Why did S&P raise ratings for Mobilink, despite the tough economic conditions in Pakistan? Two reasons: reduction in capital expenses and savings resulting from suspension of management fees to Orascom. From Cellular-News.
Mobilink continues to remain exposed to the weak macroeconomic environment, external liquidity position and security situation in Pakistan. However, they expect the recent improvement in macroeconomic environment to result in better operating performance. Also, in the near term, S&P expects Mobilink to face less funding challenges as it is expected to register positive free operating cash flows through significant reduction in capital expenditure and suspension of management fees to Orascom Telecom. Pakistan’s cellular market continues to face intense competition, resulting in lower subscriber numbers and market share for Mobilink. Nevertheless, Mobilink has maintained its No. 1 market share both in terms of subscribers and revenue in Pakistan’s wireless market.
S&P believes parent Orascom Telecom would continue to provide support to Mobilink, if required, considering: (1) the cross-default clause at the parent company in the event of a covenant breach of material subsidiaries, including Mobilink; and (2) Mobilink is the second-largest operation of Orascom Telecom by most financial measures and accounted for 20.6% of the consolidated EBITDA for 2008.
This follows Standard & Poor’s decision to raise the long-term sovereign credit ratings on Pakistan (B-/Stable/C).
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