A dominant supplier of fixed-line and mobile telecom services in France (with 34 million fixed-line and 18.8 million mobile subscribers), allowing for solid margins and cash flow surpluses; Strong market positions and brand in the European mobile-telephony market, with 24.5 million subscribers (excluding France) at end-September 2002--about half of which were in the U.K.; Solid margin and cash flow potential. Improving performance at Orange PLC (BBB-/Stable/--), Equant N.V., and Wanadoo should benefit further from the new management team's focus on free cash flow and operating margins over the next three years; and Explicit support from the group's majority shareholder, the French state. This support is a major credit factor for France Telecom's investment-grade ratings. Very high leverage, worsened by currently
