Icra made the downgrade on Monday attributing it to the recognition of higher than anticipated provisions following the Supreme Court's judgement on payment of dues for license fees on adjusted gross revenues (AGR) and spectrum usage charges in the latest quarterly results.

"Although the company has not tied up funds for the same, this liability, if materialises is expected to be funded through a bridge loan, which would result in deterioration in debt coverage metrics in the near term," Icra said in a release.

On Monday, official sources said the Committees of Secretaries to look into relief measures for the sector has been disbanded, signifying that relief on AGR is out of the question, which has also hit telecom stocks.

Icra said ratings continue to remain under watch with negative implications. Ratings on Bharti Airtel's commercial paper were reaffirmed at "A1+".

The downgrade follows Bharti Airtel's September quarter results, with the company announcing massive losses for the quarter.

"Moreover, additional provisioning related to indemnities to be paid to certain investors of Airtel Africa is also a credit negative," it said.

Icra, however, noted that the government has appointed a Committee of Secretaries to exam ine the situation and come out with recommendations for the sector.

Last month, the Supreme Court ordered telecom companies to pay over Rs 92,000 crore in dues and interest to the Department of Telecommunications (DoT) in a 14-year-long case. The matter pertained to the DoT's claim that telecom companies had underreported their revenues, paying less levies to the government.

Bharti Airtel has dues around Rs 21,682 crore, while Vodafone Idea Ltd will have to cough up Rs 28,309 crore. Reliance Jio Infocomm Ltd dues are Rs 13 crore. The apex court has asked the companies to make the payments within three months of the judgement.

In a letter dated 13 November, the DoT directed operators to conduct a self-assessment of dues in the wake of the Supreme Court verdict.

As an interim relief, the government has announced deferment of auction payment installments for the fiscals 2021 and 2022, which is expected to provide cash flow relief to the tune of Rs 5,500 crore per year for the next two years.

Additionally, the company has also filed a review petition with the Supreme Court.

Last week, Bharti Airtel, Vodafone Idea and two other companies filed a petition with the Supreme Court to review its judgement.

Besides, the telecom companies have announced tariff hikes with effect from December 1.

"The outcome of these events is expected to resolve the rating watch," Icra said.

On November 20, the cabinet approved a moratorium of two years for spectrum payments.