Company Quick10K Filing
Orange
Price15.98 EPS4
Shares2,660 P/E4
MCap42,513 P/FCF1
Net Debt32,359 EBIT23,356
TEV74,872 TEV/EBIT3
TTM 2018-12-31, in MM, except price, ratios
20-F 2019-12-31 Filed 2020-04-21
20-F 2018-12-31 Filed 2019-04-16
20-F 2018-04-04 Filed 2018-04-04
20-F 2017-04-07 Filed 2017-04-07
20-F 2016-04-04 Filed 2016-04-04
20-F 2015-04-14 Filed 2015-04-14
20-F 2013-12-31 Filed 2014-04-30
20-F 2012-12-31 Filed 2013-04-12
20-F 2011-12-31 Filed 2012-04-13
20-F 2010-12-31 Filed 2011-04-21
20-F 2009-12-31 Filed 2010-05-05

ORAN 20F Annual Report

Item 17
Item 18
Part I
Item 1 Identity of Directors, Senior Management and Advisers
Item 2 Offer Statistics and Expected Timetable
Item 3 Key Information
Item 4 Information on France Telecom
Item 4A Unresolved Staff Comments
Item 5 Operating and Financial Review and Prospects
Item 6 Directors, Senior Management and Employees
Item 7 Major Shareholders and Related Party Transactions
Item 8 Financial Information
Item 9 The Offer and Listing
Item 10 Additional Information
Item 11 Quantitative and Qualitative Disclosures About Market Risk
Item 12 Description of Securities Other Than Equity Securities
Part II
Item 13 Defaults, Dividend Arrearages and Delinquencies
Item 14 Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15 Controls and Procedures
Item 16 [Reserved]
Item 16A Audit Committee Financial Expert
Item 16B Code of Ethics
Item 16C Principal Accountant Fees and Services
Item 16D Exemptions From Listing Standards for Audit Committees
Item 16E Purchase of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F Change in Registrant's Certifying Accountant
Item 16G Corporate Governance
Item 16H Mine Safety Disclosure
Part III
Item 17 Financial Statements
Item 18 Financial Statements
Item 19 List of Exhibits
Part I
Item 1 Identity of Directors, Senior Management and Advisers
Item 2 Offer Statistics and Expected Timetable
Item 3 Key Information
Item 4 Information on France Telecom
Item 4A Unresolved Staff Comments
Item 5 Operating and Financial Review and Prospects
Item 6 Directors, Senior Management and Employees
Item 7 Major Shareholders and Related Party Transactions
Item 8 Financial Information
Item 9 The Offer and Listing
Item 10 Additional Information
Item 11 Quantitative and Qualitative Disclosures About Market Risk
Item 12 Description of Securities Other Than Equity Securities
Part II
Item 13 Defaults, Dividend Arrearages and Delinquencies
Item 14 Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15 Controls and Procedures
Item 16 [Reserved]
Item 16A Audit Committee Financial Expert
Item 16B Code of Ethics
Item 16C Principal Accountant Fees and Services
Item 16D Exemptions From Listing Standards for Audit Committees
Item 16E Purchase of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F Change in Registrant's Certifying Accountant
Item 16G Corporate Governance
Item 16H Mine Safety Disclosure
Part III
Item 17 Financial Statements
Item 18 Financial Statements
Item 19 List of Exhibits
EX-1.1 exhibit11.htm
EX-12.1 exhibit121.htm
EX-12.2 exhibit122.htm
EX-13.1 exhibit131.htm
EX-13.2 exhibit132.htm
EX-15.1 exhibit151.htm
EX-15.2 exhibit152.htm
EX-15.3 exhibit153.htm

Orange Earnings 2011-12-31

Balance SheetIncome StatementCash Flow
1209672482402012201420172020
Assets, Equity
604836241202012201420172020
Rev, G Profit, Net Income
1593-3-9-152012201420172020
Ops, Inv, Fin

20-F 1 lft20f.htm FRANCE TELECOM - FORM 20-F FRANCE TELECOM FORM 20-F

As filed with the Securities and Exchange Commission on April 13 2012

UNITED STATES SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number: 1-14712

 

FRANCE TELECOM

(Exact name of Registrant as specified in its charter)


Not applicable

(Translation of Registrant’s name into English)

6 place d’Alleray

75505 Paris Cedex 15

France

French Republic

(Jurisdiction of incorporation or organization)

(Address of principal executive offices)

Contact person: Nicolas Guérin, tel +33 1 44 44 21 05, dirjuridique.dfs@orange.com,

6 place d’Alleray 75505 Paris Cedex 15, France

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class:

American Depositary Shares, each representing one Ordinary Share, nominal value €4.00 per share

Ordinary Shares, nominal value €4.00 per share*

Name of each exchange on which registered, respectively :

New York Stock Exchange

New York Stock Exchange*

* Listed, not for trading or quotation purposes, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, nominal value €4.00 per share: 2,648,885,383 at December 31, 2011

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  

  No  

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant  to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes  

  No  

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant  was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes  

  No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).**

Yes  

  No  

** This requirement is not currently applicable to the registrant.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  
See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  

International Financial Reporting Standards as issued by the International Accounting Standards Board  

Other  

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  

   Item 18  

If this is an annual report, indicate by check mark whether the registrant is a shell company  (as defined in Rule 12b-2 of the Exchange Act).

Yes  

  No  




Presentation of information

The consolidated financial statements contained in this annual report of France Telecom on Form 20-F for the year ended December 31, 2011 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and with IFRS as adopted by the European Union, as of December 31, 2011.

This Form 20-F contains certain financial information presented on a “comparable basis”. The basis for the presentation of this financial information is set out in Item 5 Operating and Financial Review and Prospects. The unaudited financial information presented on a comparable basis is not intended to be a substitute for, and should be read in conjunction with, the consolidated financial statements included in Item 18 Financial statements, including the Notes thereto.

In this Form 20-F, references to the “EU” are to the European Union, references to the “euro” or “€” are to the euro currency of the EU, references to the “United States” or “U.S.” are to the United States of America and references to “U.S. dollars” or “$” are to United States dollars.

References to the “2011 Registration Document” are references only to those pages and sections attached in Exhibit 15 to this Form 20-F.

As used in this Form 20-F, the terms “France Telecom-Orange”, “France Telecom”, “Orange”, “France Telecom group” and “the Group”, unless the context otherwise requires, refer to France Telecom together with its consolidated subsidiaries, and “France Telecom S.A.”, as well as “the Company”, refer only to the parent company, a French société anonyme (corporation), without its subsidiaries.

References to “the Shares” are references to France Telecom’s Ordinary Shares, nominal value €4.00 per share, and references to “the ADSs” are to France Telecom’s American Depositary Shares (each representing one Ordinary Share), which are evidenced by American Depositary Receipts (ADRs).



2011 form 20-F / FRANCE TELECOM 2




Cautionary statement regarding forward-looking statements

This Annual Report on Form 20-F contains forward-looking statements - within the meaning of Section 27A of the U.S. Securities Act of 1933 (“the Securities Act”) or Section 21E of the U.S. Securities Exchange Act of 1934 (“the Exchange Act”) - about France Telecom, including, without limitation, certain statements made in Item 4.B Business overview as well as in Item 5 Operating and Financial Review and Prospects. Forward-looking statements can be identified by the use of forward-looking terminology such as “should”, “could”, “expect”, “estimate”, “believe”, “anticipate”, “propose”, “continue”, “foresee”, “benefit”, “carry out”, “meet”, “strategy”, “objective”, “aim”, “development”, “intention”, “ambition”, “risk”, “potential”, “implementation”, “roll-out” or “commitment” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by the forward-looking nature of discussions of strategy, plans or intentions.

Although France Telecom believes these statements are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved.

Important factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements include, among others:

fluctuations in general economic activity levels as well as the level of activity in each of the markets in which France Telecom operates;

the effectiveness of the strategy reflected in the “Conquests 2015” strategic plan as well as of the other strategic, operational, and financial initiatives of France Telecom and the level of Group investment necessary to pursue this strategy and to adapt its networks;

France Telecom’s ability to face intense competition within its sector and to adapt to the ongoing transformation of the telecommunications industry, in particular in France with the arrival on the market of a fourth mobile operator;

fiscal and regulatory constraints, in particular in setting wholesale rates;

results of current litigation, in particular the litigation with the European Commission regarding changes to the system for financing the retirement pensions for civil servants working at France Telecom;

risks and uncertainties specifically related to international operations;

risks related to the impairment of assets;

exchange rate fluctuations;

conditions for accessing the capital markets (in particular risks related to liquidity and credit ratings) and counterparty risks.

Forward-looking statements speak only as of the date they are made. Other than as required by law, France Telecom does not undertake any obligation to update them in light of new information or future developments.

The most significant risks are described in Item 3 Key Information – 3.D Risk Factors.



