France Telecom S.A. (FTE)

Other business combinations and purchase of minority interest (B)

The IFRS accounting for business combinations is described in Note 4.

The business combinations and purchase of minority interest included within this section result in the following differences between net equity under IFRS and US GAAP:

The adjustments included above result primarily from the business combinations described hereafter.

As discussed in Note 4 to these consolidated Financial Statements, under IFRS, France Telecom accounts for the acquisition of subsidiaries under the purchase method of accounting. The cost of the acquisition is measured as the fair value of assets acquired, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed are measured initially at their fair values at the acquisition date. The excess of the acquisition cost over the fair value of identifiable net assets acquired is recorded as goodwill. For the purchase of minority interests or the purchase of remaining assets and liabilities of a subsidiary, France Telecom recognized goodwill for the difference between the purchase price and book value of the net assets acquired.

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Under US GAAP, for both business combinations and purchase of minority interests, France Telecom is required to allocate the cost of the acquired interest to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. It was determined that for the transactions described, the fair values of the acquired share of assets and liabilities already recognized in France Telecom’s consolidated financial statements were not different from their US GAAP carrying values, except for certain tangible and intangible assets. The fair value of tangible and intangible assets was determined, and was recognized in conjunction with the purchase price allocation.

The following tables present the allocation of total purchase prices under US GAAP.