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Oi


Company Profile

GRI 2.1, 2.2, 2.6, 2.7 and 2.8GRI 2.1 - Name of the organization

GRI 2.2 - Primary brands, products, and/or services.

GRI 2.6 - Nature of ownership and legal form

GRI 2.7 - Markets served

GRI 2.8 - Scale of the organization
Oi S.A. is Brazil’s leading telecommunications service provider, offering a wide range of convergent products (those that can be offered together to a single customer), including traditional fixed line and mobile telephone services, data transmission, broadband internet access, internet and TV provider. The company services residential and small, medium and large-scale corporate users, government agencies and telecommunications companies. Oi holds the fixed line concession in 25 Brazilian states (all except São Paulo) and in the Federal District.

With acquisition of stock control of Brasil Telecom S.A. in 2009, Oi consolidated its national presence in mobile telephone and data transmission services with a unified portfolio across all regions of coverage. The availability of services on a national scale gives Oi the scope required to compete on equal terms with key international competitors operating in Brazil.

A pioneer and, in fact, the only integrated operator in Brazil, Oi believes in offering convergent services as an important competitive advantage to win customer loyalty.

GRI 2.5GRI 2.5 - Countries where the organization operates and where its main operations are located Since 2009, Oi has also operated the Globenet (full subsidiary of Oi S.A.) underwater optical fiber cable network which links Brazil, Colombia, Venezuela, Bermuda and the United States. Globenet and Metrored networks are part of the Oi data backbone2, making it the biggest and most expansive data coverage in Brazil, with more than 176,000 kilometers (109,000 miles) – (23,300 kilometers (14,500 miles) of international backbone from Globenet, 32,600 km (20,250 miles) of Brazilian national backbone and 120,300 km (74,560 miles) of state and metropolitan networks).

With Oi TV as part of the complete portfolio of services, Oi has become Brazil’s first quadruple play company, with combined offer of fixed line, mobile, broadband and pay TV, the latter available in the Federal District and the brazilian states, except São Paulo, at 2012.

2Central call-making system in a wider network, typically high performance. On an internet grid on a planetary scale there are, hierarchically divided, intercontinental (international) and national call backbones.


At Oi Stores, clients get to know the full services’ portfolio.


GRI 4.13GRI 4.13 - Memberships in associations and / or national / international advocacy organizations Participation in associations

Oi actively participates in various associations and bodies which dialog on themes relevant to the Company, its business area and relations with different consumer groups, and key among these organizations are:

  • ABDTIC (Brazilian Legal Association of Information Technology and Communications);
  • Abrasca (Brazilian Association of Public Companies);
  • ABTA (Brazilian Pay TV Association);
  • Acieg (Goiás Commercial and Industrial Association);
  • ACM (Maranhão Commercial Association);
  • ADVB (Association of Sales and Marketing Directors in Brazil) – Bahia;
  • ADVB (Association of Sales and Marketing Directors in Brazil) – Pará;
  • ADVB (Association of Sales and Marketing Directors in Brazil) – Santa Catarina;
  • AHCIET (Ibero-American Association for Research Centers and Telecommunications Companies)
  • Amcham (Americana Chamber of Commerce) – Bahia;
  • Bahia Commercial Association;
  • Maceió Commercial Association;
  • Porto Alegre Commercial Association – Policy/Business Contribution– Federasul;
  • Vitória Commercial Association;
  • Ceará Commercial Association;
  • Sergipe Business and Commercial Association;
  • Rio Grande do Sul State Industry Center;
  • Ciesp São Paulo State Industry Center;
  • Citel (Inter-American Telecommunication Commission);
  • São Paulo State Federation of Industries – Instituto Roberto Simonsen;
  • Mato Grosso Federation of Industries;
  • Fieb (Bahia State Federation of Industries);
  • IBGC (Brazilian Institute for Corporate Governance);
  • Ibrac (Brazilian Institute for Studies into Competition, Consumption and International Trade);
  • Brazilian Institute for Finance Executives (Espírito Santo);
  • Espírito Santo in Action Ação Business Movement;
  • Seta (National Union of Pay TV and Conditional Access Operators);
  • Sinditelebrasil (National Union for Telephone as Mobile and Personal Service Companies);
  • Telcomp (Brazilian Association of Competitive Telecommunications Service Providers);
  • Telebrasil (Brazilian Telecommunications Association).


