Allegiance Telecom Continues On Plan With Record Setting First Quarter Results

-- 1Q01 Revenues of $105.9 Million - Increased by 11 Percent Compared

with 4Q00 and 124 Percent Compared with 1Q00

-- Record Levels of Quarterly Installs and Orders -- New Installs of

126,200 Lines and New Orders of 165,900 Lines

-- Total Lines in Service Increases to 733,900

-- 11 Markets Pre-Overhead EBITDA Positive in 1Q01, Driving Overall

Company EBITDA Loss Margin from 59.2 Percent in 1Q00 to 28.3 Percent

in 1Q01

-- 51 New Colocations for a Total of 687, Addressing Approximately

17.81 Million Business Lines "On-Switch"

-- San Antonio and Ft. Lauderdale Service Initiated -- Allegiance

Telecom's 28th and 29th Markets

-- Web Hosting Business Unit Established to Focus on Small and Medium

Sized Enterprise (SME) Market

-- Electronic Bonding Arrangement with Qwest; 24 of 29 Current Allegiance

Markets Now Covered



Apr 24, 2001, 01:00 ET from Allegiance Telecom, Inc.

    DALLAS, April 24 /PRNewswire Interactive News Release/ -- Allegiance
 Telecom, Inc. (Nasdaq:   ALGX), an integrated communications provider (ICP),
 announced first quarter 2001 revenues of $105.9 million, an increase of 11
 percent as compared with 4Q00 and 124 percent compared with 1Q00.  Lines sold
 as well as lines installed were quarterly records, with new lines sold
 increasing from 152,000 in 4Q00 to 165,900 lines in 1Q01.  Lines installed
 also showed record growth, with new lines installed increasing from 108,000 in
 4Q00 to 126,200 in 1Q01.  To date, Allegiance has installed 733,900 lines, of
 which 90 percent are "on-switch."
     "Despite the negative financial market environment and the large number of
 technology and communications companies lowering their growth targets, we are
 pleased to announce that we have met or exceeded our key first quarter
 operating and financial metrics," said Royce J. Holland, chairman and CEO of
 Allegiance Telecom.  "I am especially pleased with the continuing growth and
 margin improvement in our nine early markets, and the fact that two additional
 markets, Philadelphia and San Diego, joined these nine markets in becoming
 pre-overhead EBITDA positive in the first quarter."
 
     Network Rollout Continues On Schedule
     With the addition of San Antonio and Ft. Lauderdale in March, Allegiance's
 network rollout proceeded on track.  The Company had 29 markets operational at
 the end of 1Q01 including Atlanta, Baltimore, Boston, Chicago, Cleveland,
 Dallas, Denver, Detroit, Fort Lauderdale, Fort Worth, Houston, Long Island,
 Los Angeles, Miami, Minneapolis/St. Paul, New York, Northern New Jersey,
 Oakland, Orange County, Philadelphia, Phoenix, St. Louis, San Antonio, San
 Diego, San Francisco, San Jose, Seattle, Tampa and Washington, D.C.  Seven
 more markets are expected to become operational in 2001, bringing Allegiance's
 total to 36 markets.
     Allegiance Telecom continued to post strong gains in its addressable
 market during the first quarter, adding 51 new colocations.  At the end of
 March, the Company was colocated in 687 central offices for unbundled loops,
 representing an addressable "on-switch" market of approximately 17.81 million
 local business access lines.
     Allegiance now has 27 switches in operation, supporting the following
 markets: Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas/Fort Worth
 (2), Denver, Detroit, Houston, Los Angeles, Miami/Ft. Lauderdale,
 Minneapolis/St. Paul, New York /Long Island (2), Northern New Jersey, Orange
 County, Philadelphia, Phoenix, St. Louis, San Antonio, San Diego, San
 Francisco/Oakland, San Jose, Seattle, Tampa and Washington, D.C.
 
