GUS gives Breathe new life

Breathe spent millions on television advertising

The UK's fourth biggest internet service provider, Breathe, has been rescued from administration by retail giant Great Universal Stores (GUS).

GUS, which owns the Argos retail chain, has promised to save at least 80 out of 140 jobs at London and Warrington-based Breathe after buying the assets and technology of the business for £1.4m.

The deal does not include liability for Breathe's debts, which means the 50,000 people who lost out when its unmetered access service collapsed are unlikely to receive a refund.

Breathe, controlled by mobile phone entrepreneur Martin Dawes, collapsed last month with losses of about £50m ($74m). It went into administration after hitting financial problems.

Technology potential

GUS will continue to provide internet access for the 300,000 Breathe subscribers.

But a spokeswoman said the catalogue shopping giant was more interested in Breathe's technology and management than its future potential as an ISP.

"The main reason Breathe was attractive to GUS was to help it expand its capabilities in the remote shopping market.

"The service will remain as it is, in the short term, but there will be changes going forward."

She added: "It is about what the assets and technology can do for GUS."

GUS was particularly interested in Breathe's mobile internet technology and the work it had done on voice-activated systems.

The retail giant has extensive online shopping interests through its Argos and home shopping franchises and Reality, its web-design firm.

Unmetered access

The deal may throw a lifeline to Breathe's workforce but the outlook remains bleak for subscribers to its failed unmetered internet package, 'Breathe freely'.

The service was intended to provide unmetered internet access for life for a flat fee of £50.

But the 50,000 people who signed up for the service are likely to remain at the back of the queue of Breathe's creditors.

Were any funds to be left over when other creditors have been paid, the money will be divided up between subscribers to the unmetered service.

The administration process, which is being handled by PricewaterhouseCoopers, is expected to take a further two months.

Administrator Michael Horrocks said: "We are delighted to have been able to conclude a sale in very difficult circumstances for Breathe.com."

Flotation hopes

As recently as four months ago, Breathe had been planning a stock market flotation valuing it at about £100m.

But a deterioration in investor sentiment towards the dot.com sector left it unable to secure fresh funding.

Breathe's expansion plans faltered because of a slower than expected take-up of Wap (wireless application protocol) enabled phones.

In the end, the cost of maintaining the internet service proved unsustainably high.

Last year, Mr Dawes sold Martin Dawes Communications, which provided mobile phone services, to BT Cellnet for £130m.

He was thought to have collected about £70m from the transaction.