GRI 2.3 e 2.9GRI 2.3 - Operational structure of the organization

GRI 2.9 - Significant changes during the reporting period
Regionalization

The Company management model was refined in 2012 to provide support to the 2012-2015 growth plan. Among key changes are the process of regionalization, with administrative division into nine regional units (see map), which began in 2011.

This decentralization enhances Oi presence in the various regions of operation and brings the Company closer to its customers. Efforts are being made in-house to standardize operations and speed up the decision-making process. The outcomes of these changes are already being seen in practice, with speedier exchange of information, time-saving and enhanced integration.


area-of-coverage-mapa


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GRI 2.8GRI 2.8 - Scale of the organization
unidades-geradoras-de-receita


The History of Oi


Corporate Governance

The corporate system in which Oi operates encompasses its bylaws, ownership and organizational structures and a number of policies, procedures and practices which interconnect and complement each other, leading to the achievement of social goals and business longevity.

GRI 4.6GRI 4.6 - Processes to ensure that conflicts of interest are avoided In 2012, the Company advanced in its process of continuous institutional framework improvement which guides its operations, approving the Policy on Transactions with Related Parties and Situations Involving Conflict of Interests. Its aims are to establish rules and consolidate procedures while preserving process transparency. As such, decisions will be taken in the best interests of the Company, its senior management and its shareholders. At the end of the year, Oi was listed in Level 1 of Corporate Governance of the BM&FBovespa, with its shares included in the Special Corporate Governance Stock Index (IGC). Furthermore, was created the Policy of Shareholders Compensation.

In addition, the ownership structure was simplified, adding value to shareholders and rendering the company more attractive for investors, with improved access to the capital market.


Sustainability

Sustainability management structures also underwent changes in 2012. The Committee on Governance, Disclosure and Sustainability was dismantled and gave way to the Executive Sustainability Group, staffed by executives in departments such as Treasury and Investor Relations, Property and Logistics, Human Ressources, Network Operations, Network Development and Engineering, Corporate Communication, Procurement and Oi Futuro.

This new framework, answering to the Executive Committee, seeks to foster business sustainability. Its primary duties are to aid integration of the theme into strategic direction; evaluate socio-environmental risk management; recommend continuance of and/or new public commitments; define the stakeholder relations strategy; leverage sustainability actions and monitor performance through follow-up of indicators; evaluate investments in sustainability such as sponsorship, new business, products and services, and keep the Sustainability Policy updated.


GRI 2.9GRI 2.9 - Significant changes during the reporting period Corporate Reorganization

In 2012, Oi completed the reorganization process begun in 2011, with the aim of simplifying the ownership structure and governance of Oi Companies (as the group of subsidiaries TNL, Coari, BRT and TMAR is known), increasing liquidity for all shareholders. The reorganization includes joint and inseparable transactions: the merger of Coari and TNL into BRT and the partial spin-off TMAR, with the merger of its shares into Coari.

BRT now concentrates its stock holdings in the Oi Companies and has become the only among them to be listed on the stock exchange – the company is now known as Oi S.A. The retention of control of Oi exclusively by TmarPart served to meet legal and regulatory obligations to Anatel (for approval of the reorganization). It was incumbent upon TmarPart and its direct or indirect shareholders to ensure retention of control and compliance with legal obligations including, potentially, exchange of preferred shares held for common shares held by its direct or indirect shareholders.

On February 27, General Meetings at Coari, BRT, TNL and TMAR approved the corporate reorganization transactions. TMAR was thereby partially spun-off, with its shares merged into Coari. TNL and Coari were merged into BRT, being wound up and universally succeeded by BRT, which was renamed Oi S.A. Oi S.A. is directly controlled by TmarPart and TMAR is its wholly-owned subsidiary.

Until April 5, 2012, TMAR, TNL, Coari and Oi shares continued to be traded on the stock exchange under tickers TMAR3, TMAR5, TMAR6, TNLP3, TNLP4, COAR3, COAR4, BRTO3 and BRTO4. As of April 9, only the Company’s common and preferred shares (OIBR3 and OIBR4) were listed on the BM&FBovespa S.A., while its ADSs (American Depositary Shares) representative of Oi stock were listed on the New York Stock Exchange (NYSE) under codes OIBR and OIBR.C.