2011 form 20-F / FRANCE TELECOM 3



Table of contents


PART I

6

ITEM 1    Identity of directors, senior management and advisers

6

ITEM 2    Offer statistics and expected timetable

6

ITEM 3    Key information

6

3.A      Selected financial data

6

3.B      Capitalization and indebtedness

8

3.C      Reasons for the offer and use of proceeds

8

3.D      Risk factors

9

ITEM 4    Information on France Telecom

10

4.A      History and development of France telecom

10

4.B      Business overview

10

4.C      Organizational structure

10

4.D      Property, plant and equipment

10

ITEM 4A  Unresolved staff comments

11

ITEM 5    Operating and financial review and prospects

11

5.A      Operating results

11

5.B      Liquidity and capital resources

12

5.C      Research and development, patents and licenses, etc.

12

5.D      Trend information

12

5.E      Off-balance sheet arrangements

12

5.F      Tabular disclosure of contractual obligations

12

5.G      Safe harbor

12

ITEM 6    Directors, senior management and employees

13

6.A      Directors and senior management

13

6.B      Compensation

13

6.C      Board practices

13

6.D      Employees

13

6.E      Share ownership

14

ITEM 7    Major shareholders and related party transactions

14

7.A      Major shareholders

14

7.B      Related party transactions

14

7.c      Interests of experts and counsels

14

ITEM 8    Financial information

15

8.A      Consolidated statements and other financial information

15

8.B      Significant changes

15

ITEM 9    The offer and listing

16

9.A      Offer and listing details

16

9.B      Plan of distribution

17

9.C      Markets

17

9.D      Selling shareholders

17

9.E      Dilution

17



2011 form 20-F / FRANCE TELECOM 4



9.F      Expenses of the issue

17

ITEM 10  Additional information

18

10.A      Share capital

18

10.B      Memorandum of association and bylaws

18

10.C    Material contracts

18

10.D    Exchange controls

18

10.E    Taxation

19

10.F    Dividends and paying agents

24

10.G    Statement by experts

24

10.H    Documents on display

24

10.I    Subsidiary information

24

ITEM 11  Quantitative and qualitative disclosures about market risk

24

ITEM 12  Description of securities other than equity securities

25

12.A    Debt Securities

25

12.B    Warrants and Rights

25

12.C    Other Securities

25

12.D    American Depositary Shares

25

PART II

27

ITEM 13  Defaults, dividend arrearages and delinquencies

27

ITEM 14  Material modifications to the rights of security holders and use of proceeds

27

ITEM 15  Controls and procedures

27

15.A    Disclosure controls and procedures

27

15.B    Management’s annual report on internal control over financial reporting

27

15.C    Report of independent registered public accounting firms

28

15.d    Changes in internal control over financial reporting

29

ITEM 16  [reserved]

29

ITEM 16A  Audit committee financial expert

29

ITEM 16B  Code of ethics

29

ITEM 16C  Principal accountant fees and services

29

ITEM 16D  Exemptions from listing standards for audit committees

30

ITEM 16E  Purchase of equity securities by the issuer and affiliated purchasers

30

ITEM 16F  Change in Registrant’s Certifying Accountant

30

ITEM 16G  Corporate governance

31

ITEM 16H  Mine Safety Disclosure

31

PART III

32

ITEM 17  Financial statements

32

ITEM 18  Financial statements

32

ITEM 19  List of exhibits

33

Signature

34



2011 form 20-F / FRANCE TELECOM 5



table of contents


PART I

ITEM 1    Identity of directors, senior management and advisers

Not applicable.

ITEM 2    Offer statistics and expected timetable

Not applicable.

ITEM 3    Key information

3.A      SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial and other operating data of France Telecom. The selected financial data set forth below should be read in conjunction with the consolidated financial statements and Item 5 Operating and Financial Review and Prospects appearing elsewhere in this Form 20-F. France Telecom’s consolidated financial statements were prepared in accordance with IFRS as published by the IASB for the years ended December 31, 2007, 2008, 2009, 2010 and 2011.

The selected financial information presented below as of and for the twelve month periods ended December 31, 2007, 2008, 2009, 2010 and 2011 is extracted or derived from the consolidated financial statements. The periods ended December 31, 2009, 2010 and 2011 are derived from audited consolidated financial statements included in the 2011 Registration Document and the periods ended December 31, 2007 and 2008 are derived from audited consolidated financial statements which are not included herein.

CONSOLIDATED INCOME STATEMENT

 

in euros

(million, except per share data)

 

2011

2010

2009

2008

2007

Revenues

 

45,277

45,503

44,845

46,712

46,568

Operating income/(loss)

 

7,948

7,562

7,650

9,754

10,540

Finance costs, net

 

(2,033)

(2,000)

(2,206)

(2,884)

(2,647)

Consolidated net income after tax of continuing operations

 

3,828

3,807

3,202

4,014

6,648

Consolidated net income after tax of discontinued operations

 

-

1,070

200

404

171

Net income attributable to owners of the parent

 

3,895

4,880

3,018

4,073

6,300

Net earnings per shares

      

Net income of continuing operations attributable to owners of France Telecom S.A.

      

Net earnings per share - basic

 

1.47(1)

1.44(3)

1.06 (3)

1.41(3)

2.36

  

2011

2010

2009

2008

2007

Net earnings per share - diluted

 

1.46(2)

1.43(3)

1.06 (3)

1.39 (3)

2.30

Net income attributable to owners of France Telecom S.A.

      

Net earnings per share - basic

 

1.47(1)

1.84(3)

1.14(3)

1.56(3)

2.42

Net earnings per share - diluted

 

1.46(2)

1.82(3)

1.14(3)

1.54(3)

2.36





2011 form 20-F / FRANCE TELECOM 6



table of contents



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

in euros

(million)

2011

2010

2009

2008

2007

Intangible assets, net (4)

38,683

40,335

37,750

43,923

47,465

Property, plant and equipment, net

23,634

24,756

23,547

25,826

27,849

Total assets

96,083

94,276

90,910

93,652

100,601

Net financial debt

30,890

31,840

32,534

35,424

37,980

Equity attributable to  the owners of the parent

27,573

29,101

26,864

27,032

29,471


CONSOLIDATED STATEMENT OF CASH FLOWS

 

in euros

(million)

2011

2010

2009

2008

2007

Net cash provided by operating activities

12,879

12,588

14,003

14,743

14,644

Net cash used in investing activities

(6,308)

(5,951)

(5,397)

(7,167)

(6,881)

Purchases of property, plant and equipment and intangible assets

(6,711)

(6,102)

(5,454)

(6,657)

(7,064)

Net cash used in financing activities

(2,860)

(6,117)

(9,554)

(6,706)

(7,654)

Cash and cash equivalents at end of year

8,061

4,428

3,805

4,694

4,025


DIVIDEND

      
 

2011

2010

2009

2008

2007

Dividend per share for the year (euros)

1.40(5)

1.40

1.40

1.40

1.30

Dividend per share for the year (dollars)(6)

1.83

1.83

1.83

1.83

1.70


(1)  The weighted average number of ordinary shares used for calculating basic earnings per share is 2,643,535,474.

(2)  The weighted average number of ordinary shares used for calculating diluted earnings per share is 2,711,972,965.

(3)  Earnings per share calculated on a comparable basis.

(4)  Includes goodwill and the other intangible assets.

(5)  Subject to approval by the shareholders' meeting of June 5, 2012.

(6)  The U.S. dollar amounts presented in the table have been translated solely for the convenience of the reader using the Noon Buying Rate on April 6, 2012 of €0.764 to $1.00.


OPERATIONAL DATA

 

2011

2010

2009

2008

2007

Number of fixed telephone lines (in millions)

44.3

45.1

46.1

46.7

47.4

Number of mobile customers (in millions)

167.4

150.4

132.6

121.8

110

Number of broadband (mainly ADSL) customers (in millions)

14.4

13.7

13.5

12.7

11.7

Number of employees (workforce end of period)

171,949

168,694

164,651

169,692

187,331



2011 form 20-F / FRANCE TELECOM 7



table of contents


Exchange rate information

Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of the euro-denominated prices of the Shares and, as a result, will affect the market price of the ADSs in the United States. In addition, exchange rate fluctuations will affect the U.S. dollar equivalent of any cash dividend received by holders of ADSs.

The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate in New York City for cable transfers for foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York expressed in U.S. dollars per €1.00, as published elsewhere. Such rates are provided solely for the convenience of the reader and are not necessarily the rates used by France Telecom in the preparation of the Consolidated Financial Statements included elsewhere in this Form 20-F. No representation is made that the euro could have been, or could be, converted into U.S. dollars at the rates indicated below or at any other rate. See Item 3.D Risk factors: “France Telecom’s results and cash position are exposed to exchange rate fluctuations”.

U.S. dollar per €1.00

Period end rate

Average rate (1)

High

Low

YEARLY AMOUNTS

    

2007

1.4603

1.3797

1.4862

1.2904

2008

1.3919

1.4726

1.6010

1.2446

2009

1.4332

1.3935

1.5100

1.2547

2010

1.3269

1.3261

1.4536

1.1959

2011

1.2973

1.3931

1.4875

1.2926

     

MONTHLY AMOUNTS

    

September 2011

1.3449

1.3747

1.4283

1.3446

October 2011

1.3947

1.3732

1.4172

1.3281

November 2011

1.3453

1.3558

1.3803

1.3244

December 2011

1.2973

1.3155

1.3487

1.2926

January 2012

1.3053

1.2910

1.3192

1.2682

February 2012

1.3359

1.3238

1.3463

1.3087

March 2012

1.3334

1.3208

1.3336

1.3025

 

(1)  The average of the Noon Buying Rates on the last business day of each month during the relevant period for the full year average, and on each business day of the month for the monthly average.


