The ratings on France Telecom S.A. (FT) reflect its leading positions in the French mobile and fixed-line telecommunications markets, and the diversification provided by its growing international mobile footprint. Together, these result in robust, sustainable free operating cash flow (FOCF). The ratings also factor in FT's steady, prudent, medium-term guideline of unadjusted net debt to GOM (gross operating margin; a proxy for EBITDA) of below 2x. The ratings remain constrained, however, by high competition in France's broadband market, the rapid technological changes transforming the traditional fixed-line business model, and FT's somewhat limited flexibility to reduce labor costs given the numerous civil servants at its domestic operations. In France, FT operates in one of the most competitive ADSL (asymmetric digital subscriber