Further details on the corporate reorganization process are available in the Material Fact on the Investor Relations website.


GRI 4.1GRI 4.1 - Governance structure of the organization, including committees under the highest governance body Governance Structure

estrutura

GRI 4.9 e 4.10GRI 4.9 - Responsibilities for implementing the economic, environmental, and social policies

GRI 4.10 - Processes for evaluating the highest governance body’s own performance
Board of Directors: approves policies and strategies and monitors the general progress of the business in all dimensions, the strategic plan, budgets and financial policies. The Board comprises up to 17 effective members and an equal number of alternates, elected by shareholders at the Ordinary General Meeting. Preferred shareholders have the right to elect a member by a separate vote.

The Board’s duties include authorizing investments in new businesses and creating subsidiaries; it is also responsible for approving strategic decisions such as investment and divestment in other companies in an amount beyond the scope of authority of the Board of Executive Officers, acquisition of fixed assets and signing of contracts in an amount beyond the scope of authority of the Board of Executive Officers, and the Company sponsorship policy along with gratuitous acts for the benefit of employees or the community in accordance with Oi’s social responsibility guidelines.

There are no mechanisms for evaluation of Board performance, but the internal regulations provide for annual self-assessment.

Fiscal Council: a permanent, independent body, as defined by the bylaws. Its primary responsibilities are to monitor management activities, examine financial statements and communicate its conclusions to shareholders.

Council members self-assess their performance in compliance with the US Sarbanes-Oxley law in order to certify the effectiveness of internal controls, efficiency of operations and compliance with applicable laws and standards.

GRI 4.4GRI 4.4 - Mechanisms for shareholders and employees to provide recommendations Pursuant to the requirements of the SEC (Securities and Exchange Commission), the Fiscal Council also performs the role of Audit Committee, in addition to being responsible for the Complaint Channel, available on the Company website. This channel receives complaints exclusively regarding accounting, internal accounting controls or audit matters and confidential and/or anonymous reports from employees of the parent company or its affiliates on questionable accounting or audit issues.


BOARD OF DIRECTORS3

Member Alternate
José Mauro Mettrau Carneiro da Cunha4 (Chairman) José Augusto da Gama Figueira
João Carlos de Almeida Gaspar Antonio Cardoso dos Santos
Zeinal Abedin Mahomed Bava Luis Miguel da Fonseca Pacheco de Melo
Shakhaf Wine Abílio Cesário Lopes Martins
Armando Galhardo Nunes Guerra Junior Paulo Márcio de Oliveira Monteiro
Sergio Franklin Quintella Bruno Gonçalves Siqueira
Renato Torres de Faria Carlos Fernando Horta Bretas
Rafael Cardoso Cordeiro André Sant’anna Valladares de Andrade
Fernando Magalhães Portella Carlos Jereissati
Alexandre Jereissati Legey Carlos Francisco Ribeiro Jereissati
Pedro Jereissati Cristina Anne Betts
Cristiano Yazbek Pereira Erika Jereissati Zullo
Fernando Marques dos Santos Laura Bedeschi Rego de Mattos
José Valdir Ribeiro dos Reis Luciana Freitas Rodrigues
Carlos Fernando Costa Marcelo Almeida de Souza
Carlos Augusto Borges Alcinei Cardoso Rodrigues


GRI 4.2 and 4.3GRI 4.2 - Chair of the highest governance body

GRI 4.3 - Members of the highest governance body that are independent and / or non-executive members

3 Board members are not executives, i.e. are not part of the Board of Executive Officers and do not perform any direct management function in the Company.

4 After the Board Meeting of January 22, 2013, José Mauro Mettrau Carneiro da Cunha took office as CEO of the Company and subsidiaries, replacing Francisco Tosta Valim Filho. José Mauro Mettrau Carneiro da Cunha stepped down from the post of Chairman of the Board, with his alternate José Augusto da Gama Figueira nominated assume this role.


To find out more about the professional career paths of Board members, click here.


