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XO to Acquire Allegiance for $311 Million

February 13, 2004 -- (WEB HOST INDUSTRY REVIEW) -- Telecommunications carrier XO Communications ( has been selected as the winning bidder for substantially all of the assets of Texas-based carrier Allegiance Telecom ( and its subsidiaries, the company announced on Friday. The acquisition does not include Allegiance's equipment and maintenance business, managed modem business and other unspecified assets and operations.

Under the terms of the transaction, XO will acquire all the Allegiance assets covered by the agreement for $311 million in cash and 45.38 million shares in XO common stock.

The companies said the transaction, subject to regulatory approval and termination of applicable waiting periods, should be completed within the next few days and will be submitted to US bankruptcy court for the southern district of New York for approval on February 19. Allegiance Telecom filed for chapter 11 bankruptcy last May.

XO said the acquisition of Allegiance will make it the largest independent provider of national local telecommunications and broadband services in the United States, with 330,000 customers and $1.6 billion in revenue.

"The acquisition of Allegiance Telecom's network assets will make XO the nation's largest national local telecommunications services provider," says Carl Grivner, chief executive officer of XO Communications. "The combination of XO and Allegiance is good for both the industry and businesses. It will contribute to increased competition for regional Bell operating companies and give businesses more choices for their end-to-end telecommunications needs. In addition, the acquisition increases the density of our PoPs (Points of Presence) in local markets, which uniquely positions XO to sell last mile and metro services to all the large long distance companies."

Griver also said that he expects the acquisition, over time, to help XO reduce network costs by $60 million and general and administrative costs by $100 million.

"The telecommunications industry is ripe for consolidation, and this acquisition strengthens XO's platform for the future acquisition of undervalued assets in the industry," says Carl Icahn, chairman of XO Communications.

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