Given France Telecom's need to refinance around EURO15 billion of long-term debt in 2003, Moody's Investors Service hit the nail on the head when it stressed the company's "continuing and significant dependency upon access to the debt capital markets." Unfortunately for France Telecom, though, a downgrade by both rating agencies -Moody's downgraded France Telecom to Baa3', while Standard & Poor's cut its ratings to BBB' - renders the prospect of capital market funding a tough gamble.

The downgrades confirm long-standing market concerns about the company's rising debt burden, which could reach EURO75 billion by the end of the year. Both agencies have also left France Telecom's ratings on negative outlook, thereby signaling doubt about the company's ability to fund its near-term refinancing needs and improve its liquidity situation.

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