     Financial and Operational Highlights
     Allegiance Telecom posted a strong sales increase for the quarter, with
 lines sold increasing from 152,000 lines in 4Q00 to 165,900 in 1Q01, an
 increase of 9 percent compared with 4Q00 and an increase of 74 percent
 compared with 1Q00.  Lines installed also showed significant growth, with
 organic lines installed increasing from 108,000 in 4Q00 to 126,200 in 1Q01, a
 17 percent increase in new installs compared to 4Q00 and an increase of 74
 percent compared with 1Q00.
     Effective personnel recruitment efforts resulted in Allegiance's sales
 force growing to 1,471 people, out of a total Allegiance employee base of
 3,834 as of March 31, 2001.  One of the key facets of the Company's business
 plan is the continuous building of an end user direct sales organization,
 bringing Allegiance products and services directly to customers in each of the
 Company's operational markets.
     For the first quarter ended March 31, 2001, Allegiance Telecom had
 consolidated revenues of $105.9 million.  This represents an increase of 11
 percent as compared with 4Q00 and an increase of 124 percent over 1Q00.
 Allegiance continues to use its capital to support the development of new and
 existing markets, resulting in a first quarter EBITDA (earnings before
 interest, taxes, depreciation and amortization, excluding management ownership
 allocation charge and non-cash deferred compensation expenses) loss of $29.9
 million and capital expenditures of $120.5 million.  The Company continued on
 its path to profitability with EBITDA loss as a percent of revenue for the
 quarter at 28.3 percent, versus 31.5 percent in 4Q00 and 59.2 percent for
 1Q00.
     Gross margin continues to improve; for 1Q01, Allegiance Telecom's gross
 margin was 51.6 percent, up from 50.4 percent in 4Q00.
     "Allegiance Telecom used approximately $161 million of its cash and short-
 term investments during the first quarter to further expand its operations,
 capital expenditures related to switching platforms, colocations, construction
 of its SONET fiber networks and its data network -- which supports the
 Company's product suite of local, long distance, data and Internet services --
 and acquisitions," said Thomas M. Lord, Allegiance executive vice president of
 corporate development and chief financial officer.  "At March 31, 2001,
 Allegiance had an undrawn committed credit facility of $500 million and more
 than $510 million of cash and short-term investments.  We believe that this
 liquidity fully funds Allegiance's 36-market business plan," he said.
 
     Early Markets Demonstrate Significant Strides Toward Profitability
 To demonstrate its progress toward profitability, Allegiance Telecom began
 reporting operating results in 4Q00 for nine of its markets that began service
 in 1998 or early 1999 and became pre-overhead EBITDA positive during the
 fourth quarter (before corporate overhead allocation).  These nine markets are
 Dallas, New York, Atlanta, Fort Worth, Chicago, Los Angeles, San Francisco,
 Boston and Houston.
     In 1Q01, the nine markets continued to show significant growth and margin
 improvements.  New line installations increased by almost 50,000 lines,
 resulting in an improvement of about 13 percent compared with 4Q00 and 86
 percent over 1Q00.  Likewise, revenue increased to $64.2 million, an increase
 of about 9 percent compared with 4Q00 and 56 percent more than 1Q00.  Gross
 margin improved to 59.0 percent of revenue.  Pre-overhead EBITDA was a
 positive $14.3 million, representing a pre-overhead EBITDA margin of 22.3
 percent versus 11.9 percent for 1Q00.
     Two additional markets, Philadelphia and San Diego, also became pre-
 overhead EBITDA positive in the first quarter, for a total of 11 pre-overhead
 EBITDA positive markets.
     "The continuing impressive performance of these nine markets in terms of
 revenue growth, and especially pre-overhead EBITDA margin growth, shows the
 Allegiance business plan is working as we intended," said Holland.
 "Allegiance Telecom continues its movement up the growth curve, cutting
 consolidated EBITDA loss margin from 59.2 percent in 1Q00 to 28.3 percent in
 1Q01.  As we progress in 2001, we expect to see additional markets turning
 pre-overhead EBITDA positive.  This should diminish overall company EBITDA
 loss margin to the low teens by the end of the year, positioning Allegiance to
 turn EBITDA positive during 2002."
 
     Formation of New Allegiance Telecom Web Hosting Division
     In mid-April, Allegiance announced the creation of a centralized Web
 hosting division.  This new division is the result of the critical mass
 created by the growth in Allegiance's Internet and hosting business and
 acquisitions of several regional Internet service companies.  It will focus on
 developing, marketing, and selling national Web hosting and Internet
 connectivity services primarily to the small and medium-sized enterprise (SME)
 market.
     The new centralized Allegiance Web hosting division will market and sell
 its services, including a full-suite of shared, dedicated, managed and
 colocated hosting services and Internet connectivity services, under a
 separate brand.
     Allegiance also announced it acquired Web hosting assets, including the
 customers and world-class Internet data center, of Medford, Mass.-based
 HarvardNet.  In addition, Allegiance announced it acquired Adgrafix, a Web
 hosting services company headquartered in Sudbury, Mass.  These new
 acquisitions solidify the East Coast footprint of Allegiance's new Web hosting
 division.
     Mark Washburn, former HarvardNet president and CEO, joined Allegiance as
 senior vice president of Web hosting, responsible for operations of the newly
 created division.  He reports to Dan Yost, Allegiance president and chief
 operating officer.
     "The creation of this division, bolstered by these acquisitions, is value
 accretive to Allegiance with minimal impact on the company's short term EBITDA
 [earnings before interest, taxes, depreciation and amortization, excluding
 management ownership allocation charge and non-cash deferred compensation
 expenses] losses," said Yost.  He stressed that all of these acquisitions
 provide significant cross-marketing and cross-selling opportunities for
 Allegiance's integrated package of voice and data communications services.
 
