JOHANNESBURG, June 2 (Reuters) - Net1 UEPS Technologies said it had pulled out of buying a stake in Blue Label Telecoms, part of a wider deal to acquire a stake in South African mobile operator Cell C, because it would have damaged shareholder value.
Net1, a payments company with extensive operations in emerging markets, is part of a group led by Blue Label, an airtime distributor, working to cut mobile operator Cell C's debt to 6 billion rand, from around 20 billion.
Net1 said on Thursday that it would scale back its commitment in the original deal to take over Cell C, investing 2 billion rand ($153 million) for a 15 percent stake in the debt-ridden mobile operator and dropping its plan to take a stake in Blue Label as part of the deal.
Cell C, the number three mobile operator in Africa's most advanced economy, has struggled in the past decade to compete in a mature market dominated by Vodacom and MTN.
The Net1 board said it would require cash reserves, bank finance and the issuance of shares to fund the transactions, which would reduce value for its shareholders.
"The Board accordingly concluded that Net1 could only use cash resources and bank debt and could therefore only conclude two of the three investments," Net1 said in a statement.
Net1 also plans to buy a stake in DNI-4PL Contracts, a distributor of Cell C's mobile user starter packs and prepaid airtime.
Blue Label said last year it would pay 5.5 billion rand for a 45 percent holding in Cell C, a company founded in 2001 by Saudi Arabia's Oger Telecom and former director Zwelakhe Mankazana.
Blue Label will replace the Net1 subscription with a private placement with other parties to part fund its Cell C investment. (Reporting by Tanisha Heiberg; editing by Alexander Smith)