XO outbids Qwest for Allegiance Telecom

FRAMINGHAM (02/13/2004) - XO Communications Inc. this week outbid Qwest Communications International Inc. to buy virtually all of the assets of bankrupt carrier Allegiance Telecom Inc. for US$625 million in cash and stock.

Under the terms of the transaction, XO will purchase substantially all of Allegiance's assets for approximately $311 million in cash and approximately 45.38 million shares of XO common stock. The deal does not include Allegiance's customer premise equipment sales and maintenance business, its managed modem business and certain other Allegiance assets and operations.

With the acquisition, XO says it will become the nation's largest independent provider of national local telecommunications and broadband services with approximately 330,000 customers and more than $1.6 billion in revenue. XO says it will double the number of points of presence within the 36 markets where it and Allegiance overlap, and significantly increase its network of nationwide connections to RBOC networks.

The deal will also save XO $60 million in network costs and $100 million in general and administrative expenses, the CLEC says.

Qwest in December announced an agreement to acquire Allegiance. Allegiance filed for bankruptcy last spring.

"After careful analysis, we determined that we will discontinue bidding for the assets," a Qwest spokeswoman says.

Even though Qwest said the Allegiance assets would support its plans for profitable growth and enable it to "better serve business customers" and "support the delivery of new services," the spokeswoman says losing those assets would not impair these initiatives.

XO and Allegiance expect to finalize the definitive agreement within the next several days and submit it on Feb. 19 for approval by the U.S. Bankruptcy Court for the Southern District of New York.

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