Allegiance Telecom Closes 2003 With Annual Growth

DALLAS, April 15 -- Allegiance Telecom, Inc. (OTC Bulletin Board: ALGXQ), a national local exchange carrier (NLEC), today announced results for its fourth quarter and year-end 2003. Allegiance reported fourth quarter revenues of $187.5 million, a decrease of 0.4 percent compared with 3Q03 and a decrease of 8.5 percent compared with 4Q02, and full- year revenue of $776.9 million, an increase of 0.8 percent compared with 2002. Excluding the revenue impact of the Company's customer premises equipment (CPE) sales and maintenance business, which had 4Q03 revenue of $29.4 million versus $27.8 million in 3Q03, revenue for 4Q03 declined by $2.4 million from the third quarter, a reduction of 1.5 percent. Adjusted EBITDA (see FOOTNOTE) margin for the fourth quarter was 6.2 percent, with consolidated Adjusted EBITDA of $11.6 million for 4Q03. Allegiance also reported it achieved Free Cash Flow from Operations of $4.9 million.

For the year ending December 31, 2003, Allegiance had an Adjusted EBITDA loss of $13.4 million, an 81.3 percent decrease from 2002. Capital expenditures for 2003 totaled $22.6 million versus $129.9 million in 2002, a reduction of 82.6 percent.

On February 13, 2004, Allegiance selected XO Communications, Inc. (OTC Bulletin Board: XOCM) as the winning bidder for substantially all of the assets of Allegiance Telecom, which had filed for financial restructuring under Chapter 11 of the U.S. Bankruptcy Code on May 14, 2003. Under the terms of the purchase agreement, XO will purchase, for approximately $311 million in cash and approximately 45.38 million shares of XO common stock, substantially all of the assets of Allegiance Telecom and its subsidiaries, except for Allegiance's customer premises equipment sales and maintenance business (operated under the name of Shared Technologies), its dedicated dial-up access services business operated under an agreement with Level 3 Communications LLC, its shared hosting business and certain other Allegiance assets and operations. On February 20, 2004, the U.S. Bankruptcy Court for the Southern District of New York approved the proposed purchase of substantially all of Allegiance's assets by XO, and XO expects to close on the sale by the end of the second quarter 2004.

Operational and Financial Highlights

Reflecting Allegiance's progress toward positive free cash flow, Free Cash Flow from Operations was $4.9 million, an increase of 38.8 percent from the third quarter and an increase of 113.9 percent from 4Q02. Allegiance experienced a decline in cash burn from operations of 82.2 percent in 2003 compared with 2002.

Allegiance Telecom, Inc. ( http://www.algx.com ) is a facilities-based national local exchange carrier headquartered in Dallas, Texas. As the leader in competitive local service for medium and small businesses, Allegiance offers "One source for business telecom(TM)" -- a complete telecommunications package, including local, long distance, international calling, high-speed data transmission and Internet services and a full suite of customer premise communications equipment and service offerings. Allegiance serves 36 major metropolitan areas in the U.S. with its single source approach. Allegiance's common stock is traded on the Over The Counter Bulletin Board under the symbol ALGXQ.OB.