Breathe loses battle for life

About 50,000 Breathe customers are likely to be left out of pocket

Breathe, the UK's fourth biggest internet service provider, has collapsed with losses of about £50m ($74m).

The privately held company - backed by high-profile venture capitalists Chase Capital Partners and 3i - expired late on Friday night after failing to find a buyer.

As recently as three months ago, Breathe had been planning a stock market flotation valuing it at about £100m. But a further deterioration in investor sentiment towards the dot.com sector had left it unable to secure fresh funding.

Breathe's collapse is expected to leave about 50,000 customers out of pocket. They had each paid a single upfront fee of £50 for what had been promoted as free internet access for life.

But earlier this month, Breathe had said it was closing the service because the business was no longer viable. Instead, it offered customers metered access.

Slow Wap phone take-up

In this, Breathe joined a long list of ISPs which had abandoned or failed in attempts to launch similar services in the UK.

In all, Breathe had more than 500,000 customers.

The end of the road for Breathe is also a severe blow for mobile phone entrepreneur Martin Dawes who was thought to have invested about £30m in the company and was its majority shareholder.

Analysts said he had hoped the free internet access offer would help Breathe build a large subscriber base, which would then migrate to wireless internet.

But the plans had 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 had 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.

Second loss in weeks

Other of Breathe's major backers including Chase Capital and 3i were taking their second substantial dot.com loss in several weeks, after the demise of the UK arm of the financial news website TheStreet.

Accountancy firm PricewaterhouseCoopers has been appointed as administrator to Breathe and will now try to sell the business as a going concern.

In a statement, PwC partner Mike Horrocks said: "We have no plans for redundancies at present and will continue to run the business operation while we look for a buyer."

Breathe employs 140 people in London and Warrington.