     Implementation of Electronic Bonding with Qwest
     Allegiance Telecom and Qwest Communications International Inc. (NYSE:   Q),
 announced the completion of electronic bonding between their operations
 support systems (OSS), reducing the time required to process customer orders
 for local telephone service requests.
     Electronic bonding enables computers at different phone companies to
 communicate with each other in real-time, providing for rapid sharing of
 customer information, service requests and other data.  This enables
 Allegiance to process orders quicker and at a lower cost to better serve their
 local customers.  More important, electronic bonding with Qwest makes it
 easier for business customers in the Allegiance Telecom markets of Denver,
 Phoenix, Seattle and Minneapolis/St. Paul (and the soon-to-open Portland, Ore.
 market) to switch from one local service provider to another.
     "This accomplishment builds on Allegiance Telecom's previously successful
 electronic bonding of OSS with Verizon in New York and Massachusetts, SBC in
 Texas and Missouri, Pacific Bell in California, Ameritech in Illinois,
 Michigan and Ohio, and BellSouth in Georgia and Florida," said Yost.  "We've
 bonded electronically with Qwest for both local service requests (LSRs) for
 unbundled loops and access service requests (ASRs) for special access requests
 such as high capacity T-1 lines.  Allegiance is LSR bonded in six regional
 Bell operating company regions, encompassing 24 of Allegiance's current 29
 markets, and is ASR bonded in 100 percent of its current markets."  Yost noted
 an electronic bonding arrangement with Verizon's southern region (including
 northern New Jersey, Philadelphia, Baltimore and Washington, D.C) is in
 testing and is expected to be announced during the second quarter.
 
     Regulatory Certifications
     Allegiance Telecom is certificated to provide competitive local exchange
 services in 24 states and the District of Columbia, including Arizona,
 California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, New
 Jersey, New York, Maryland, Massachusetts, Michigan, Missouri, Nevada, North
 Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Virginia, Washington
 State and Wisconsin.
 
     Corporate Background
     Based in Dallas, Allegiance Telecom is a facilities-based integrated
 communications provider (ICP) offering businesses a complete package of
 telecommunications services, including local, long distance, international
 calling, high-speed data transmission and Internet services.  Allegiance is
 currently operational in 29 U.S. markets including: Atlanta, Baltimore,
 Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Lauderdale, Fort
 Worth, Houston, Long Island, Los Angeles, Miami, Minneapolis/St.Paul, New
 York, Northern New Jersey, Oakland, Orange County, Philadelphia, Phoenix, St.
 Louis, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa and
 Washington D.C.  The Company is targeting a total of 36 major metropolitan
 areas with its "one-stop shopping" approach.  The Company's Web address is:
 http://www.algx.com .  Allegiance's common stock is traded on the Nasdaq
 National Market under the symbol ALGX.
 
     Certain statements in this press release constitute "forward-looking
 statements" within the meaning of the Private Securities Litigation Reform Act
 of 1995, and the Company intends that such forward-looking statements be
 subject to the safe harbors created thereby. The words "believes," "expects,"
 "estimates," "anticipates," "plans," "will be" and "forecasts" and similar
 words or expressions identify forward-looking statements made by or on behalf
 of the Company.  These forward-looking statements were derived using numerous
 assumptions and are subject to many uncertainties and factors which may cause
 the actual results of the Company to be materially different from those stated
 in such forward-looking statements.  Examples of such uncertainties and
 factors include, but are not limited to, the Company's ability to timely and
 effectively provision new customers; technological, regulatory or other
 developments in the industry; and the ability to develop and maintain
 efficient billing, customer service and information systems.  Additional
 factors are set forth in the Company's SEC reports, including but not limited
 to the Annual Report on Form 10-K for the year ended December 31, 2000.  The
 Company does not undertake any obligation to update or revise any
 forward-looking statement made by it or on its behalf, whether as a result of
 new information, future events or otherwise.
 
