Moody's assigns (P)B3 to Mobilink's proposed USD Notes

The proceeds will be utilised in part to refinance bank loans and fund ongoing capital expenditure. At the same time, Moody's has assigned a (P)B1 corporate family rating to Mobilink. The outlook for the ratings is stable.

This is the first time Moody's has assigned ratings to Mobilink. Moody's expects to affirm the ratings and remove their provisional status upon satisfactory review of final documentation and completion of the issuance.

The securities will be sold in a privately negotiated transaction -- without registration under the Securities Act of 1933 (the Act) -- under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance will be designed to permit resale under Rule 144A.

"The (P)B1 corporate family rating reflects Mobilink's strong position as Pakistan's largest mobile operator, and as facilitated by management's ability to rapidly roll out extensive network coverage as well as establish its brand to enhance prospects for strong subscriber and revenue growth," says Moody's Charles Macgregor, a VP/Senior Credit
Officer, lead analyst for the company.

"The rating also reflects the increasingly competitive and fragmented nature of Pakistan's cellular market; the challenges Mobilink faces in managing its growth strategy and profit margin; and its projected negative free cash flow position due to substantial growth-driven capex spending and a resultant increase in debt and financial leverage," Moody's Macgregor adds.

In accordance with Moody's global rating methodology for telecommunications companies (please refer to Rating Methodology: Global
Telecommunications Industry, February 2005), Mobilink's overall performance measurements indicate a Ba3 rating category, one notch above
its (P)B1 corporate family rating category.

At the same time, the (P)B1 corporate family rating factors in the company's substantial debt-funded capex plan, medium-term refinancing
risk, and moderate risk of financial demands from its parent. The latter situation is partially mitigated by the restrictions on dividends in Mobilink's existing loan documents.

The rating also considers country-specific issues, such as the political, economic and legal environments in Pakistan (rated B2), albeit that country is enjoying strong GDP growth and a continuing decline in its domestic and external debt burdens.

Most of Mobilink's debt is on a secured basis, and senior unsecured bondholders will be exposed to meaningful effective subordination, given
the ratio of secured debt to total debt will roughly measure 70%. Moody's does not expect this situation will materially improve in the next 2-3 years. The senior unsecured bond rating is therefore notched 2 levels below the corporate family rating.

The rating outlook is stable, reflecting the strength of Mobilink's growing underlying cash flow, which is supported by a lowly penetrated cellular market and expectations the company will generate credit metrics appropriate for its rating level.

Upward rating pressure could emerge if Mobilink executes its growth strategy without the competitive environment fragmenting. It will also need to demonstrate an ability to both become self-funding, evidenced by improving free cash flow, and to cover its capex and interest, evidenced by (EBITDA-Capex)/Interest of 1-2 times.

On the other hand, the local currency corporate family rating could undergo downward pressure if Mobilink a) experiences a significant deterioration in market share and ARPU due to intensified competition, resulting in ongoing negative free cash flow, b) aggressively increases its dividend payouts to its parent, thereby reducing available retained cash flow, such that adj. RCF/adj. debt falls below 10%, or c) is unable to access finance to fund ongoing growth. Refinancing pressure may also emerge in 2008 if Mobilink is unable to enhance free cash flow, and such a development could be a driver for downward rating pressure.