France Telecom (FT) is cutting its dividends and putting off a promised share buyback to adopt a more prudent stance in the face of brutal competition in its home market from a new mobile player. France has been locked in a mobile price war since mid-January, when Iliad launched its ultra low-cost mobile offers, leading France Telecom to lose 201,000 customers to date, chief financial officer Gervais Pellissier said on Wednesday. Meanwhile, Europe’s ongoing debt crisis has made borrowing more expensive and the economic outlook darker than a year ago. “France has lost its triple AAA credit rating and that weighs indirectly on us,” Pellissier said on a call after annual results on Wednesday. “In this context, the solidity of our balance sheet now seems to us a priority.” As a result, France Telecom will not buy back shares in 2012 as it had promised investors it would do after selling its Swiss unit to a private equity fund for $1.5 billion in December. The company also effectively scaled back its operating cash flow goal for this year given the impact of Iliad’s Free launch, now aiming for 8 billion for the year instead of the 9 billion euros given in its strategic plan announced last May. It will also revise the way it pays out dividends, limiting them in 2012 and 2013 to 40-45 per cent of operating free cash flow, and allowing the group to maintain its key debt ratio at 2 times operating profit. Pellissier said this would likely lead to a dividend between 1.21 and 1.35 euros per share, down from the 1.40 it will pay for 2011. France Telecom’s moves are a sign of the times as Europe’s telecom operators struggle to find growth amid intense regulatory pressure and tough price competition. Spain’s Telefonica trimmed dividends in December and is focusing on paying down debt, while Dutch operator KPN slashed its returns to shareholders via buybacks. Telecom Italia may cut its dividend when it reports results on Thursday, analysts say, while investors will also look to see what Deutsche Telekom does. Shares in France Telecom were up 1.5 per cent to 11.62 euros at 0857 GMT as analysts welcomed the largely in-line 2011 results. Analysts seemed unmoved by the dividend cut, which was somewhat anticipated. “No doubt the company saw little sense in paying a dividend for which it got little or no credit,” wrote Robin Beinenstock, analyst at Bernstein, in a note.