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Notice to the Market

Rio de Janeiro, October 17, 2016.

Brazilian Securities and Exchange Commission(Comissão de Valores Mobiliários—CVM)

Attn.: Mr. Fernando Soares Vieira

Superintendent of Corporate Relations

Mr. Guilherme Rocha Lopes

Director of Corporate Monitoring - 2

c/c: emissores@bvmf.com.br

Re: Official Letter No. 363/2016/CVM/SEP/GEA-2

Dear Sirs,

In reference to Official Letter No. 363/2016/CVM/SEP/GEA-2 ("Official Letter"), copy hereto attached, which requests that Oi S.A. - In Judicial Reorganization ("Oi" or "Company") provide clarifications in connection with an article published in Jornal Valor Econômico on October 14, 2016, the Company hereby clarifies as follows.

Oi informs that the R$11 billion amount allotted to the debt with the National Agency for Telecommunications (Agência Nacional de Telecomunicações—Anatel) disclosed in Oi’s Judicial Reorganization corresponds to the fines imposed by Anatel that are still contested by the Company in the administrative sphere or fines that are being legally contested, in addition to fines that were subject to a Terms of Conduct Adjustment Agreement (Termo de Ajustamento de Conduta—TAC), which was deliberated by the Directing Board of Anatel but has not been signed.

The difference between the amount stated by the Company in the judicial reorganization and the R$ 20.2 billion amount presented by Anatel in a Press Release dated October 13, 2016 and mentioned in the news article, refers to tax debts (that, pursuant to Law No. 11,101/05 ("Law No. 11,101"), are not subject to judicial reorganization), contractual liens and other illiquid disciplinary procedures that were not included in the judicial reorganization because they did not yet have the fines applied, which is also why there is has not been a final determination of the amount of fines at this time. In the aforementioned Press Release, even Anatel informs that the calculated amounts result from "estimated fines in ongoing proceedings," confirming that these amounts still are not quantifiable and exact. Pursuant to Law No. 11,101, actions involving unquantifiable claims are not suspended by a decision granting a judicial reorganization proceeding, but rather adjudicated in the court of origin until the value of the claim is calculated, and only after the credit becomes liquid may the respective amount be included in the appropriate class within the list of creditors.

Although Anatel has publicly presented such information in its Press Release, such fact is not sufficient to provide claims in favor of Anatel with respect to the Company.

The Company clarifies that, in this phase of the Oi Companies’ Judicial Reorganization, it is natural that creditors, such as Anatel, present their calculations of claims included in the list of creditors prepared in the context of judicial reorganization which amounts differ from those included in the list.

Finally, the Company informs that the Judicial Administrator will prepare a new list of creditors, based on the diverging amounts presented (and qualification of the same), which will reflect its understanding of the nature of the Anatel claims. It estimates that this list will be disclosed in mid-December, 2016, observing the time frame established in Article 7, paragraph 2 of Law No. 11,101.

Oi reiterates its commitment to maintain its shareholders and the market informed with respect to the subject matter discussed herein and is at the disposal of the Brazilian Securities and Exchange Commission for further clarifications.

Sincerely,

Oi S.A. - In Judicial Reorganization
Ricardo Malavazi Martins
Chief Financial Officer and Investor Relations Officer



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(¹) This translation is still subject to the auditors review

(¹) This translation is still subject to the auditors review

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