"Despite Mobilink's strong fundamental credit quality, its ratings remain constrained by a two-notch differential with the Caa1 sovereign rating. The company's negative outlook is in line with that of Pakistan's sovereign ratings," says Yoshio Takahashi, a Moody's Assistant Vice President and Analyst.

Mobilink still demonstrated a solid financial performance in 3Q 2012. Its revenue increased by 8% year-on-year for the first nine months ended 30 September 2012, and which was driven by an increase in subscribers.

"Its consolidated EBITDA before management fees also grew by 10%, and which was a result of its cost cutting initiatives. Its EBITDA margin remained strong at 46.2%," says Takahashi.

The company also generated free cash flow of USD86 million for the same period, which it used to reduce debt.

"As a result, its total debt in September 2012 declined to USD530 million, from USD588 million in December 2011," says Takahashi.

Based on these results, Mobilink's adjusted debt/EBITDA in September 2012 improved to 1.7x from 1.9x in December 2011, and is strong for the rating level.

Mobilink's has adequate liquidity; as of September 2012, the company held USD80 million in cash and cash equivalents, and USD210 million in undrawn committed lines. It also had USD198 million in available vendor financing. Moody's expects that its cash flow from operations over the next 12 months will be at least USD300 million.

These cash sources -- about USD790 million in total -- are expected to cover the company's USD180 million in short-term debt falling due over the twelve months to 30 September 2013, over USD200 million in estimated capital expenditure (including USD37 million in committed capital obligations), as well as a potential payment for a 3G license auction of at least USD300 million.

Although it will depend on the actual amount and final payment terms for the 3G auction, it is Moody's expectation that Mobilink may have to raise additional funds to finance its 3G license.

Mobilink has USD112 million outstanding under its USD250 million bond which is due to mature on 13 November 2013. While the company remains relatively lowly geared, it is our expectation that Mobilink will seek to refinance the bonds and we will continue to monitor developments in this regard.

Moody's expects that Mobilink will continue to benefit from being a part of a more globally diversified and financially sound telecoms group.

It should receive financial support from its parent, Orascom Telecom Holdings (unrated), or its ultimate shareholder, VimpelCom Limited (Ba3, stable), in case of need, although its corporate family rating does not incorporate any uplift from their potential support.

Please see the ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The principal methodology used in rating Mobilink was the Global Telecommunications Industry published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Mobilink is the largest mobile operator in Pakistan with about 36 million customers equating to a subscriber market share of about 30% as of September 2012 (Source: Pakistan Telecommunication Authority). However, the company estimates that its market share is around 36% based on an active subscriber base.

Yoshio TakahashiAsst Vice President - Analyst Corporate Finance Group Moody'sInvestors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Laura Acres Senior Vice President Corporate Finance Group JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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