XO Comms Reports Q1

RESTON, Va. -- XO Communications, Inc. (OTC Bulletin Board: XOCM.OB - News) today reported its first quarter 2005 financial and operational results.

Revenue for the first quarter ended March 31, 2005 was $361.5 million, an increase of 39 percent compared with $260.9 million in the same period in the prior year. Revenue for the first quarter of 2005 includes a full quarter of revenue from the acquired telecommunications services assets of Allegiance Telecom.

Consolidated net loss for the first quarter of 2005 was $42.9 million, an improvement of $5.6 million compared to a net loss of $48.5 million in the same period in the prior year. Consolidated EBITDA for the first quarter of 2005 was $21.6 million, an improvement of $39.5 million compared to a $17.9 million EBITDA loss in the same period in the prior year. A portion of the EBITDA increase related to $10 million of favorable settlements with other carriers contributing to a reduction in the cost of service.

"We're off to a solid start in 2005, demonstrated by our financial results and the reception by customers to our new IP-based services," said Carl Grivner, XO Communications CEO. "Our first quarter results show that we continue to execute on our strategic plan. We achieved positive EBITDA for the third consecutive quarter and were able to maintain our cash position with a slight improvement over the previous quarter. We are also seeing strong demand for our recently launched VoIP services bundle, XOptions Flex, for which we've already received more than 230 customer orders."

Revenue from voice services -- consisting of local, long distance and other voice services -- was $186.3 million in the first quarter of 2005 compared with $130.9 million for the same period in the prior year. Revenue from data services -- consisting of Internet access, network access and web hosting -- was $108.4 million in the first quarter of 2005 compared with $92.9 million for the same period in the prior year. Revenue from integrated services -- consisting of integrated data and voice services -- was $66.8 million in the first quarter of 2005 compared with $37.1 million for the same period in the prior year.

Selling, operating and general (SOG) expenses as a percentage of revenue for the first quarter of 2005 were 53 percent compared to 65 percent in the same period in the prior year. The improvements in SOG as a percentage of revenue were primarily due to the Company's ongoing cost reduction initiatives and greater efficiencies resulting from the integration of the acquired Allegiance Telecom operations.

Cash, cash equivalents and marketable securities were $267.3 million at March 31, 2005, an increase of $16.0 million from the previous quarter.

In May of 2005, XO obtained a waiver of compliance with certain financial covenants contained in its senior secured credit facility through December 31, 2006. The waiver was obtained from the affiliate of Mr. Icahn which holds a majority of the loans outstanding under that agreement. In connection with the waiver, XO agreed that in the event of a sale of the Company and in the event of certain other significant sale or divestiture transactions, it will prepay all amounts outstanding under the credit facility in cash and offer to repurchase outstanding shares of XO's outstanding preferred stock at their liquidation value accrued through the date of redemption for cash or, in certain events, securities. The affiliate of Mr. Icahn which holds a majority of such Preferred Stock has agreed to accept this offer, to the extent it consists of cash.

In March 2005, XO retained Jefferies & Company, Inc. ("Jefferies") to present strategic alternatives based on, among other things, the competitive environment of the telecommunications industry, the current regulatory environment, and the recent and pending mergers and acquisitions in the industry. XO has received the Jefferies report, which addressed potential operational improvements and disposition possibilities, and is considering all of its strategic alternatives.

XO Communications Inc.