On April 6, 2012, the Noon Buying Rate was $1.3089 per one euro.

For information regarding the effects of currency fluctuations on France Telecom’s results, see Item 5 Operating and Financial Review and Prospects.


3.B      CAPITALIZATION AND INDEBTEDNESS

Not applicable.

3.C      REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.



2011 form 20-F / FRANCE TELECOM 8



table of contents



3.D      RISK FACTORS

The information set forth in section 4 Risk factors on pages 15 et seq. of the 2011 Registration Document is incorporated herein by reference.

The price of France Telecom’s ADSs and the U.S. dollar value of any dividend will be affected by fluctuations in the U.S. dollar/euro exchange rate.

The ADSs are quoted in U.S. dollars. Fluctuations in the exchange rate between the euro and the U.S. dollar are likely to affect the market price of the ADSs. For example, because France Telecom’s financial statements are reported in euro, a decline in the value of the euro against the U.S. dollar would reduce France Telecom’s earnings as reported in U.S. dollars. This could adversely affect the price at which the ADSs trade on the U.S. securities markets. Any dividend that France Telecom might pay in the future would be denominated in euro. A decline in the value of the euro against the U.S. dollar would reduce the U.S. dollar equivalent of any such dividend.

Holders of ADSs may face disadvantages compared to holders of France Telecom’s shares when attempting to exercise certain rights as shareholders.

Holders of ADSs may face more difficulties in exercising their rights as shareholders than they would if they held shares directly. For example, to exercise their voting rights, holders of ADSs must instruct the depositary how to vote their shares. Because of this extra procedural step involving the depositary, the process for exercising voting rights will take longer for holders of ADSs than for holders of shares. ADSs for which the depositary does not receive timely voting instructions will not be voted at any meeting.

Preemptive rights may be unavailable to holders of France Telecom’s ADSs.

Holders of France Telecom’s ADSs or U.S. resident shareholders may be unable to exercise preemptive rights granted to France Telecom’s shareholders, in which case holders of France Telecom’s ADSs could be substantially diluted. Under French law, whenever France Telecom issues new shares for payment in cash or in kind, France Telecom is usually required to grant preemptive rights to its shareholders. However, holders of France Telecom’s ADSs or U.S. resident shareholders may not be able to exercise these preemptive rights to acquire shares unless both the rights and the Shares are registered under the Securities Act or an exemption from registration is available.

If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case no value will be given for these rights.

Auditors in various non-U.S. jurisdictions, including France, are not inspected by the U.S. Public Company Accounting Oversight Board (“PCAOB”) and, as a result, there is a risk that quality improvements or deficiencies that could be identified by a PCAOB inspection will not be identified or addressed.

The independent registered public accounting firms that issue the audit reports included in this Annual Report on Form 20-F are required by the laws of the United States to undergo regular inspections, including reviewing of work papers and interviews, by the PCAOB to assess their compliance with the laws of the United States and applicable professional standards.  Because France Telecom’s auditors are located in France, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the French authorities, France Telecom’s auditors are not currently inspected by the PCAOB.  France Telecom’s auditors are, however, subject to regular inspections by the Haut Conseil du commissariat aux comptes, a comparable French regulatory body, that are similar in scope to the PCAOB inspections.

During its inspections, the PCAOB may identify deficiencies in an accounting firm’s audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.  Since the PCAOB cannot conduct inspections in France, the PCAOB is prevented from regularly evaluating our auditors’ audits and quality control procedures.  As a result, investors in France Telecom securities may be deprived of any benefits that would have been realized as a result of PCAOB inspections and, depending on the circumstances, investors in France Telecom securities could lose confidence in France Telecom’s control procedures, financial statements or, more generally, in the quality of its reported financial information.


2011 form 20-F / FRANCE TELECOM 9



table of contents


ITEM 4    Information on France Telecom

4.A      HISTORY AND DEVELOPMENT OF FRANCE TELECOM

See Item 18 Financial Statements – Note 2 to the consolidated financial statements.

The information set forth in section 5.1. History and evolution of the Company on pages 27 and 28 of the 2011 Registration Document is incorporated herein by reference.

Agent in the United States: France Telecom Participations U.S. Inc., 13375 McLearen Road, Oak Hill, Virginia 20171

4.B      BUSINESS OVERVIEW

The information set forth under:

Section 6 Overview of the Group’s business on pages 29 et seq.,

The Glossary of technical terms on pages 598 et seq.,

of the 2011 Registration Document is incorporated herein by reference.

Seasonality

In general, France Telecom’s business operations are not affected by any major seasonal variations. However, the telephone traffic generated from fixed line telephony over the Northern Hemisphere summer months in the third quarter (ended September 30) is generally lower than in the other quarters.

Furthermore, in the personal communication services markets, the number of new mobile customers for telecommunications services is generally higher in the second half of the calendar year than in the first half, primarily because of the increase in sales during the Christmas season. Consequently, revenues generated from the sale of equipment and packages, as well as the costs incurred in ordering equipment for customers and sales commissions, are higher in the second half of the calendar year than in the first half.

4.C      ORGANIZATIONAL STRUCTURE

The information set forth in section 7 Organizational chart on page 169 of the 2011 Registration Document is incorporated herein by reference.


4.D      PROPERTY, PLANT AND EQUIPMENT

The information set forth under:

Section 8 Property, plant and equipment on pages 171 et seq.,

subsection Investment in networks of section 9.1.1.4 Significant events, on pages 197 and 198,  

and section 17.4 Environmental information, on pages 358 et seq.,

of the 2011 Registration Document is incorporated herein by reference.


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ITEM 4A  Unresolved staff comments

None.

ITEM 5    Operating and financial review and prospects

There are no differences between IFRS as adopted in the European Union and IFRS as issued by the IASB, as applied by France Telecom.

References in this Item to the Notes to the consolidated financial statements are references to the consolidated financial statements presented in Item 18 Financial Statements of this document.

5.A      OPERATING RESULTS

This section sets forth:

an overview of the operating results of the Group, incorporated by reference to (i) the introduction to section 9.1 Analysis of the Group’s financial position and earnings and (ii) section 9.1.1 Overview, on pages 194 et seq. of the 2011 Registration Document;

a presentation of critical accounting policies set forth below;

a comparative analysis of the Group income statement and capital expenditures (and related financial information) and a comparative analysis by business segment for 2011, 2010 and 2009 incorporated by reference to sections 9.1.2 Analysis of the Group’s income statement and capital expenditures and 9.1.3 Analysis by operating segment, respectively on pages 203 et seq. and 222 et seq. of the 2011 Registration Document;

In this Annual Report on Form 20-F, including in the foregoing sections that are incorporated by reference herein, France Telecom sets forth certain financial aggregates that are not defined under IFRS, in addition to the financial aggregates that are in accordance with IFRS. Accordingly, the information set forth in section 9.1.5.4 Financial aggregates not defined by IFRS on pages 273 et seq. of the 2011 Registration Document is incorporated herein by reference. The financial aggregates not defined under IFRS are provided as additional information and should not be substituted for or confused with the financial aggregates that are defined under IFRS.

In addition, the information set forth in (i) section 9.1.5.1 Transition from data on a historical basis to data on a comparable basis on pages 263 et seq. of the 2011 Registration Document; (ii) section 9.1.5.2 Additional information by operating segment on pages 268 et seq., (iii) Item 18 Financial Statements - Note 1 to the consolidated financial statements; and (iv) the Financial glossary set forth in appendix on pages 605 et seq. of the 2011 Registration Document is incorporated by reference herein.

Critical accounting policies

The information set forth under section 20.1.3 Critical accounting policies on pages 501 et seq. of the 2011 Registration Document is incorporated herein by reference.



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5.B      LIQUIDITY AND CAPITAL RESOURCES

This section presents, for the France Telecom group:

i) a comparative analysis of liquidity and cash flows, with a presentation of the net cash provided by operating activities, of the net cash used in investing activities and of the net cash used in financing activities,

ii) a presentation of the Group’s shareholders’ equity, and

iii) a discussion on the Group’s financial debt and financial resources,

incorporated herein by reference to section 9.1.4 Cash flow, shareholders’ equity and financial debt, on pages 253 et seq. of the 2011 Registration Document.

See also Item 18 Financial Statements – Notes 10 and 11 to the consolidated financial statements.

5.C      RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

The information set forth in section 11 Innovation, research and development, patents and licenses on pages 287 et seq. of the 2011 Registration Document is incorporated herein by reference.

5.D      TREND INFORMATION

The information set forth under:

Section 9.1 Analysis of the Group's financial position and earnings on pages 194 et seq.,

Section 6.1 The telecommunications services market, on pages 30 et seq.,

Section 6.2 France Telecom-Orange strategy, on pages 33 et seq.,

Section 4 Risk factors, on pages 15 et seq.,

of the 2011 Registration Document is incorporated herein by reference.

5.E      OFF-BALANCE SHEET ARRANGEMENTS

See Item 18 Financial Statements – Note 14 to the consolidated financial statements.