FISCAL COUNCIL

Member Alternate
Sidnei Nunes Aparecido Carlos Correia Galdino
Allan Kardec de Melo Ferreira Newton Brandão Ferraz Ramos
Ricardo Berretta Pavie (Vacant)
Marcos Duarte Santos Peter Edward Cortes Marsden Wilson


BOARD OF EXECUTIVE OFFICERS

Francisco Tosta Valim Filho5 (CEO)
Alex Waldemar Zornig (CFO and IRO)
Francis James Leahy Meaney
Pedro Santos Ripper
Julio Cesar Fonseca
Eurico de Jesus Teles Neto
João de Deus Pinheiro Macedo
Bayard de Paoli Gontijo
Tarso Rebello Dias

5 Replaced by José Mauro Mettrau Carneiro da Cunha as of January 22, 2013, pursuant to a Board decision.


To find out more about the career of our Executive Officers, click here.


GRI 4.1GRI 4.1 - Governance structure of the organization, including committees under the highest governance body Support to Decision Making

A set of structures provides support to the decisionmaking process by the Company’s senior management. The main structures are detailed below:

Disclosure Committee: staffed by the CEO, CFO, treasury, investor relations, corporate communications, controllership, legal-corporate and marketable securities executive officers, and is executive in nature. Its duties include: approving and reviewing risk management and internal controls of relevant processes and the flow of public information disclosure, including the Annual Management Report and the reports submitted to the CVM (Securities and Exchange Commission), SEC and Anatel (National Telecommunications Agency). The committee oversees compliance with the legal standards and regulations on disclosure and validates conference calls and the analyses of recommendations of risk rating agencies; ensures the accuracy and reliability of managerial, financial and operational data used internally, as well as of the information disclosed or published; and reviews the processes for the issue of annual certificates required by law, among other tasks.

Board Committees: there are four structures which assist the board in overseeing the different aspects of planning and implementation of the strategy.

The Finance, Monitoring and Budget Committee focuses on the financial aspects of strategic planning, financial strategy, annual budget, tax planning, and business performance.

The Human Resources and Compensation Committee helps supervise the human resources strategy and issues related to major changes to the organizational structure, compensation strategy and performance assessment.

The Risk and Contingency Committee assists the Board in issues related to internal audits, compliance with laws, regulations, policies and the code of conduct, information disclosure, corporate risk management and contingency management and control.

The work of the Committee of Engineering and Networks, Technology and Innovation and Service Offerings is related to the operational aspects of strategic planning, commercial strategic positioning of business units, operational quality indicators, innovation cycle and new businesses, new partnership opportunities with suppliers and other entities, network and platform strategies, IT architecture, opportunities for collaboration and synergies with the operating partner.


Continuous Development

In line with best market practices, Oi invests in the continuous improvement of the systems and structures that support the Company’s governance. Key development milestones since 2001 are as follows:



Internal Audit

Linked directly to the Board of Directors and indirectly to the CEO. It acts independently of operations with the aim of reviewing processes and systems and recommending improvements. This body is driven by the principles and best practices of the Institute of Internal Auditors, an organization based in the United States and present in Brazil, regulating the internal audit profession. Its structure is divided according to area of operations – IT and Operations, Compliance and Processes and Business – and has a support arm that uses sophisticated data mining and programming techniques to facilitate the work of auditors and maximize audit results.

Operations in this area cover a wide spectrum of auditing which includes the dimensions of sustainability and social responsibility. Its annual work plan is approved by the Board – through the Risk and Contingency Committee – and by the Fiscal Council, which is authorized by SEC to operate as an Audit Committee.


Risk Management and Internal Controls

Oi’s Risk Management Model is periodically refined and in compliance with best market practices, such as the Brazilian Risk Management Standard (ABNT – NBR ISO 31000), Internal Control – Integrated Framework by Coso (Committee of Sponsoring Organizations of the Treadway Commission), and Cobit (Control Objectives for Information and Related Technology). Oi processes undergo external audit annually in accordance with representativeness of the related accounting records. In parallel to this, the Internal Audit examines all processes regardless of accounting record representativeness.

