BT has agreed to buy online directory firm Scoot.com for �5m, in a move that will bolster its own directory business.

Scoot.com was worth �2bn at the height of the dot.com bubble, but its shares tumbled as the dot.com dream turned sour and the company was due to run out of cash.

The deal not only saves Scoot, but offers BT a chance to rebuild its own directory services business before the market is opened to competition.

"The forthcoming deregulation of directory enquiry services in the UK will allow BT to offer a much fuller range of services to its customers, as the boundaries between directory enquiries and the classified listings markets are removed," BT said.

BT - burdened with debt by its purchase of third generation mobile phone licences - sold its directory publisher Yell last year in an effort to reduce its debt.

BT will also take on �3m of Scoot.com's liabilities.

Frustrated ambitions

Scoot.com hoped to make money by taking commissions from businesses which benefited from the customers channelled by Scoot.com to their goods and services.

Launched in 1998, the company was hit hard by lower than expected user numbers, forcing it to scale back ambitious plans to expand into mainland Europe.

Having sold its European unit to major shareholder Vivendi Universal, the group now operates only in the UK and Ireland.

Last year, Scoot.com was forced to sell the popular Loot advertising magazine, its most valuable asset, in order to stay afloat.

The sale earned Scoot just �45m, less than a quarter of the price it paid for the magazine in June 2000.