S&P: France Telecom outlook stable

Standard & Poor's said it revised its outlook France Telecom SA to stable from positive due to operating and financial pressures on the group and affirmed the group's A-/A-2 corporate credit ratings and A- senior unsecured bank loan rating.

The outlook revision reflects the lower probability of a one-notch upgrade of the long-term rating on France Telecom over the medium term given the increasing operating and financial pressures on the groups due to the mounting shareholder pressure on telecoms operators to adopt more-aggressive financial policies given the modest growth opportunities of the industry in mature markets and the industry consolidation process in Europe, the agency said.

Moreover, the agency said the French domestic fixed-line business is undergoing severe competitive, technological and regulatory pressures.

Despite this, S&P said the ratings on France Telecom reflect the group's continued strong operating and financial performance. In 2005, the group achieved a GOM-to-sales ratio of 37.6% on €49 billion of revenues and strong free cash flow of €7.3 billion and mobile services grew strongly, particularly in emerging markets.

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