5.F      TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

See Item 18 Financial Statements – Notes 11.3 and 14 to the consolidated financial statements.

5.G      SAFE HARBOR

Not applicable.


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ITEM 6    Directors, senior management and employees

6.A      DIRECTORS AND SENIOR MANAGEMENT

The information set forth in section 14 Administrative and management bodies and senior management on pages 295 et seq. of the 2011 Registration Document is incorporated herein by reference.

6.B      COMPENSATION

The information set forth in sections 15 Compensation and benefits paid to directors, corporate officers and senior management on pages 311 et seq. and 17.2.4 Compensation on pages 346 et seq. of the 2011 Registration Document is incorporated herein by reference.

6.C      BOARD PRACTICES

The information set forth under:

Section 14.1.1 Composition of the Board of Directors, on pages 296 et seq.,

Section 15.1 Rules for determining the compensation of directors and corporate officers, on pages 312 et seq.,

Section 15.2.1.3 Tables summarizing other benefits granted to the corporate officers, on page 316,

Section 15.3 Executive Committee compensation in 2011, on page 318,

Section 16.1.1 Reference to a Code of Corporate Governance, on page 320,

Section 16.2 Operation of the Board of Directors, on page 321 et seq.,

Section 16.3 Operation of the General Management, on page 324 et seq.,

Section 16.4 Internal Control and Risk Management, on page 326 et seq.,

of the 2011 Registration Document is incorporated herein by reference.

6.D      EMPLOYEES

The information set forth in sections 17.2.1 Employment, on pages 338 et seq., 17.2.2 Work Organization, on pages 344 et seq., and 17.2.3 Social dialogue, on pages 345 et seq. of the 2011 Registration Document is incorporated herein by reference.



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6.E      SHARE OWNERSHIP

The information set forth under:

Section 14.1.3.2 Information on Company shares held by directors and corporate officers, on pages 306 et seq.,

Section 14.2.2 Shareholdings and stock-options, on page 310 (with respect to the Executive Committee),

Section 15.2.1 Compensation paid to corporate officers, on page 314,

Section 15.3 Executive Committee compensation in 2011, on page 318,

Section 17.2.4 Compensation, on pages 346 et seq. (with respect to employees),

of the 2011 Registration Document is incorporated herein by reference.

ITEM 7    Major shareholders and related party transactions

7.A      MAJOR SHAREHOLDERS

The information set forth in section 18 Major shareholders, on pages 365 et seq. of the 2011 Registration Document is incorporated herein by reference.

Securities held and number of record holders in the United States

As of March 20, 2012, there were 87,116,043 ADSs of France Telecom outstanding and 157 holders of record were registered with The Bank of New York Mellon, depositary for the ADS program.

As of March 21, 2012, 36 United States residents were registered as owners of France Telecom’s shares with BNP Paribas Securities Services, provider of securities services for France Telecom. Those U.S. residents held 10 924 France Telecom shares.

Based on a Euroclear Identifiable-Bearer Securities (Titres au porteur identifiable) service report and on a survey conducted by a specialized information provider, France Telecom estimates that U.S. corporate and institutional investors held approximately 14.6 % of its share capital as at December 31, 2011.

7.B      RELATED PARTY TRANSACTIONS

See Item 18 Financial Statements – Note 9.2 to the consolidated financial statements.

The information set forth in section 19 Transactions with parent companies, on page 369 of the 2011 Registration Document is incorporated herein by reference.

7.C      INTERESTS OF EXPERTS AND COUNSELS

Not applicable


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ITEM 8    Financial information

8.A      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18 Financial Statements.

The information set forth in sections 20.3 Dividend distribution policy, and 20.4 Litigation and arbitration proceedings, on page 554 of the 2011 Registration Document is incorporated herein by reference.

8.B      SIGNIFICANT CHANGES

On April 12, 2012, France Telecom-Orange (FT) and Orascom Telecom Media and Technology Holding S.A.E. (OTMT) announced that they agreed on new terms for their continued partnership in Egyptian Company for Mobile Services (ECMS), which is listed on the Egyptian Exchange (EGX).  FT and OTMT currently hold 51.03% of the capital and voting rights of ECMS through MobiNil for Telecommunications S.A.E. (MobiNil). In addition, OTMT holds 20% directly and the remaining 29% of ECMS’s share capital is held by the public.

As part of the agreements,  on April 12, 2012, MT Telecom filed an application to launch  a mandatory tender offer to purchase up to 100% of the shares of ECMS with the Egyptian Financial Supervisory Authority (EFSA) at a price per share of EGP 202.5. OTMT has agreed to sell its 15% stake in ECMS as part of the planned offer. The offer remains subject to approval by the EFSA.  

Pursuant to the new agreements, following the settlement of the offer, OTMT will decrease its direct shareholding in ECMS from 20% to 5% and a new holding company, MT Telecom, would hold up to 95% of the outstanding equity of ECMS after the proposed transactions, assuming EFSA approvals and 100% of the free float is tendered in the offer.  MobiNil, the company that is currently owned by OTMT and FT (28.75% and 71.25% respectively), would be 100% owned by FT once the transactions are completed.

MobiNil will also tender its entire shareholding in ECMS in the offer, thereby reducing its ECMS holding to zero. FT will also purchase OTMT’s 28.75% stake in MobiNil.  Based on current exchange rates, FT’s estimated total investment in ECMS as a result of the proposed transactions is 1.5 billion euros (which may be increased as a result of the exercise of the put and call options described below by up to approximately 185 million euros).

Following successful completion of the planned offer, OTMT would remain FT’s strategic partner in Egypt through MT Telecom, in which it would hold 28.75% of the voting rights, with FT holding the remaining 71.25%. OTMT would continue to be represented on the board of directors and participate in the management of ECMS through an amended and restated shareholders' agreement reflecting this new structure and its general services agreement. The parties have agreed to a revised set of put and call options with respect to OTMT’s remaining stakes in ECMS and MT Telecom, with a maximum exercise price of EGP 296 per share for shares sold pursuant to the put or call options in 2017.

Furthermore, the information set forth in section 20.5 Significant change in financial or trading position, on page 554 of the 2011 Registration Document is incorporated herein by reference.


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ITEM 9    The offer and listing

9.A      OFFER AND LISTING DETAILS

For information regarding risks related to France Telecom’s shares and ADSs, see Item 3.D Risk Factors: “France Telecom’s share price may fluctuate due to a wide range of factors”. “The price of France Telecom’s ADSs and the U.S. dollar value of any dividend will be affected by fluctuations in the U.S. dollar / euro exchange rate”. “Holders of ADSs may face disadvantages compared to holders of France Telecom’s shares when attempting to exercise voting rights” and “Preemptive rights may be unavailable to holders of France Telecom’s ADSs”.

Trading history of France Telecom’s securities listed on the New York Stock Exchange (NYSE)

France Telecom’s share is traded on compartment A (large capitalizations) of Euronext Paris (ticker : FTE.PA and International Security Identification Number : FR0000133308) and in the form of ADS on the NYSE (ticker : FTE and CUSIP : 35177Q10).

The table below shows the annual high and low prices, unadjusted for dividends, for France Telecom’s shares on Euronext Paris and France Telecom’s ADSs on the NYSE from 2007 to 2011.  

 

Euronext Paris

NYSE

US$

 

High

Low

High

Low

2007

26.78

18.94

39.51

25.36

2008

25.87

16.94

38.42

22.57

2009

20.75

15.55

28.75

21.00

2010

17.83

14.15

25.91

17.31

2011

16.53

11.39

23.54

15.14

Source: Bloomberg


The table below shows the quarterly high and low prices, unadjusted for dividends, for France Telecom’s shares on Euronext Paris and France Telecom’s ADSs on the NYSE since January 1, 2010.

 

Euronext Paris

NYSE

US$

 

High

Low

High

Low

First Quarter 2010

17.83

16.23

25.91

22.50

Second Quarter 2010

17,82

14,29

24,20

17,31

Third Quarter 2010

16,55

14,15

21,84

17,80

Fourth Quarter 2010

17,36

15,60

24,47

20,41

First Quarter 2011

16,53

14,74

22,62

20,31

Second Quarter 2011

15,90

14,19

23,54

20,12

Third Quarter 2011

14,66

11,39

21,33

15,52

Fourth Quarter 2011

13,59

11,58

19,34

15,14

First Quarter 2012

12,36

11,01

16,08

14,51

Source: Bloomberg




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The table below shows the monthly high and low prices (unadjusted for payment of dividends) for France Telecom’s shares on Euronext Paris and France Telecom’s ADSs on the NYSE for the most recent six months.

 

Euronext Paris

NYSE

US$

 

High

Low

High

Low

October 2011

13,59

12,03

19,34

15,80

November 2011

12,84

11,58

17,82

15,37

December 2011

12,70

11,72

17,02

15,14

January 2012

12,36

11,20

16,08

14,68

February 2012

11,73

11,25

15,87

14,75

March 2012

11,62

11,01

15,45

14,51

Source: Bloomberg


9.B      PLAN OF DISTRIBUTION

Not applicable

9.C      MARKETS

The principal trading market for the Shares is Euronext Paris, where the Shares have been traded since October 20, 1997. Prior to that date, there was no public trading market for the Shares. The shares are included in the “CAC 40 Index” (a main benchmark index of 40 major stocks listed on Euronext Paris). The shares in the form of American Depositary Shares (“ADSs”) are also listed on the NYSE. BNP Paribas holds the share registry for France Telecom and The Bank of New York Mellon acts as depositary for the ADSs.

