The ratings on Deutsche Telekom AG (DT) are underpinned by the group's massive cash flow generation, with €7.4 billion of free operating cash flow (FOCF; operating cash flow after capital expenditures) generated over the first nine months of 2003. DT is estimated to have generated FOCF of about €7 billion over full-year 2003--significantly above its initial target of €5 billion to €6 billion--and management continues to aim for about €6 billion annually thereafter. Cash flow performance is the main mitigating factor for the group's still high debt burden. At Sept. 30, 2003, DT's net debt (adjusted for leases, securitization, and unfunded pension liabilities) was €59.7 billion, yielding a ratio of net debt to annualized EBITDA of about 3.0x. Although this
