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Moody's decided on the downgrade due to concern about the company's liquidity, high reliance on the troubled banking sector and its reduced cash balance as a result of its larger-than-expected dividend payout in August."

Looking forward, Moody's expects a potentially high cash outflow at the early-2014 spectrum licence, which will reduce the free cash flow for debt repayment and force the company to rely more heavily on tapping financial markets.

Moody's last downgraded Telekom in April, citing similar concerns.

Telekom said Moody's arguments were largely based on lacklustre macroeconomic indicators and on factors beyond its control, such as the decision of the shareholders to pay out interim dividends.

But it disagrees with the assessment about the exposure to the Slovenian bank system, noting that it "does not depend on domestic banks".