9.D      SELLING SHAREHOLDERS

Not applicable

9.E      DILUTION

Not applicable

9.F      EXPENSES OF THE ISSUE

Not applicable


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ITEM 10  Additional information

10.A      SHARE CAPITAL

Not applicable.

10.B      MEMORANDUM OF ASSOCIATION AND BYLAWS

The information set forth under:

Section 14.1.3.2.3 Restrictions regarding the sale of shares by the directors and corporate officers, on page 306,

Section 16.2.2 Chairman of the Board of Directors, on page 321,

Section 21.2 Memorandum and bylaws, on pages 558 et seq.,

Section 21.3 Factors that may have an effect in the event of a public offering, on page 561,

of the 2011 Registration Document is incorporated herein by reference.

Ownership of shares by non-French persons

Under the French Commercial Code, there is no limitation on the right of non-residents or non-French shareholders to own or, where applicable, to vote securities of a French company.

Under the French Monetary and Financial Code, a person who is not a resident of the European Union (“EU”) is not required to obtain a prior authorization before acquiring a controlling interest in a French company with the exception of investments in certain sensitive economic areas, such as defense and public health. However, both EU and non-EU residents must file an administrative notice (déclaration administrative) with French authorities in connection with the acquisition of 33 1/3 % or more of the capital or voting rights of a French company. Violations of this administrative notice requirement are sanctioned by a fine of 750 euros. This amount may be multiplied by five if the violation is made by a legal entity.

10.C    MATERIAL CONTRACTS

The information set forth in section 22 Material contracts, on page 563 of the 2011 Registration Document is incorporated herein by reference.

10.D    EXCHANGE CONTROLS

Under current French exchange control regulations, there are no limitations on the amount of payments that may be remitted by France Telecom to non-residents of France. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a non-resident, such as dividends payments, be handled by an authorized intermediary. In France, all registered banks and substantially all credit establishments are accredited intermediaries.

Neither the French Commercial Code nor France Telecom’s bylaws presently impose any restrictions on the ability of non-French holders to hold or vote the Shares.



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10.E    TAXATION

The discussions set forth in this section are based on French tax law and U.S. federal income tax law, including applicable treaties and conventions, as in effect on the date of this annual report. These Tax laws, and related interpretations, are subject to change, possibly with retroactive effect. This section is further based in part on representations of the depositary and assumes that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.

10.E.1  French Taxation

The following is a general summary of the material French tax consequences of owning and disposing of the Shares or ADSs of France Telecom. This summary may only be relevant to you if you are not a resident of France (as defined in Section 4 B of the French General Tax Code), no double tax treaty between France and your country contains a provision under which dividends or capital gains are expressly liable to French tax (see Section 4 bis of the French General Tax Code) and you do not hold your Shares or ADSs in connection with a permanent establishment or a fixed base in France through which you carry on a business or perform personal services.

This discussion is intended only as a descriptive summary. It does not address all aspects of French tax laws that may be relevant to you in light of your particular circumstances.

If you are considering buying Shares or ADSs of France Telecom, you should consult your own tax advisor about the potential tax effects of owning or disposing of Shares or ADSs in your particular situation.

France has recently introduced a comprehensive set of new tax rules applicable to French assets (such as the Shares/ADSs) that are held by or in foreign trusts. These rules provide notably for the inclusion of trust assets in the settlor's net assets for purpose of applying the French wealth tax, for the application of French gift and death duties to French assets held in trust, for a specific tax on capital on the French assets of foreign trusts not already subject to the French wealth tax and for a number of French tax reporting and disclosure obligations. The following discussion does not address the French tax consequences applicable to Shares and ADSs held in trusts.

Taxation on sale or disposal of Shares and ADSs

Generally, you will not be subject to any French income tax or capital gains tax when you sell or dispose of Shares or ADSs of France Telecom if all of the following apply to you:

you are not a French resident for French tax purposes;

you have not held more than 25% of France Telecom’s dividend rights, known as “droits aux bénéfices sociaux”, at any time during the preceding five years, either directly or indirectly, and, as relates to individuals, alone or with relatives; and

you have not transferred the Shares/ADSs as part of a redemption or repurchase by France Telecom, in which case the proceeds may under certain circumstances be partially or fully characterized as dividends under French domestic law and, as a result, be subject to French dividend withholding tax.

unless you are established or domiciled in a jurisdiction listed as a non-cooperative state or territory (état ou territoire non coopératif) within the meaning of Article 238-0 A of the French General Tax Code (a “Non-Cooperative State”), in which case you will be subject to a 50% tax on capital gain. The list of Non-Cooperative States is published by ministerial executive order and is updated on a yearly basis.

If an applicable double tax treaty between France and your country contains more favorable provisions, you may not be subject to any French income tax or capital gains tax when you sell or dispose of any Shares or ADSs of France Telecom even if one or more of the above statements do not apply to you.

If you are a resident of the United States who is eligible for the benefits of the income tax treaty between the United States of America and France dated August 31, 1994 (as further amended) (the “U.S. France Treaty”), you will not be subject to French tax on any capital gain if you sell or exchange your Shares or ADSs unless you have a permanent establishment or fixed base in France and the Shares or ADSs sold or exchanged were part of the business property of that permanent establishment or fixed base.

Special rules apply to individuals who are residents of more than one country.



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Subject to specific conditions, foreign states, international organizations and a number of foreign public bodies are not considered French residents for these purposes.

Transfers of shares issued by a listed French company such as France Telecom will not be subject to French registration or stamp duty if such transfers are not evidenced by a written purchase and sale agreement (acte). However, if the transfer is evidenced by a written purchase and sale agreement executed either in France or outside of France, the transfer of Shares or ADSs will be subject to transfer duty at (i) 3% for the portion of the sale price below €200,000, (ii) 0.5% for the portion of the sale price between €200,000 and €500,000,000, and (iii) 0.25% for the portion of the sale price exceeding €500,000,000.

Pursuant to law 2012-354 dated March 14, 2012, the transfer duty rate is scheduled to be reduced as from August 1, 2012, to 0.1% as from the first euro with no cap.  If the transaction falls in the scope of the new tax on financial transactions provided for by article 235 ter ZD of the French General Tax Code, the transfer duty does not apply.

Article 235 ter ZD of the French General Tax Code provides that as from August 1, 2012, the acquisition for consideration of shares or equivalent instruments issued by a company whose registered office is located in France and whose market capitalization exceeds € 1 billion on the January 1 preceding the taxable event, is subject to a 0.1% financial transactions duty. Such new rules have not yet been interpreted by the French tax authorities and it is uncertain at this stage whether ADSs are in the scope of Article 235 ter ZD. If you are considering buying ADSs of France Telecom, you should consult your own tax advisor about the potential tax effects of owning or disposing of ADS in your particular situation.

Taxation of dividends

Under French domestic law, French companies must generally deduct a 30% French withholding tax from dividends (including distributions from share capital premium, insofar as the company has distributable reserves, or the relevant portion of certain repurchase or redemption by France Telecom of its own shares) paid to non-residents (21% for distributions made to individuals that are resident in the European Economic Area). Under most tax treaties between France and other countries, the rate of this withholding tax may be reduced in specific circumstances. Generally, a holder who is a non-French resident is subsequently entitled to a tax credit in his or her country of residence for the amount of tax actually withheld at the appropriate treaty rate.

However, dividends paid or deemed to be paid by a French corporation, such as France Telecom, towards non-cooperative States or territories, as defined in Article 238-0 A of the French General Tax Code, will generally be subject to French withholding tax at a rate of 55%, irrespective of the tax residence of the beneficiary of the dividends if the dividends are received or deemed to be received in such States or territories (subject to the more favorable provisions of an applicable double tax treaty).

Under some tax treaties, a shareholder who fulfills specific conditions may generally apply to the French tax authorities for a lower rate of withholding tax, generally 15%. Under some tax treaties, the withholding tax is eliminated altogether.

If the arrangements provided for by any of such treaties apply to a shareholder, France Telecom or the authorized intermediary will withhold tax from the dividend at the lower rate, provided that the shareholder complies, before the date of payment of the dividend, with the applicable filing formalities. Otherwise, France Telecom or the authorized intermediary must withhold tax at the full rate of 21% or 30% or 55% as applicable, and the shareholder may subsequently claim the refund of excess tax paid.

If you are a resident of the United States who is eligible for the benefits of the U.S. France Treaty, French dividend withholding tax is reduced to 15% if your ownership of the Shares or ADSs is not effectively connected with a permanent establishment or a fixed base that you have in France and certain other requirements are satisfied. In particular, you will have to comply with the formalities set out in Section 10.5.3 “Procedure for Reduced Withholding Rate”. If you fail to comply with such formalities before the date of payment of the dividend, France Telecom or the authorized intermediary shall deduct French withholding tax at the rate of 21% or 30% or 55% as applicable. In that case, you may claim a refund from the French tax authorities of the excess withholding tax.  



