Telekom Austria late on Wednesday announced it will take a €400 million impairment charge on its Bulgarian subsidiary Mobiltel in the first half.

"This impairment is primarily due to an increase in the cost of capital…and changed expectations with regard to medium-term macroeconomic developments in Bulgaria," the telco said in a statement.

On 13 June, Standard & Poor's cut its sovereign credit rating for Bulgaria from BBB to BBB-, forecasting mediocre economic growth unless meaningful political and structural reforms are implemented.

Indeed, there are doubts over the future of the socialist-led government following a poor performance at May's European elections and the budget deficit at the end of April was three times larger than it was 12 months ago.

Telekom Austria said the impairment will negatively impact net income and equity in the first half of 2014; however, it reiterated its full-year guidance of a 3% decline in group revenue, capex of approximately €700 million, and proposed dividend of €0.05 per share.

Mobiltel ended fiscal 2013 with 4.2 million customers, down from 4.5 million after Telekom Austria altered its method of counting customers by shortening the period of time a SIM remains unused before it is considered inactive.

It is still Bulgaria's largest mobile operator though, ahead of Telenor-owned Globul, which ended 2013 with 4 million customers.