GRI SO2GRI SO2 - Total number of business units analyzed for risks related to corruption Oi’s Risk Management Model is periodically refined and in compliance with best market practices, such as the Brazilian Risk Management Standard (ABNT – NBR ISO 31000), Internal Control – Integrated Framework by Coso (Committee of Sponsoring Organizations of the Treadway Commission), and Cobit (Control Objectives for Information and Related Technology). Oi processes undergo external audit annually in accordance with representativeness of the related accounting records. In parallel to this, the Internal Audit examines all processes regardless of accounting record representativeness.

In order to mitigate identified risks, Oi designs and implements controls adapted to its business and constantly monitors its internal environment with a view to prevent losses and preserve assets. In addition, the corporate Risk Management system brings together essential, reliable and updated information, providing enhanced transparency and security to the decision-making process.

In 2012, the Company improved its controls by creating the Business Continuity Committee. This new structure operates in line with ABNT – NBR ISO 15999 and adopts a comprehensive approach. In addition to the focus on business, which aims to preserve the integrity of personal, material and financial assets, the Committee observes and seeks to mitigate potential risks to society and the environment.

In monitoring this new risk context, Oi modified and intensified processes to identify, analyze and deal with risks. By adopting the Business Continuity Model in the strategic, tactical and operational dimensions, Oi seeks to boost its resilience against the manifestation of serious risks. Business continuity strategies and plans have been established for the assets that support Oi’s key processes, with a view to maintaining the availability of services to customers.

The systematic supervision of controls related to the treatment and disclosure of financial information have made for appropriate conformity certification regarding operation of the control environment in the Company.


Financial risks

Financial risk management takes into account the consolidated structure of the Oi Group at strategic, tactical and operational levels.

In the strategic dimension, the Board of Executive Officers agrees with the Board on the risk policies to be followed each fiscal year.

On a tactical level, supervision is the responsibility of the Financial Risk Management Committee, staffed by the CEO, CFO, planning and performance, controllership, regulatory affairs, legal, taxation and treasury executive officers. The committee meets once a month, with the Audit officer as a passive participant.

Operational control is carried out by the Financial Risk Department, which monitors the compliance of financial operations with the Hedge Policy. Approved in October 2009, this policy contributed to the monitoring of risks related to liquidity, credit and market in conjunction with the Investment Policy.

Investment Policy: this is aligned with Oi’s strategic objectives and focuses on conservatism and achieving liquidity and suitable profitability. It controls liquidity risks by establishing maximum grace periods and approval limits. To mitigate credit risks, it defines the limits of concentration for financial institutions and minimum credit ratings. Focused on market risks, the policy identifies eligible and non-eligible instruments.

Hedge Policy: this policy sets out guidelines for the management of financial risks related to the capitals market, formalizes the management of exposure to risk factors and determines the procedures and controls required to identify, measure and minimize financial risk factors. The aim is to ensure a healthy cash flow, limiting the impacts of financial result volatility to predetermined levels.

This policy is based on two assumptions: the Brazilian Real is Oi’s functional currency and Treasury has the responsibility to contract derivatives to limit unwanted risk and replace it with acceptable risk. The sole purpose of derivative transactions is to reduce exchange-rate risks or risks linked to interest rates, and leverage through such transactions is not permitted.

In the Hedge policy, credit and liquidity risks are controlled by stress reports, in which risk factors experience both favorable and unfavorable shocks. The Company also observes the counterparts limits in the execution of contracts and implementation of operations, besides considering the ratings of those involved, guarantees tendered and financial transaction thresholds.

In relation to the market, the identification of risk factors is based on the characteristics of the financial transactions contracted and to be contracted each fiscal year. The simulation of different scenarios using statistical models serves as a basis for measuring impacts on the Group’s financial performance. Such analysis guides the risk policy, approved annually by the Board of Executive Officers and the Board of Directors.

To define the risk policy, the Company considers the worst expected impact of the financial result on the Group’s net income, with 95% reliability. In this manner, the Hedge Policy aims to ensure the Group’s maximum net financial expense each fiscal year.

To put the risk policy into practice, the Treasury department may contract protection instruments, including financial investments and derivative transactions, such as swaps, NDF (non-deliverable forwards) and options. The main permitted financial instruments include: interest rate swaps (IRS), plain vanilla currency swaps or cross currency swaps (CCS), series swaps, NDFs (non-deliverable forwards) and maintenance of cash in dollars (natural hedge).


