period last year, representing 63% of the segment’s total net revenue.  Excluding the non-recurring effect of the FIFA contract, the share increased by 3.3 p.p. Non-traditional services revenues grew by 22.6% y.o.y. excluding the revenues related to the FIFA contract.

SMEs

The SME segment was more severely impacted by the economic slowdown this quarter. A number of structural measures designed to reduce costs and improve processes have led to an increase in 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, in order to improve the management of delivery, repair and accounts; (iv) revision of the credit policy in order to reduce bad debt; and (v) the end of handset subsidies.

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Operating Costs and Expenses

Table 2 — Breakdown of Operating Costs and Expenses

Total consolidated routine opex fell by a substantial 10.4% over 2Q14, totaling R$ 4,837 million. In the sequential comparison, operating costs and expenses fell by 3.8%.

The routine opex of Brazilian operations reached R$ 4,739 million in 2Q15, -10.5% y.o.y and -3.5% q.o.q. This demonstrates the successful execution of the Company’s operational turnaround through cost reduction plan that, over 2015, is showing results even on a scenario of dollar appreciation, higher electricity tariffs and 8.9% accumulated inflation in the last twelve months, which negatively pressuring costs.

In order to ensure compliance with this transformation plan, an executive area was created to monitor and support the execution of the plan’s initiatives, supported by external consultants specialized in this type of project.

Personnel

Personnel costs and expenses in Brazil totaled R$ 596 million in 2Q15, 15.8% less than in 2Q14, due to the downsizing in staff occurred in April this year, in addition to a series of measures adopted in order to increase productivity and efficiency, control overtime and on-call hours, combined with a more restrictive hiring policy. These costs remained virtually flat compared with the previous quarter, given that the staff downsizing was offset by the seasonal effect of the holiday period which occurs in the first quarter.

Interconnection

Interconnection costs in Brazil ended 2Q15 at R$ 427 million, a significant drop of 36.4% y.o.y and -15.2% q.o.q, due to the decline in MTR cuts and voice and SMS off-net traffic.

Third-party Services

Costs and expenses related to third-party services in the Brazilian operations totaled R$ 1,574 million in 2Q15, 3.2% up compared to 2Q14, impacted by the electricity tariff increases and higher expenses with TV content and VAS — due to the expansion of the pay TV customer base and the upturn in data traffic. On the other hand,

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expenses with sales commissions, freight, travel and call center declined as a consequence of cost reduction efforts. Third-party costs moved up by 2.7% over 1Q15, chiefly due to the increase in electricity tariff.

Network Maintenance Service

Network maintenance service costs in Brazil increased by 12.4% y.o.y. and 8.6% q.o.q., reaching R$ 490 million in 2Q15, mainly due to contractual adjustments with the network service providers. It is important to highlight that this expense line is associated with the quality of services, which is also a prioriy of the Company, despite the focus on cost reduction and efficiency gains. This increase shows that Oi is not sacrificing its operations to deliver short-term results.

Handset Costs/Other (COGS)

Handset costs in the Brazilian operations fell substantially in this quarter, (-79.4% y.o.y and -74,2% q.o.q) , reaching R$ 36 million, due to the Company’s new strategy of outsourcing sales and managing the handset inventory, which was implemented at the beginning of the quarter, as explained before.

Marketing

Marketing expenses totaled R$ 91 million in 2Q15, which corresponds to half of the amount recorded in the same period last year, when there was a non-recurring increase in marketing expenses due to the World Cup campaigns. In sequential terms, there was an upturn of 173.8%, due to lower spending on institutional advertising in 1Q15.

Rent and Insurance

The Company presented rent and insurance expenses in Brazil of R$ 811 million in 2Q15, 2.3% higher than in 2Q14. This was a result of the dollar appreciation and contractual adjusments, which had a direct impact on operational leasing contracts, especially those of GlobeNet and the SES-6 satellite, and due to the increase in leased capacity of GlobeNet, in addition to the growth of costs with network infrastructure leasing, due to the sale of one mobile towers lot, concluded in December 2014. In a sequential basis, there was a 7.4% decline, due to annual contractual adjustments.

Provision for Contingencies

The Brazilian operations’ expenses with provisions for contingencies reached R$ 269 million in 2Q15,  +27.4% y.o.y and 20.5% q.o.q, due to the increase in the number of claims in the Special Civil Court (JEC), with a relative increase in the average payment.

Provision for Bad Debt

In 2Q15, the provision for bad debt totaled R$ 179 million, 3.1% higher than in 2Q14 and 22.7% up on 1Q15. The provision increase reflects the deterioration of the Brazilian economic scenario, in which the decline in consumption, production and employment had a direct impact on the bad debt levels of companies in all sectors of the economy. At Oi, the biggest impacts were in Residential wireline and in small and median enterprises (SME). Provision for bad debt were 2.7% of operating Brazilian net revenue (+0.2 p.p. y.o.y).