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Certain tax exempt U.S. entities (such as tax-exempt U.S. pension funds, which include the exempt pension funds established and managed in order to pay retirement benefits subject to the provisions of Section 401(a) of the Internal Revenue Code (qualified retirement plans), Section 403(b) of the Internal Revenue Code (tax deferred annuity contracts) or Section 457 of the Internal Revenue Code (deferred compensation plans), and various other tax-exempt entities, including certain state-owned institutions, not-for-profit organizations and individuals with respect to dividends which they beneficially own and which are derived from an investment retirement account) may be eligible for the reduced withholding tax rate of 15% on dividends. Specific rules apply to them as further described below in Section 10.5.3 “Procedure for Reduced Withholding Rate”.  

Estate and Gift Tax

France imposes estate and gift tax where an individual or entity acquires shares of a French company from a non-resident of France by way of inheritance or gift. France has entered into estate and gift tax treaties with a number of countries. Under these treaties, the transfer by residents of those countries of shares of a French company by way of inheritance or gift may be exempt from French inheritance or gift tax or give rise to a tax credit in such countries, assuming specific conditions are met.  

Under the “Convention Between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritance and Gifts of November 24, 1978” (as further amended), French estate and gift tax generally will not apply to the individual or entity acquiring your Shares or ADSs if that individual or entity as well as you are residents of the United States and if you transfer your Shares or ADSs by gift, or they are transferred by reason of your death, unless you are domiciled in France at the time of making the gift of the Shares or ADSs or at the time of your death, or you used the Shares or ADSs in conducting a business through a permanent establishment or fixed base in France, or you held the Shares or ADSs for that use.  

You should consult your own tax advisor about whether French estate and gift tax will apply and whether an exemption or tax credit can be claimed.  

Wealth Tax

You will not be subject to French wealth tax, known as impôt de solidarité sur la fortune, on your Shares or ADSs of France Telecom if both of the following apply to you:  

you are not a French resident for the purpose of French taxation; and  

you own, either directly or indirectly, less than 10% of France Telecom capital stock, provided your Shares or ADSs do not enable you to exercise influence on France Telecom.  

If a double tax treaty between France and your country contains more favorable provisions, you may not be subject to French wealth tax even if one or both of the above statements do not apply to you.

The French wealth tax generally does not apply to Shares or ADSs if you are a resident of the United States for purposes of the U.S. France Treaty provided that you do not own directly or indirectly Shares or ADSs exceeding 25% of the financial rights of France Telecom.

10.E.2  U.S. Taxation of U.S. Holders

The following discussion is a general summary of certain U.S. federal income tax considerations relevant to the ownership and disposition of France Telecom Shares and ADSs. The discussion is not a complete description of all tax considerations that may be relevant to you, and it does not consider your particular circumstances. It applies to you only if you are a U.S. Holder, you hold the Shares or ADSs as capital assets, you use the U.S. dollar as your functional currency and you are eligible for the benefits of the U.S. France Treaty. It does not address the tax treatment of investors subject to special rules, such as banks, tax-exempt entities, insurance companies, dealers, traders in securities that elect to mark to market, U.S. expatriates or persons who directly, indirectly or constructively own 10% or more of the Shares or ADSs, have a permanent establishment in France or hold Shares or ADSs as part of a straddle, hedging, conversion or other integrated transaction.



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In compliance with U.S. Treasury Department Circular 230, we notify you that this advice was written to support the promotion and marketing of the Shares and ADSs. As a result you cannot rely on the statements herein to avoid U.S. tax penalties. You should seek advice from an independent tax advisor about the tax consequences under your own particular circumstances of investing in the Shares or ADSs under the laws of France, the United States and its constituent jurisdictions, and any other jurisdictions where you may be subject to tax.

U.S. Partnerships

A U.S. partnership generally can claim benefits under the U.S. France Treaty only to the extent its income is taxable in the United States as the income of a resident, either in the hands of such partnership or in the hands of its partners. The French tax authorities have however conceded that the benefits of the U.S. France Treaty may still be claimed if one or several members of the U.S. partnership are themselves U.S. partnerships (and up to six tiers of interposed partnerships) to the extent of the income taxable in the United States as the income of a resident in the hands of the ultimate partner or partners.  

Specific rules apply to U.S. partnerships and their partners. Partnerships and their partners should consult their tax advisors concerning the French tax consequences of the acquisition, ownership and disposition of the Shares or ADSs.

As used here, a “U.S. Holder” means a beneficial owner of the Shares or ADSs, that is, for U.S. federal income tax purposes (i) an individual citizen or resident of the United States, (ii) a corporation or other business entity taxed as a corporation that is created or organized under the laws of the United States or its political subdivisions, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source or (iv) a trust subject to the primary supervision of a U.S. court and the control of one or more U.S. persons or that has elected to be treated as a domestic trust.  

The U.S. federal income tax treatment of a partner in a partnership that holds Shares or ADSs will depend on the status of the partner and the activities of the partnership. Partnerships should consult their tax advisors concerning the U.S. federal income tax consequences of the acquisition, ownership and disposition of the Shares or ADSs.  

U.S. Holders of ADSs generally will be treated for U.S. federal income tax purposes as owners of the shares underlying the ADSs.  

France Telecom believes, and this discussion assumes, that France Telecom is not and will not become a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes.

Dividends

Distributions on France Telecom Shares and ADSs, including French tax withheld and the gross amount of any payment on account of a French tax credit, will be includable in income as dividends from foreign sources when actually or constructively received. The dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations. The dividends received prior to January 1, 2013 by non-corporate U.S. Holders, however, will be taxed as qualified dividends, at the same preferential rate allowed for long-term capital gains, because the ADSs are readily tradable on the NYSE.

The U.S. dollar amount of a dividend received on the Shares or ADSs will be based on the exchange rate for the currency received (if the dividend is paid in a currency other than U.S. dollars) on the date you recognize the dividend for U.S. federal income tax purposes, whether or not you convert the payment into U.S. dollars. You will have a basis in the currency received equal to the U.S. dollar amount of the dividend you realized. Any gain or loss on a subsequent conversion or other disposition of the currency generally will be ordinary income or loss from U.S. sources.

Subject to generally applicable limitations, you may claim a deduction or a foreign tax credit for tax withheld at the lowest withholding rate to which you are entitled. In computing foreign tax credit limitations, noncorporate U.S. Holders eligible for the preferential tax rate applicable to qualified dividend income may take into account only the portion of the dividend effectively taxed at the highest applicable marginal rate. You should consult your own tax adviser about your eligibility for benefits under the U.S. France Treaty including a reduced rate of French withholding tax and for applicable limitations on claiming a deduction or foreign tax credit for any French tax withheld.  



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Dispositions

You will recognize gain or loss on disposition of France Telecom Shares or ADSs in an amount equal to the difference between the amount you realized and your adjusted tax basis in the Shares or ADSs. Your adjusted tax basis in a share or ADS will generally be the amount you paid for it measured in U.S. dollars. The U.S. dollar cost of a share or ADS purchased with foreign currency will generally be the U.S. dollar value of the purchase price. The gain or loss generally will be from sources within the United States. The gain or loss will be long-term capital gain or loss if the holder held the shares or ADSs for at least one year. Long term capital gains realized prior to January 1, 2013 by non-corporate U.S. Holders qualify for preferential tax rates as low as 15%. Deductions for capital losses are subject to limitations.

If you receive a currency other than U.S. dollars upon disposition of the Shares or ADSs, you will realize an amount equal to the U.S. dollar value of the currency received on the date of disposition (or, if you are a cash-basis or electing accrual basis taxpayer, the settlement date). You will have a tax basis in the currency received equal to the U.S. dollar amount you realized. Any gain or loss on a subsequent conversion or disposition of the currency received generally will be U.S. source ordinary income or loss.

Deposits or withdrawals of shares in exchange for ADSs will not be taxable transactions subject to U.S. federal income tax.

U.S. Information Reporting and Backup Withholding for U.S. Holders

Your dividends on the Shares or ADSs and proceeds from the sale or other disposition of the Shares or ADSs may be reported to the U.S. Internal Revenue Service unless you are a corporation or you otherwise establish a basis for exemption. Backup withholding tax may apply to amounts subject to reporting if you fail to provide an accurate taxpayer identification number or otherwise establish a basis for exemption. You can claim a credit against your U.S. federal income tax liability for amounts withheld under the backup withholding rules and a refund for any excess.

Under recent legislation, certain U.S. Holders will be required to report information with respect to Shares and ADSs that are held through foreign accounts.  U.S. Holders who fail to report information required under these rules could become subject to substantial penalties.  U.S. Holders are urged to consult their tax advisors regarding these and other reporting requirements that may apply with respect to their Shares or ADSs.

10.E.3  Procedure for reduced withholding rate

If you are eligible for benefits under the U.S. France Treaty, you will be entitled to reduce the rate of French withholding tax on dividends by filing the applicable form(s) with the depositary or other financial institution managing your securities account in the United States, or failing that, the French paying agent, if the financial institution managing your securities account or the French paying agent receives the form(s) before the date of payment of the dividend. If you fail to submit the applicable form(s) in time to avoid withholding, you may claim a refund for the amount withheld in excess of the U.S. France Treaty rate.