Ethics and Anti-Corruption

GRI DMA HR and DMA SOGRI DMA HR and DMA SO - Forma de Gestão Ethics is an important theme in Oi management, guiding the standard of conduct and relations within the Company. The Code of Ethics, launched in 2007, was reformulated in 2012 in a joint action between Ethics Agents, the Ethics Committee and representatives from various company departments. This new version comprehensively covered current issues such as conduct on social networks, digital relations, brand protection, competition compliance, sustainability and the fight against corruption.

GRI HR3 and SO3GRI HR3 - Total hours of employee training on policies and procedures concerning aspects of human rights, including the percentage of employees trained

GRI SO3 - Percentage of employees trained in anti-corruption policies and procedures
To reinforce the values set out by the code, Oi has provided online training (e-learning) in Ethics and Anti-Corruption, with case studies dealing with topics such as socio-environmental responsibility, the fight against corruption, relations with customers and suppliers, confidential information, attitude, use of resources and human rights issues, tackling discrimination, slave labor and exploitation of child labor. In 2012, 3,095 employees completed this training.

Training in human rights and anti-corruption policies and procedures, including online Code of Ethics and sustainability platforms, generated 5,642 study hours for 28% of the total company headcount in 2012. 786 employees took part in face-to-face Ethics training.


Monitoring

The Oi Ethics Committee, comprising five directors, oversees compliance with the code and analyzes reports of violations received via the Complaints Channel. The channel is open to all groups on the Company website and is also available for employees on the intranet. Any reports can be made anonymously or in guaranteed confidence.

GRI HR4 and SO4GRI HR4 - Total number of incidents of discrimination and corrective actions taken

GRI SO4 - Actions taken in response to incidents of corruption
In 2012, the channel received 11 accusations on practices of discrimination and corruption. All accusations were analyzed and appropriate measures taken, including termination, warning and communication to the enforcement agencies when necessary.

Oi repudiates the practice of false, conspiratorial and vindictive reports. Committee decisions are transparent, and are published for in-house consumption. To this end, the Company maintains permanent structure to monitor and deal with questions received to ensure the credibility of its code and the actions of the Ethics Committee.

The Committee also nominates Ethical Agents, a volunteer team of employees which works to promote the ethics culture in-house, and advise employees on the guidelines of the code. The 1st National Meeting of Ethics Agents, held in January in Rio de Janeiro, marked formation of a new group of agents.


Legal compliance

GRI DMA SOGRI DMA SO - Forma de Gestão Oi observes relevant laws and respects free competition in the conduct of its business. Oi repudiates any violation of trade secrets or improper obtaining of confidential information on products and services, and its Code of Ethics prohibits any behavior which may cause the public to consider it unethical, anti-competitive or contrary to the laws governing the market.

GRI SO7GRI SO7 - Number of legal actions for anticompetitive behavior In 2012, the Company defended three lawsuits (two related to unfaithful competition and one regarding publicity harmful to the competition). These cases, as at the end of 2012, are still awaiting final decision.


Information Security

GRI PR1GRI PR1 - Assessment of impacts on health and safety during life cycle stages of products and services The initiatives to ensure information security apply especially to the areas of Business, Information Technology and Engineering and are aimed at supporting the development of products and services, defining technological standards across the network and raising awareness among teams as to the importance of this matter. This work is based on legal standards and best and current control practices.

In 2012, the challenge was to intensify the synergy of actions focused on security with strategy, management and quality of service to internal and external clients. Employees in the area of Information Security participated in the development of products launched by Oi, making recommendations on security controls and improvements to development processes.

Externally, information security management guides security services provided to cyber and corporative clients. In 2012, Oi operated the telecommunications network for Rio+20 (United Nations Conference on Sustainable Development). To provide this service, Oi made available its entire information security equipment to protect the network from hacker attacks.

The Company seeks to minimize risks related to the definition of security parameters and detect and prevent problems, in addition to applying and monitoring business rules and internal controls related to SOX (Sarbanes-Oxley). In order to protect internal information throughout the product and service lifespan and prevent improper accesses, Oi invests in security tools and in the automation of processes and concession of access, as well as in the guarantee of access to mainframe systems.

