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France Telecom (NYSE: FTE  ) reports earnings tomorrow, and many investors have already dismissed it as another unwieldy victim of the eurozone crisis. But a closer examination reveals an undervalued dividend play with international growth opportunity.

Appellation controlee
You wouldn't realize by looking at the company today, but France Telecom has a dark past: Before 1998, it was a government-operated, monopolistic, inefficient nightmare. In the same year that France won the World Cup and minted the first euro coins, it opened its telecom borders to full competition.

Over the next decade, France Telecom survived the dot-com bust, acquired Orange Plc and other strategic investments, and reduced its government ownership by around 50%. 

Today, the company has annual sales of $59 billion , 170,000 employees , and 223 million customers (more on this later).  

Tu casa, mi casa
If you can, take a deep breath and remove yourself from macroeconomic paralysis long enough to examine France Telecom's business model. The company boasts all the traditional offerings (landlines, mobile, and so on), but is increasingly focused on mobile data, Internet services, and even cloud computing. 

It's not slowing down, either. France Telecom's 5,000 person R&D team is hard at work innovating and re-innovating to keep up with the rapidly changing industry. 

Of course, the company's rivals aren't exactly sticking to landlines. Competitor Vodafone (Nasdaq: VOD  ) boasts 370 million customers, and its networks sent and received almost 300 billion text and data messages in fiscal 2011. Its investment in Verizon (NYSE: VZ  ) also gives it strategic presence in the U.S., a country France Telecom has largely chosen to ignore. 

But France Telecom doesn't have to necessarily have more customers. Its stock suffered earlier this year, when French competitor Free came online, but many investors failed to realize that France Telecom raked in revenue from Free, whose limited network capabilities had the budding company on its knees for roaming agreements. 

What's in a name?
France Telecom is about as French as French fries. Sure, the company has 300-year-old roots in the Land of Escargot, but things have changed. The company currently has consumer enterprises in 38 countries and local presence in 160 countries.  

The following graphic can cause a shiver down any investor's spine, when you see that the majority of the company's revenue originating from France and Spain. But swallow your fear and consider that almost 60% of the company's mobile customers are outside Europe. Mobile use comprises the bottom of a lucrative pyramid, which I predict many of its emerging-market customers will quickly ascend in the coming years.

 Source: France Telecom 2011 20-F report.

Africa and the Middle East are two of France Telecom's main focus areas. They're also two of the fastest-growing regions in the world. Coincidence? I think not.

The company controls 40% of Egypt's market , 34% of Jordan's , and 60% of Senegal's , and it enjoys a growing presence in more than a dozen other countries. I relied on its Uganda coverage for 3G Internet in some of the most remote villages in the world, and I was rarely disappointed.

Source: France Telecom 2011 annual report.

The end of a dividend?
France Telecom is acutely aware that its dividend can make or break its shareholder relationship. Its current yield is 11.3%, one of the highest on the market. The dividend glory days are over, though, as the company's CEO recently announced plans to preserve cash for future investment opportunities . The company currently pays out 86% of its earnings in dividends,  but its new policy will see that amount halved to 40% to 45% of operating cash flow generated. 

Here's the twist: Telecoms are no longer stalwarts, and dividends should be cut. The proliferation of mobile data and emerging-market opportunities have shoved telecom companies back into competitive growth models, and I want to give France Telecom every cent it needs to establish itself as a technological and global leader.

Both Verizon and France Telecom currently have about $42 billion in long-term debt, and their ability to manage this could determine who ultimately succeeds.

Spanish telecom Telefonica (NYSE: TEF  ) is loaded up with a whopping $72 billion in debt, putting it at a serious disadvantage in the years to come. Likewise, VimpleCom (NYSE: VIP  ) currently struggles with a -7.9% operating margin , making its 13.2% dividend yield highly unsustainable.

The bell tolls for thee
France Telecom reports earnings tomorrow, and most investors expect management to emerge from its hole waving the white flag of surrender. This may or may not be the case, but expectations are low and perceptions are skewed. I've invested real money in France Telecom and am looking forward to reaping a reasonably sized dividend while I wait for the company's strategic international placements to boost it into a global superpower.

To balance your telecom investments across other sectors, be sure to also check out The Motley Fool's special free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks." This report outlines the best companies offering exceptional dividends, and is a must-read for investors looking to sustainably grow their portfolios. But hurry: It's available for a limited time only, so click here to grab your free copy today.

Justin Loiseau owns shares of France Telecom and a cell phone. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.

The Motley Fool owns shares of France Telecom. Motley Fool newsletter services recommend France Telecom and Vodafone Group. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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