In order to have taxes on dividends withheld at the reduced amount, you generally must provide the depositary, or other financial institution managing your securities account in the United States, with a certificate of residence before the dividend is paid. If this certificate is not stamped by the U.S. Internal Revenue Service, the depositary or other financial institution managing your securities account in the U.S. must provide the French paying agent with a document listing certain information about the U.S. Holder and its shares or ADSs and a certificate whereby the financial institution managing your securities account in the United States takes full responsibility for the accuracy of the information provided in the document.

Tax exempt U.S. pension funds, charities or other tax exempt organizations must also provide a certificate from the U.S. Internal Revenue Service setting out that they have been created and operate in compliance with the Internal Revenue Code of 1986, as amended. Tax exempt organizations may obtain this certification by filing a U.S. Internal Revenue Service Form 8802. Similar requirements apply to REITs, RICs and REMICs.

Collective trusts of pension funds may apply for the withholding tax reduction on behalf of their members if they provide a complete list of their members, the required certificate from the IRS for each member which is a tax exempt U.S. pension fund and a certificate setting out the dividend to which each tax exempt U.S. pension fund which is a member is entitled.



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The relevant French forms will be provided by the depositary to all U.S. Holders of ADSs registered with the depositary and all U.S. Internal Revenue Service Forms are also available from the U.S. Internal Revenue Service. The depositary will arrange for the filing with the French paying agent and the French tax authorities of all forms completed by U.S. Holders of ADSs that are returned to the depositary in sufficient time.

You should consult your own independent tax advisors about the availability and applicability of the reduced rate of French withholding tax.

10.F    DIVIDENDS AND PAYING AGENTS

Not applicable.

10.G    STATEMENT BY EXPERTS

Not applicable.

10.H    DOCUMENTS ON DISPLAY

We are subject to the reporting requirements of the Exchange Act applicable to foreign private issuers. In connection with the Exchange Act, we file reports, including this Form 20-F, and other information with the Securities and Exchange Commission. Such reports and other information are available on the SEC’s website at www.sec.gov, and may also be inspected and copied at prescribed rates at the public reference facilities maintained by the SEC at its Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.

All documents provided to shareholders as required by law may be consulted at France Telecom's registered offices at 6 Place d’Alleray, 75015 Paris, France.

In addition, the bylaws of France Telecom are available on France Telecom’s website at www.orange.com.

France Telecom’s consolidated financial statements for the past three years are also available on its website.

10.I    SUBSIDIARY INFORMATION

Not applicable.

ITEM 11  Quantitative and qualitative disclosures about market risk

See Item 18 Financial Statements – Note 11 to the consolidated financial statements.


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ITEM 12  Description of securities other than equity securities

12.A    DEBT SECURITIES

Not applicable.

12.B    WARRANTS AND RIGHTS

Not applicable.

12.C    OTHER SECURITIES

Not applicable.

12.D    AMERICAN DEPOSITARY SHARES

France Telecom's ADR facility is maintained by the Bank of New York Mellon ("the Depositary"). A copy of our form of Amended and Restated Deposit Agreement ("the Deposit Agreement") among the Depositary, owners and beneficial owners of ADSs evidenced by ADRs issued under the Deposit Agreement and France Telecom was filed with the SEC as an exhibit to the post effective amendment N°1 to our Form F-6 filed on March 26, 2008. Société Générale ("the Custodian") acts as agent of the Depositary for the purposes of this Deposit Agreement. For more complete information, including on holders’ rights and obligations, holders should read the entire deposit agreement, as amended, and the ADR itself.

Fees and charges payable by a holder of ADSs

Under the Deposit Agreement, the Depositary collects fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of the distributable property to pay the fees.

The fees payable to the Depositary by investors are as follows:

Depositary actions:

Fee:

•    Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property

$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)

•    Cancellation of ADSs for the purpose of withdrawal, including if the Deposit Agree­ment terminates

$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)

•    Any cash distribution to ADS registered holders

$.02 (or less) per ADS

•    Distribution of securities distributed to holders of deposited securities which are distributed by the Depositary to ADS registered holders

A fee equivalent to the fee that would be payable if securities distributed to holders of deposited securities had been shares and the shares had been deposited for issuance of ADSs

    Transfer and registration of shares on the Depositary’s share register to or from the name of the Depositary or its agent when depositing or withdrawing shares

Registration or transfer fees




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In addition, investors must, as necessary, reimburse the Depositary for :


•    Taxes and other governmental charges the Depositary or the Custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes


•    Any charges incurred by the depositary or its agents for servicing the deposited securities


•    Expenses of the Depositary for cable, telex and facsimile transmissions (when expressly provided in the Deposit Agreement)


•    Expenses of the Depositary for converting foreign currency to U.S. dollars

Fees and payments made by the Depositary to the Issuer

The Depositary has agreed to reimburse the Company for expenses the Company incurs that are related to establishment and maintenance expenses of the ADR facility. The Depositary has agreed to reimburse the Company for its continuing annual stock exchange listing fees. The Depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse the Company annually for certain investor relationship programs or special investor relations promotional activities. In certain instances, the Depositary has agreed to provide additional payments to the Company based on any applicable performance indicators relating to the ADR facility. The amount of reimbursement available to the Company is not necessarily tied to the amount of fees the Depositary collects from investors.

During the financial year ended December 31, 2011, a 0.6 million U.S. dollars payment was made by the Depositary to France Telecom.

Voting the Shares at shareholders’ meetings

Pursuant to a deposit agreement signed with the Company, the Depositary shall, at the instruction of the Company, mail to owners of ADSs (the Owners):

a notice of impending meetings,

a statement that the Owners will be entitled, subject to any applicable provision of French law and the bylaws of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the shares represented by the ADSs,

copy or summary of any material provided by the Company,

a voting instruction card,

and a statement as to the manner in which such instructions may be given.

If no instruction is received by the Depositary, the latter shall deem the Owners, subject to certain conditions, to have instructed the Depositary to give a discretionary proxy to a person designated by the Company to vote the shares represented by the ADSs.

The Depositary will not charge any fee in connection with enabling the Owners to exercise their voting rights.

The Depositary and the Company may amend the voting procedures from time to time as they determine appropriate to comply with French or United States law or the bylaws of the Company.

Reports, Notices and Other Communications

On or before the first date on which the Company gives notice of any meeting of holders of Shares or of the taking of any action in respect of any cash or other distribution or the offering of any rights, the Company shall transmit to the Depositary a copy of the notice thereof. The Company will also arrange for the prompt transmittal to the Depositary of any other report and communication which is made generally available by the Company to holders of its Shares.  The Company may arrange for the Depositary to mail copies of such notices, reports and communications to all Owners.


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PART II

ITEM 13  Defaults, dividend arrearages and delinquencies

As of the date of this Form 20-F and to France Telecom’s knowledge, there has been no material default in the payment of principal or interest or any other material default not cured within 30 days relating to indebtedness of France Telecom or any of its fully consolidated subsidiaries.

ITEM 14  Material modifications to the rights of security holders and use of proceeds

None.

ITEM 15  Controls and procedures

15.A    DISCLOSURE CONTROLS AND PROCEDURES

In 2003, France Telecom created a Disclosure Committee whose mission is to ensure the accuracy, the compliance with applicable laws, regulations and recognized practices, the consistency and the quality of the financial information disclosed by France Telecom. The Disclosure Committee, operating under the authority of the Chief Executive Officer Delegate, reviews all financial information distributed by the Group, as well as related documents such as press releases, presentations to financial analysts and management reports. The Disclosure Committee is chaired, by delegation, by the Group Accounting Director and brings together the heads of the Legal, Internal Audit, Investor Relations and Communication Departments.

France Telecom’s Chief Executive Officer and Chief Executive Officer Delegate (in his capacity as Chief Financial Officer), after evaluating the effectiveness of the Group’s disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2011, have concluded that, as of such date, France Telecom’s disclosure controls and procedures were effective. France Telecom’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the specified time periods, and that such information is made known to the Chief Executive Officer and Chief Executive Officer Delegate in his capacity as Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

15.B    MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

France Telecom’s management is responsible for establishing and maintaining adequate internal control over financial reporting of France Telecom (as defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

France Telecom’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles.



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The Group’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Group; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with Generally Accepted Accounting Principles, and that receipts and expenditures of the Group are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Group’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Group management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework presented in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that the Group’s internal control over financial reporting was effective as of December 31, 2011. The effectiveness of the Group’s internal control over financial reporting as of December 31, 2011 has been audited by Deloitte et Associés and Ernst & Young Audit, independent registered public accounting firms, as stated in their report which is included herein.

15.C    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

To the Board of Directors and Shareholders of France Telecom:

We have audited France Telecom and subsidiaries (the “Group”) internal control over financial reporting as at December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).  The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



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In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2011 consolidated financial statements of the Group and our report dated February 22, 2012 expressed an unqualified opinion thereon.

s/ DELOITTE & ASSOCIES

/s/ ERNST & YOUNG AUDIT

 

Represented by Vincent de La Bachelerie


Neuilly-sur-Seine and Paris-La Défense,

February, 22, 2012

15.D    CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

None.

