The ratings on France Telecom S.A. (FT) reflect its leading positions in the French mobile and fixed-line telecommunications markets and wide diversification provided by its growing international mobile franchise. These business positions, together with good operating efficiency, have resulted in stable operating margins and strong organic free operating cash flow (FOCF) generation for the company over recent years. The ratings also factor in FT's prudent financial policy, reflected by a medium-term leverage ratio target of reported net debt to EBITDA of below 2x. The ratings remain constrained, however, by high competition in France's broadband market, FT's somewhat limited flexibility to reduce labor costs given the numerous civil servants at its domestic operations, and its strategy and financial policy which is
