Blue Label Telecoms is considering offers for potential new investment in Cell C 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 and MTN.

Cell C knocked R1.05-billion off Blue Label’s first-half core headline earnings, said the Johannesburg-based provider of services such as airtime, and the shares fell by more than 25% by the close.

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 CEO 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, 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. — (c) 2019 Bloomberg LP