Blue Label Telecoms Ltd. is considering offers for potential new investment in Cell C Pty Ltd. after posting a first-half loss partly caused by its interest in South Africa’s third-largest mobile-phone company.
Blue Label led a rescue of Cell C two years ago, but the move is yet to pay off as the unit struggles with debt and the dominance of larger rivals, Vodacom Group Ltd. and MTN Group Ltd.
Cell C knocked R1.05 billion ($75 million) off Blue Label’s first-half core headline earnings, said the Johannesburg-based provider of services such as airtime, and the shares fell as much as 21%, the most since 2008.
Cell C needs more funding, and Blue Label is considering a number of potential transactions that would build on last week’s deal with investment firm Buffett Group, according to Chief Executive Officer Mark Levy.
“The recent transaction will provide us with additional balance sheet support for Cell C and help us meet possible capital needs,” Levy said in an interview.
He declined to comment on the details of any new deals. Telkom SA SOC Ltd., South Africa’s biggest fixed-line provider, is interested in making an offer, people familiar with the matter said last year.
Since Blue Label bought into Cell C as part of the R5.5 billion recapitalisation deal, about two thirds of its value has been wiped out on concerns that the investment would be a drain on finances. Blue Label needs to boost Cell C’s balance sheet, renegotiate interest terms on debt, as well as consider any offers from investors, Levy said.
Blue Label extended losses and was down 21% at R4.84 by 15h45. in Johannesburg, valuing the group at R4.4 billion.