Internally, control of access to information is equally strict. BI (Business Intelligence) information systems control access by personal password and logging of transactions. Access to reports containing personal client data require authorization from a manager, acting within the regulations of an information confidentiality agreement. The BI area also issues informative reports with client data, such as CPF (Individual Taxpayer’s ID) and call history, to be used as a basis for business analyses and decision making.

As with all the other employees of the Company, Information Security professionals undertake to comply with Oi’s Code of Ethics, which requires confidential treatment of client data. To reinforce awareness of this theme, in 2012 Oi promoted a training session with a view to minimizing its potential negative impacts on its business and products, primarily in relation to fraud.


Innovation and Technology


Digital revolution and technology are the leading aspects of the development in the telecommunications sector. In order to preserve its leading position in the domestic market, Oi keeps an eye on new standards and tries to anticipate market demands based upon pioneering efforts and creativity. In terms of management routine, this attitude translates into several actions that create the Company’s Innovation Ecosystem.

In 2012, service prospecting and focus on research and development were enhanced with the creation of the Inova program, which was divided into three different types of innovation initiatives. The Incremental Innovation is focused on the Company’s daily routine and continuous improvement; the Planned Innovation is aimed at medium-term actions based on the development and launch of new products and services; and the Exploratory Innovation tries to approach new business models, trends, and technology, laying the groundwork for long-term evolution. Together, these three types of innovation initiatives drive the Company into the future.

The activities developed in the Incremental Innovation are aimed at getting the internal public engaged in the process of searching for solutions for the daily challenges. All employees can participate in these activities. During an activity called Market of Ideas, participants develop their own virtual “portfolio” of ideas, which is periodically assessed by their co-workers. Every time an idea is approved by most team members, it is considered the winner of the cycle and is forwarded for analysis by the department it was designed for. Once the head of the department approves the idea, it is analyzed by the Innovation Committee, which decides about the possibility of implementation. The Innovation Initiative completed its first cycle in September 2012, and 56 new ideas were forwarded for analysis.


Other Initiatives

Throughout 2012, Oi continued to implement the Program for Encouraging Innovation. Since 2011, this program has provided financial support to technology research conducted in partnership with STIs (science and technology institutes), public or private research centers, and universities. These joint efforts bring the market needs closer to the long-term vision, ensuring mutual gains. Oi benefits from the expertise of these partner institutions at the same time as these partners receive financial support to develop their research. In 2012 alone, some R$ 144 million were invested in 63 projects.

Another highlight of the year was the launch of the app Oi Spot for mobile phones, which is able to detect problems in the use of the mobile network and makes it possible for the Company to get information about the users’ perception of the voice and mobile internet services. When the users experiences problems to make phone calls, get mobile signal, or internet access, the system identifies the users’ geographical location and the type of environment where the problem occurred, and such information help to improve the services.

Focusing on the increased use of the internet, the Oi Wi-Fi project started to be tested. This project will enable the use of public phones as hotspots for wireless internet access. Six prototypes will be tested in 2013.


Institutional Relations

GRI DMA SOGRI DMA SO - Forma de Gestão The telecommunications sector is a key driver of the economic and social development of Brazil and may strongly contribute to build a more sustainable society by increasing access to information, strengthening interpersonal connections, and enhancing knowledge exchange using technology. Oi tries to play this role in a professional and transparent manner, actively participating in the discussion of relevant policies for the Brazilian society.

Profissionalização

The area of Institutional Relations of the Company is constantly in contact with several levels of the Executive, Legislative and Judiciary branches of the government, sectoral forums, regulatory agencies, and entities representing different sectors of society. The activities are based on a set of internal policies, such as the Institutional Relationship Guide and the Code of Ethics. In 2012, this system was enhanced by the creation of the Oi Policy of Institutional Relations, which is based on eight areas of operation:
• Government Relations: brings the Company closer to government agencies, creating long-term value.

• Relationship with entities: guarantees a direct and active participation in important multi-sectoral forums about industry-based topics within the institutional and governmental dimensions.

• Internal mobilization: shares technical knowledge with its internal structures and relationship experiences with its stakeholders.

