The ratings on France Telecom S.A. (FT) reflect a better-than-average business risk profile, primarily stemming from the group's strong domestic positions in fixed-line and mobile telephony, as well as its large mobile-telephony subscriber base in Europe. Regulatory pressure is the main near-term threat to FT's operating performance, while technology developments, coupled with an aggressive competitive environment, could gradually jeopardize the group's revenue base. FT is expected to offset such pressures, however, through steady improvement in operating efficiency and an adequate product offer. The ratings also take into account the group's rapid improvement in credit metrics on the back of markedly stronger and sustainable cash flow generation, as well as a predictable financial policy through year-end 2005. Since year-end 2002, FT
