Allegiance Telecom Announces Preliminary Estimates of Fourth Quarter Results And Expansion of Original Business Plan - Company Financial Information

Cambridge Telcom Report, Jan 10, 2000

Allegiance Telecom, Inc., a leading competitive provider of telecommunications services to small and medium-sized business, Monday pre-announced certain results from its fourth quarter and, at the same time, detailed a major expansion of its business plan. With the planned addition of 12 new markets to its original 24-market business plan, the Company plans to be operational in 36 of the largest metropolitan areas in the United States by the end of 2001.

Based on preliminary information, the Company estimates that for the fourth quarter and for the year ended December 31, 1999, it had consolidated revenues in the range of $38.5 million to $40.0 million and $98.3 million to $99.8 million, respectively; earnings before interest, income taxes, depreciation and amortization, management ownership allocation charge and noncash deferred compensation in the range of negative $26 million to negative $27 million and negative $103.4 million to negative $104.4 million, respectively; capital expenditures in the range of $55.0 million to $57.0 million and $270.9 million and $272.9 million, respectively. Based on preliminary information, the Company estimates that it sold between 73,000 and 75,000 lines and installed between 59,500 and 61,000 lines during the fourth quarter ended December 31, 1999, and that it has sold between 335,100 to 337,100 lines and has installed between 240,900 to 242,400 lines to date.

In connection with the expanded business plan, Allegiance has obtained a commitment from Goldman Sachs Credit Partners L.P., Toronto Dominion (Texas), Inc., BankBoston, N.A., Morgan Stanley Senior Funding, Inc. and various other lenders to fully underwrite $500 million of senior secured credit facilities. The credit facilities consist of a $350 million revolving credit facility and a $150 million delayed draw term loan facility. The credit facilities are subject to customary conditions for a transaction of this type, including completion of definitive documentation and finalization of all terms and conditions. The Company expects to close these facilities in February 2000.

"We have launched operations in the 19 largest metropolitan markets in the U.S. and have raised the capital that we think is necessary to fully fund the deployment of our first 24 markets," said Royce J. Holland, chairman and CEO of Allegiance Telecom. "In light of this progress we have decided to expand our original 24-market business plan by 50 percent."

According to Holland, there are three key components of the business plan expansion:

* Allegiance will increase the number of target markets by 12, to a total of 36 of the largest metropolitan markets in the U.S. It plans to provide service in 27 markets by the end of 2000 and intends to deploy service in an additional nine markets by the end of 2001.

* Allegiance plans to increase its collocation footprint by approximately 100 central offices in its initial 24 target markets.

* Allegiance is moving to the next stage of its smart build strategy in most of its existing markets by acquiring long-term rights to use dark fiber rings that will connect many of the central offices where the Company is located. These dark fiber rings will replace the network elements that Allegiance is leasing on a short-term basis from various ILECs and are expected to provide the Company with higher operating margins and more reliable network services. Allegiance currently has dark fiber rings in operation in New York City, Dallas and Houston and has entered into contracts for dark fiber rings in an additional 16 metropolitan markets, all of which are expected to be in operation before the end of 2000. Allegiance has also contracted for similar long-term arrangements for long-haul fiber routes connecting its Boston, New York City and Washington, D.C. networks.

"This expanded business plan calls for total projected central office collocations of 990, up from 650, and a projected 33% increase in the number of nonresidential access lines that we can address with our collocation footprint," added Holland.

Based in Dallas, Texas, Allegiance Telecom is a facilities-based competitive local exchange carrier that offers businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. The Company is targeting 36 major metropolitan areas in the U.S. with its "one-stop shopping" approach. Allegiance is currently operational in the following 19 markets: Atlanta, Baltimore, Boston, Chicago, Dallas, Detroit, Fort Worth, Houston, Long Island, Los Angeles, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, San Diego, San Francisco, San Jose and Washington D.C. The Company's web address is: www.allegiancetele.com.