DBRS Updates Report on France Telecom SA

Dominion Bond Rating Service (“DBRS”) has today released a report on France Telecom SA (“FT” or the “Company”) that provides additional analytical detail relating to DBRS’s decision to change the trend on FT’s long-term rating to Stable from Positive. (Please see press release dated January 12, 2006.)

The change in FT’s trend reflects DBRS’s expectation that increased technological and competitive pressures will continue to affect the Company’s revenue growth and resulting cash flow from operations. In response to these pressures, FT has announced that it will accelerate programs to simplify its brand portfolio and strengthen customer loyalty; these initiatives will come at the expense of pressuring EBITDA margins and restraining future growth in cash flow from operations. As a result, DBRS believes FT will be challenged in improving its credit metrics sufficiently over the next couple of years.

DBRS does acknowledge that FT’s rating still remains solidly in the BBB (high) category, underpinned by its strong incumbent fixed-line franchise in France, its large global mobility operations with dominant subscriber bases in France and the U.K., and the Company’s excellent liquidity position augmented by the generation of substantial free cash flow.

Note:
This rating is based on public information.