The ratings on France Telecom S.A. (FT), one of world's largest integrated telecommunications operators, reflect its leading positions in the French mobile and fixed-line telecoms markets and wide diversification provided by its growing international mobile franchise. These business positions, together with good operating efficiency maintained through cost cutting programs, have resulted in sizable operating margins and strong organic free operating cash flow (FOCF) generation. The ratings also factor in FT's prudent financial policy, reflected by a medium-term leverage ratio target of reported net debt to EBITDA below 2.0x. The ratings remain constrained, however, by the difficult macroeconomic environment affecting some of FT's markets, continuing stiff competition in France's broadband market and the company's somewhat limited flexibility to reduce labor costs
