S&P: France Telecom unaffected

Standard & Poor's said Friday that its ratings and outlook on France Telecom SA (BBB+/positive/A-2) remain unchanged following Friday's disclosure by the company's management that reporting its 2004 financial statements in accordance with International Financial Reporting Standards would have resulted, among other adjustments, in €9.3 billion of additional net debt.

S&P's methodology when calculating credit ratios typically leads it to adjust total debt for certain off-balance-sheet commitments, such as operating leases and asset-back debt securities, as well as outstanding put options and any contingent liabilities that are reasonably likely to materialize. In France Telecom's case, adjustments to debt totaled about €10.5 billion at year-end 2003 - mostly reflecting outstanding put options and the net present value of lease obligations - compared with the IFRS impact of €9.3 billion disclosed today.

S&P said it will continue to exclude from its debt calculation the perpetual mandatory convertible bonds redeemable in France Telecom shares, as these hybrid instruments are viewed as having a high equity content.

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