ITEM 16  [reserved]

ITEM 16A  Audit committee financial expert

At its meeting held on February 5, 2008, France Telecom’s Board of Directors determined that a member of its Audit Committee, Mr. Charles-Henri Filippi, is an Audit Committee financial expert as defined in Item 16A(b) of Form 20-F. Charles-Henri Filippi is “independent” as defined by Rule 10A-3(b)(1)(ii) of the Exchange Act, as amended (see Item 6 Directors, Senior Management and Employees).

ITEM 16B  Code of ethics

France Telecom’s Board of Directors has adopted a Code of Ethics that applies to all France Telecom employees, including the Chief Executive Officer, principal financial officer, principal accounting officer and persons performing similar functions. A copy of France Telecom’s Code of Ethics is available on France Telecom’s website at www.orange.com.

ITEM 16C  Principal accountant fees and services

See Item 18 Financial statements - Note 20 Fees paid to statutory auditors to the consolidated financial statements for further information.


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ITEM 16D  Exemptions from listing standards for audit committees

France Telecom’s Audit Committee consists of six directors including three directors who meet the independence requirements under Rule 10A-3 of the Exchange Act, as amended, and three who are exempt from such requirements pursuant to Rule 10A-3(b)(1)(iv) of the Exchange Act. The Audit Committee members exempt from the independence requirements include Mr. Comolli, who meets the exemption requirements under Rule 10A-3(b)(1)(iv)(E) of the Exchange Act relating to foreign government representatives, and Messrs. Guillot and Maouche, who meet the exemption requirements under Rule 10A-3(b)(1)(iv)(C) of the Exchange Act relating to non-executive employees. France Telecom’s reliance on such exemptions does not materially adversely affect the ability of the Audit Committee to act independently.

ITEM 16E  Purchase of equity securities by the issuer and affiliated purchasers

The information set forth in section 21.1.3 Treasury shares held by or on behalf of the Issuer or its subsidiaries – Share buyback program, on pages 556 et seq. of the 2011 Registration Document is incorporated herein by reference.

The table below presents additional information on the purchases of treasury shares in 2011 :

Settlement month

Total number of shares purchased (1)

Weighted average gross price per share (€)

Total number of shares purchased as part of publicly announced programs

Maximum number of shares that may yet be purchased under the programs (2)

January 2011

1,623,031

15.84

1,623,031

261,399,124

February 2011

2,348,532

16.17

2,348,532

261,499,124

March 2011

1,965,000

15.73

1,965,000

261,499,124

April 2011

1,609,639

15.59

1,609,639

261,499,124

May 2011

1,436,000

15.66

1,436,000

261,299,124

June 2011

1,900,000

14.93

1,900,000

263,600,793

July 2011

1,977,150

14.17

1,977,150

264,850,793

August 2011

7,225,099

12.76

7,225,099

258,425,793

September 2011

9,910,565

11.70

9,910,565

256,559,121

October 2011

2,565,978

12.53

2,565,978

264,217,764

November 2011

1,986,000

12.26

1,986,000

262,965,793

December 2011

932,718

12.00

932,718

264,850,793

Total

35,479,712

 

35,479,712

261,399,124

(1)  Until June 7, 2011, under the 2010 Share buyback program approved by the Annual Shareholders' Meeting of June 9, 2010  for up to 10% of the share capital; from June 7, 2011, under the 2011 Share buyback program approved by the Annual Shareholders' Meeting of June 7, 2011 for up to 10% of the share capital for a period of 18 months

(2)  At month end

ITEM 16F  Change in Registrant’s Certifying Accountant

Not applicable.


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ITEM 16G  Corporate governance

France Telecom has endeavored to take into account the NYSE corporate governance standards as codified in Section 303A of the NYSE Listed Company Manual. However, because France Telecom S.A. is not a US company, most of those standards do not apply to France Telecom, which may choose to follow rules applicable in France.

The table below discloses the significant ways in which France Telecom’s corporate governance practices differ from those required for U.S. companies listed on the NYSE.

NYSE Standards

Corporate Governance Practices of France Telecom

Board Independence

France Telecom’s Board of Directors has chosen to check the independence of its members against the criteria set out in France in the Afep/Medef Report (in Item 16G : “the Report”), which provides that one-third of board members should be independent. According to the criteria the Report sets out, seven members (out of the total of 15 current board members) are independent.

France Telecom has not tested the independence of its board members under the NYSE standards; a majority of the board may not be independent under those criteria.

The criteria against which the directors’ independence must be tested, as provided in the Report, are set forth in section 14.1.1.1 Independent Directors on page 297 of the 2011 Registration Document, which section is incorporated herein by reference.

Executive Sessions/ Communications with the Presiding Director or Non-Management Directors

French law does not require (and France Telecom does not provide for) non-management directors to meet regularly without management and nothing requires non-management directors to meet alone in an executive session at least once a year. However, if the directors decide to meet in such session, they may do so.

French law does not mandate (and France Telecom does not provide for) a method for interested parties to communicate with the presiding director or non-management directors.

Compensation/Nominating/ Corporate Governance Committee

France Telecom has a combined Governance and Corporate Social Responsibility Committee. The Committee consists of three directors, including two independent directors. The NYSE standards provide for the implementation of two separate committees (a Nominating Committee and a Compensation Committee) composed exclusively of independent directors. In terms of internal mechanics, while the Committee has a written charter, it does not comply with all the requirements of the NYSE.

Audit Committee

France Telecom’s Audit Committee consists of six directors including three independent directors.

Of those, one is a representative of the French Government and two are employees who are not executive officers of the Issuer. While not meeting the definition of independence set forth in Rules 10A-3 (b) (1) of the Exchange Act, as amended, they fall within the exceptions under Rule 10A-3(b)(1)(iv) (C) relating to non executive employees and Rule 10A-3(b)(1)(iv) (E) relating to foreign government representatives. For its part, the Report recommends that two-thirds of an audit committee’s members should be independent.

The Committee is responsible for organizing the procedure for selecting the statutory auditors. It makes a recommendation to the Board of Directors regarding their choice and terms of compensation. As required by French law, the actual appointment of the statutory auditors is made by the Shareholders’ Meeting.

According to its charter, the Committee has the authority to engage advisors and determine appropriate funding for payment of compensation to an accounting firm for an audit or other service.

Equity Compensation Plans

Under French law, France Telecom must obtain shareholder approval at a Shareholders’ Meeting in order to adopt an equity compensation plan. Generally, the shareholders then delegate to the Board of Directors the authority to decide on the specific terms and conditions of the granting of equity compensation, within the limits of the shareholders' authorization.

Adoption and disclosure of corporate governance guidelines

France Telecom has adopted corporate governance guidelines (the “Internal Guidelines”, available on its website at www.orange.com) as required by French law.

These corporate governance guidelines do not cover all items required by NYSE guidelines for U.S. companies.

Code of Ethics

France Telecom has adopted a Code of Ethics to be observed by all its directors, officers and other employees that generally meets the requirements of the NYSE.

ITEM 16H  Mine Safety Disclosure

Not applicable.


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PART III

ITEM 17  Financial statements

Not applicable

ITEM 18  Financial statements

The information set forth in section 20.1.1 Consolidated financial statements, Segment information, Notes to the consolidated financial statements on pages 372 to 499 of the 2011 Registration Statement is incorporated herein by reference.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

To the Board of Directors and Shareholders of France Telecom:

We have audited the accompanying consolidated statements of the financial position of France Telecom and subsidiaries (the “Group”) as at December 31, 2011, 2010, 2009, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2011, 2010, 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting as at December 31, 2011, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2012 expressed an unqualified opinion thereon.


/s/ DELOITTE & ASSOCIES

/s/ ERNST & YOUNG AUDIT

 

Represented by Vincent de La Bachelerie

Neuilly-sur-Seine and Paris-La Défense,

February, 22, 2012


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ITEM 19  List of exhibits

1.1

Bylaws (statuts) of France Telecom, as amended on January 10, 2012.

2.3*

Indenture dated March 14, 2001 between France Telecom and, inter alia, Citibank, NA as Trustee.

8.0

List of France Telecom’s subsidiaries : the information set forth in Note 17 Scope of consolidation and associates to the 2011 Consolidated financial statements, on page 478 of the 2011 Registration Statement is incorporated herein by reference.

12.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

12.2

Certification of Chief Executive Officer Delegate acting in his capacity as Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

13.1

Certification of Chief Executive Officer pursuant to Section 18 U.S.C. section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

13.2

Certification of Chief Executive Officer Delegate acting in his capacity as Chief Financial Officer pursuant to Section 18 U.S.C. section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

15.1

Excerpt of the pages and sections of the 2011 Registration Document that are incorporated herein by reference

15.2

Consent of Deloitte & Associés as auditors of France Telecom.

15.3

Consent of Ernst & Young Audit as auditors of France Telecom.


*

Incorporated by reference to France Telecom’s annual report on Form 20-F for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on May 29, 2001.



2011 form 20-F / FRANCE TELECOM 33



table of contents


Signature

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

FRANCE TELECOM


/s/

Gervais Pellissier

Name:

Gervais Pellissier

Title:

Chief Executive Officer Delegate and Chief Financial Officer


Paris, France

April 13, 2012



2011 form 20-F / FRANCE TELECOM 34