• Corporate sustainability: provides visibility to the Company’s commitment to corporate sustainability.

• Corporate institutional relationship: is focused on compliance with the Company’s operation policies and achievement of business goals, creating credibility at different corporate levels.

• Political, strategic and institutional scenario: analyzes different scenarios and situations at diverse levels.

• Institutional tools: consolidates and improves the relationship asset.

• Business strategy support: analyzes possibilities of partnerships and identifies business opportunities between Oi and institutional stakeholders.


Partnerships

GRI EC8GRI EC8 - Impact of infrastructure investments provided for public benefit In 2012, the Company established a closer relationship with consumer protection agencies. The intention was to make consumer protection agencies and state prosecutors’ offices more familiar with the Company’s institutional and corporate profile, as well as the projects conducted by Oi, providing them with useful information for the communities served by the Company. One of the projects consisted of a booklet containing explanations on the rights and duties of the consumers.

Another important partnership was established with the Ministry of Health to produce telephone cards for use in public telephones containing informational and awareness messages. In 2012, the theme approached by Oi was the fight against dengue.

Oi set a cooperation agreement with the Brazilian Navy to provide telecommunications services to the EACF (Comandante Ferraz Antarctic Station), which is being rebuilt after a fire earlier this year. Through this agreement, the Company reinforces its commitment to actively participate in projects that bring benefits to the Brazilian society and cooperates once with the Brazilian Navy in the implementation and maintenance of new telecommunications infrastructure for integrated voice, data, internet, and mobile services, as well as TV reception solution, which have been provided to the Station since 2006.


GRI SO5GRI SO5 - Posições quanto a políticas públicas Dialogue and Mobilization

Oi monitors and analyzes the proposed changes in laws and regulations at the federal, state and municipal levels through the Caple (Monitoring Committee of Legislative Proposals), composed of members of the following executive committees: Executive Planning, Regulatory and Sectoral Policy, Legal, Regulatory, Government Relations, and Institutional Relations. In 2012, the Caple analyzed 113 proposals from a set of 2,074 bills that were being monitored.

The most important topics discussed with the political leaders were:

  • proposals of laws to reduce theft of cables and batteries;
  • laws restricting the expansion of mobile telephony;
  • adherence to the 38/2009 Agreement of Confaz- National Council of Finance Policy for taxexemption for broadband services;
  • federal bill PLS 293/12 on policies related to the installation of telecommunications infrastructure;
  • federal bill 2,126/2011 (Civil Rights Framework for Internet);
  • federal bill 5,476/2001 (prohibition of monthly basic subscription);
  • provisional measure 563/12 on tax cuts for telecom, converted into law 12.715/2012;
  • creation of laws to foster the investment in culture and sports.

Oi also participates in the discussions of the CGPID (Steering Committee of the Digital Inclusion Program), pursuant to what is established in the contract of adhesion to the PNBL (National Broadband Plan) signed with the Ministry of Communications and Anatel (National Telecommunications Agency).

GRI SO6GRI SO6 - Policies of financial contributions to political parties, politicians, and institutions It is worth mentioning that any relationship with the government is based on dialogue and joint development, not involving financial assistance whatsoever. Oi strictly follows the provisions of law 9.504, effective as of September 30, 1997, which prohibits the utility concessionaires to directly or indirectly donate to candidates or political parties.


FifaTM World Cup

Because of the urban interventions underway in several Brazilian cities with the purpose of preparing for the 2014 FifaTM World Cup, Oi has been asked to perform relocation and removal of telecommunications infrastructure. The mapping of costs, impacts and risks enables a transparent dialogue with the agencies involved and the joint search for solutions.

In 2012, the Special Secretariat for the 2014 World Cup (Secopa) of the state of Mato Grosso, for example, requested the removal of a telephone station that serves the data network of the state and covers the major bodies of the state government, as well as fixed telephony and/or broadband services of official bodies, schools, and retail business. The technical complexity of the operation and the risk of temporary interruption of the services provided to important state and federal agencies, as well as corporate and retail customers in the state, and the high cost involved were the key factors considered in the discussions and helped to define alternatives to the removal of the telephone station.





Meet some of the employees that make Oi what it is all over Brazil.







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