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EBITDA

Table 3 – EBITDA and EBITDA margin

Consolidated routine EBITDA totaled R$ 1,947 million in 2Q15, a growth of 11.0% comparing to 2Q14 and a decrease of 3.2% comparing to the previous quarter.

The routine EBITDA of the Brazilian operations reached R$ 1,816 million, an increase of 10.7% y.o.y fueled by cost discipline and focus on operational efficiency. In the quarter, the routine EBITDA margin of the Brazilian operations reached 27.7%, versus 23.7% in 2Q14 (+4.1 p.p.). In the sequential comparison, Brazil’s routine EBITDA fell by 5.8% chiefly due to the 4.2% reduction in net revenues in the period.

In 2Q15, non-routine opex items totaled R$ 48 million, which was due to severance costs incurred with the layoff of employees in April this year.

Routine EBITDA from other international operations (Africa and East Timor) reached R$ 131 million in the quarter (+14.4% y.o.y. and +57.5% q.o.q.), due to the positive impact in operation net revenues in Namibia and due to the reduction in provision for bad debt in Angola.

Capex

Table 4 – Capex

2Q15 investments stood at R$ 1,069 million (-25.1% y.o.y. and +4.3% q.o.q.) on a consolidated basis. In the same period, Capex in Brazil came to R$ 1,041 million, 24.5% lower than in 2Q14 and 5.8% up on   1Q15.

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The Company maintained its focus on more efficient capital allocation, investing in the capacity expansion of the transport network and in the improvement of the 3G mobile and fixed broadband networks. As a result, Oi has enhanced the quality of the services it provides, with continuous improvement in Anatel’s mobile quality indicators and the reduction in fixed broadband bottlenecks, despite the increase in data traffic volume.

Examples of investments to expand the transport capacity of its network include (i) the construction of a new transmission grid, which currently connects 12 state capitals in the Northeast and the South of the country in a transmission network with more than 30,000 kilometers of fiber optic cable using OTN-100G equipment, among the most modern technology available on the market, which ensures transport capacity for the entire IP traffic, which has been growing consistently every year. This investment will also ensure Oi’s capacity to grow rapidly and at a lower cost in the coming years, in addition to adding more resilience to the network; and (ii) the implementation of Single Edge equipment in all Brazilian states, which will bring a new IP network architecture that is simpler and closer to our customers. The current network has different accesses for corporate, mobile and residential customers. With Single Edge, which is already used by large operators in Europe and the United States, data traffic will be grouped, bringing important operational and resource gains, such as the possib ility of expanding the network more rapidly, reducing energy consumption and repair costs, facilitating maintenance and operation, and simplifying the technical training of operating and engineering staff.

In the Brazilian operations, R$ 916 million (88.0% of total Capex) was allocated to the network in 2Q15.

Operational Cash Flow (EBITDA –Capex)

Table 5 – Operational Cash Flow

Table 6 – Operational Cash Flow of Brazilian Operations

Consolidated routine operational cash flow (Routine EBITDA minus Capex) totalled R$ 878 million in 2Q15, a substantially greater value compared to the reported in 2Q14, when reached R$ 328 million, and 11.0% lower than in 1Q15.

In 2Q15, routine EBITDA minus Capex of the Brazilian operations totaled R$ 775 million, a 197.6% y.o.y. increase due to the upturn in routine EBITDA and more efficient investments. In the sequential comparison, the 17.9% decline was chiefly due to lower routine EBITDA in the period.

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Depreciation / Amortization

In 2Q15, the Company reported depreciation and amortization expenses of R$ 1,272 million (+20.9% y.o.y. and +4.4% q.o.q.).

Table 7 – Depreciation and Amortization

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Financial Results

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

The Company posted net financial expenses of R$ 1,210 million in 2Q15, 4.7% lower than in 1Q15 and 16.6% up on 2Q14. It is worth noting that the 2Q15 result includes one month of net financial expenses from Portugal Telecom International Finance (PTIF), whose debt was no longer classified as liabilities associated to held-for- sale assets, but included in the Company’s consolidated result.

The q.o.q. increase of R$ 23 million in “net interest” and R$ 255 million in the “net foreign exchange result” was more than offset by the decline in “other financial income/expenses”, which reached R$ 66 million in 2Q15.

The variation in net interest was chiefly due to the impact of one additional month of net interest from PTIF, associated with the higher CDI in the period, as a result of the successive increases in the Selic rate by the Central Bank. The increase in the foreign exchange results basically reflect the impact of the higher CDI on the Company’s hedging cost, as well as the upturn in average debt denominated in foreign currency, due to the latest disbursements and the issue of Eurobonds due in 2021. The reversal from other financial expenses to other financial income was the result of the financial gain with the prepayment of debentures in the quarter (approximately R$ 250 million, net of the write-off of funding costs), as part of the liability management process after the inflow of proceeds received from the sale of PT Portugal, in addition to lower expenses with monetary variation on other liabilities, associated with higher interest income on judicial deposits.

Net Earnings (Loss)

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