Breathe.com Calls in Administrator

[London, ENGLAND] Breathe.com, the U.K. ISP that
terminated “lifetime” unmetered access for 50,000
customers recently, confirmed over the weekend that
it has gone into administration.

Although unable to find further financing to
ensure its long-term future, Breathe.com will
not close immediately. The administrator,
PricewaterhouseCoopers, will try to sell the
business as a going concern and even hopes to
avoid redundancies among the 140 staff.

A statement from PwC said: “We are actively
looking for interested parties to maximize
realizations and secure the future for Breathe.com.”

One of the ten largest ISPs in the U.K., Breathe.com
has over half a million customers. It ran a
major advertising campaign during the summer
to attract new users, while its mobile service
claimed to have (in September) 0.6 million users,
helped by various “free phone” offers.

Poor management has clearly played a part in
Breathe.com’s fall. It recently withdrew its
unmetered access package without offering refunds
to subscribers who had paid £50 (US $75)
for their supposed lifetime membership.

Breathe.com’s investors are 3i and Chase Capital
Partners which have a 35 percent stake, having
put in £20 million (US $30 million), and
founder Martin Dawes who has 65 percent. Dawes
sold his mobile operation to BT Cellnet to finance
Breathe.com.

The policy of spending heavily on TV advertising
while at the same time kicking customers off the
service has clearly not been a very sound business
model. Breathe.com’s demise should not therefore be
taken as an indication that the bigger names
in the industry are unstable — although one
or two certainly are.

There will, however, be a knock-on effect, with
Breathe.com’s problems having a negative influence
on forthcoming ISP flotations and sales, such as
the auction of LineOne by United News & Media.

Breathe.com’s survival will now depend on finding
a buyer.