In my Foolish opinion, there are two ways to profitably invest in telecom carriers. You could place your bets on fast-growing, emerging market wireless plays such as America Movil (NYSE:AMX) and China Mobile (NYSE:CHL). Or you could take a position in integrated, incumbent carriers like BT Group (NYSE:BT), which serve mature markets and are embracing new technologies that should provide a spark to earnings and dividends in the future. Motley FoolIncome Investor pick France Telecom (NYSE:FTE) falls into the latter category.

France Telecom remains one of my favorite plays in the European telecom market, thanks to the company's dominant position in -- surprise, surprise -- France, the growth potential of its international wireless assets and domestic broadband operations, and the fact that its shares trade at a discount to peers such as Deutsche Telecom (NYSE:DT) and Telefonica (NYSE:TEF).

At the risk of covering old ground, let's take a quick look at the company's prospects.

About the company
France Telecom is one of the world's largest telecom carriers, offering services to more than 153 million customers worldwide. The company divides its operations into four segments: Personal Communication Services (a fancy name for wireless services), Home Communication Services (fixed-line and Internet offerings), Enterprise Communication Services (sales to corporate customers), and Directories (yellow pages, etc.). The Directories business will no longer be a contributor, since France Telecom recently completed a sale of a 54% stake in the business to U.S. private equity firms for roughly $4.1 billion. As of Sept. 30, France Telecom had roughly 93 million mobile subscribers worldwide, over 50 million fixed-line customers, and more than 9.2 million broadband users in Europe alone.

But enough generalizations; let's get to specifics.

Market leadership
France Telecom is far and away the leading telecom operator in France, holding a 70% share of the fixed-line market, a little less than 50% share of all cellular customers, and roughly a 50% share of the ADSL (broadband) market. In addition, as of year-end 2005, France Telecom held significant positions in various other wireless markets, including the United Kingdom (22% market share), Poland (34% share), Spain (24%), Belgium (33%), Egypt (55%), Romania (52%), Slovakia (56%), and Moldavia (58%), among others.

While France Telecom's wireless operations in mature markets such as the U.K, Spain, and France should continue to expand with the introduction of new higher-margin 3G services, the real driver of cellular growth over the next few years will come from the company's international assets in the fast-growing, emerging markets of Eastern Europe and Africa.

International wireless
As I outlined above, France Telecom holds significant market share positions in what it terms "growing markets." Now, as of Sept. 30, these markets made up only 12% of total revenue, but this represented a 200-basis-point increase over the prior-year period. In simple terms, the company's emerging-market cellular operations are growing by leaps and bounds. France Telecom reported that its Eastern European subscriber base grew some 23% over the past year, while Africa, the Middle East and other emerging markets recorded a 51% increase in customers. As a result, the company's cellular operations in nations such Poland, Slovakia, and Romania posted double-digit gains in revenue, a trend that is likely to continue for the foreseeable future.

Broadband operations
Broadband operations should be another key driver of France Telecom's growth going forward. The company reported that European broadband customers climbed 55% over the last 12 months to reach 9.2 million, while domestic ADSL subscribers grew 61% over the same period. Since this is a higher-margin business than traditional fixed-line telephony (or even cellular), it bodes well for both future revenue growth and margin improvement.

Sounds interesting, right? Well, take a look at the company's valuation ...

At a current price of $26 and change, shares of France Telecom trade at 11 times fiscal 2007 estimates, a 27% discount to the average multiple sported by its closest competitors, Deutsche Telecom and Telefonica. As the company's international cellular business continues to flourish and its broadband operations gain traction, I believe this discount will shrink. Given that France Telecom sports a yield greater than 4%, I believe that patient, income-oriented investors should not hang up on these shares.

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Fool contributor Will Frankenhoff is enjoying his time writing for The Fool more than playing golf, reading The Financial Times, rooting for the Jints, or taking a nap. He welcomes your feedback. He does not own shares in any of the companies mentioned above. The Fool has adisclosure policy.