 
                     ALLEGIANCE TELECOM, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (Dollars in thousands, except share and per share amounts)
 
                                            Three Months         Three Months
                                               Ended                 Ended
                                           March 31, 2001       March 31, 2000
                                             (unaudited)          (unaudited)
 
      Revenues                                $105,874              $47,161
      Network Costs                             51,228               27,120
        Gross Margin %                            51.6%                42.5%
 
      Selling, General and
       Administrative                           84,622               47,991
      Depreciation, Amortization and
       Noncash Compensation                     57,417               25,780
 
          Loss From Operations                 (87,393)             (53,730)
 
      Other Income (Expense)
        Interest Income                          7,048               13,454
        Interest Expense                       (15,995)             (20,994)
          Other Income (Expense), net           (8,947)              (7,540)
 
      Net Loss Applicable to Common
       Stock                                  $(96,340)            $(61,270)
 
      Net Loss Per Share, basic and
        diluted (A)                             $(0.87)              $(0.59)
 
      Weighted Average Shares
       Outstanding,
        basic and diluted (A)              111,058,599          104,095,622
 
      Other Financial Data:
      EBITDA (B)                              $(29,976)            $(27,950)
      Capital Expenditures                     120,483              102,533
 
     Notes:
     (A) The basic and diluted net loss per share reflect the three-for-two
         stock split, which occurred on February 28, 2000.
     (B) EBITDA excludes non-cash compensation expense.
 
 
                     ALLEGIANCE TELECOM, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                   (Dollars in thousands, except share amounts)
 
                                            March 31, 2001  December 31, 2000
                                             (unaudited)
                                      ASSETS
          CURRENT ASSETS:
       Cash, cash equivalents, and short-
        term investments (A)                    $510,093          $670,911
       Other current assets                      119,548            99,366
        Total current assets                     629,641           770,277
 
      PROPERTY AND EQUIPMENT
       Property and equipment                  1,045,456           907,182
       Accumulated Depreciation                 (198,704)         (162,279)
       Total property and equipment, net         846,752           744,903
 
      NON-CURRENT ASSETS (B)                     178,290           153,659
 
      TOTAL ASSETS                            $1,654,683        $1,668,839
 
 
                       LIABILITIES AND STOCKHOLDERS' EQUITY
 
      CURRENT LIABILITIES                       $149,793          $139,070
 
      LONG-TERM DEBT                             576,303           566,312
 
      OTHER LONG-TERM LIABILITIES                  7,348             4,972
 
      STOCKHOLDERS' EQUITY                       921,239           958,485
 
      TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY                                 $1,654,683        $1,668,839
 
      COMMON SHARES OUTSTANDING              113,020,934       110,059,681
 
     Notes:
     (A) Includes restricted short-term investments of $13,129 and $12,952 at
         March 31, 2001 and December 31, 2000, respectively.
     (B) Includes restricted long-term investments of $829 at March 31, 2001
         and December 31, 2000.
 
 
                        Selected Operational Statistics
 
                 As of            As of           As of           As of
                March 31,       December 31,   September 30      March 31
                  2001             2000            2000            2000
 
      Markets
       Served   New York         New York        New York        New York
                Dallas           Dallas          Dallas          Dallas
                Atlanta          Atlanta         Atlanta         Atlanta
                Fort Worth       Fort Worth      Fort Worth      Fort Worth
                Los Angeles      Los Angeles     Los Angeles     Los Angeles
                Chicago          Chicago         Chicago         Chicago
                Boston           Boston          Boston          Boston
                Oakland          Oakland         Oakland         Oakland
                San Francisco    San Francisco   San Francisco   San Francisco
                Philadelphia     Philadelphia    Philadelphia    Philadelphia
                Washington,D.C.  Washington,D.C. Washington,D.C.Washington,D.C.
                San Jose         San Jose        San Jose        San Jose
                Orange County    Orange County   Orange County   Orange County
                Houston          Houston         Houston         Houston
                No. New Jersey   No. New Jersey  No. New Jersey  No. New Jersey
                Long Island      Long Island     Long Island     Long Island
                San Diego        San Diego       San Diego       San Diego
                Detroit          Detroit         Detroit         Detroit
                Baltimore        Baltimore       Baltimore       Baltimore
                Denver           Denver          Denver          Denver
                St.Louis         St. Louis       St. Louis
                Cleveland        Cleveland       Cleveland
                Seattle          Seattle         Seattle
                Miami            Miami           Miami
                Minneapolis/     Minneapolis/    Minneapolis/
                 St.Paul          St. Paul       St. Paul
                Phoenix          Phoenix
                Tampa            Tampa
                San Antonio
                Ft.Lauderdale
 
     # of Markets      29              27              25              20
 
     # of Switches     27              26              24              16
 
     Central Offices
     Collocated       687             636             552             395
 
     Addressable Markets (Lines)
     via
      Collocated
       Co's   17,810,000      16,460,000      14,730,000      11,800,000
 
     Sales
      Headcount    1,471           1,333           1,231             905
 
     Total
      Headcount    3,834           3,249           2,936           2,038
 
     Lines
      Installed   733,900         607,700         499,700         314,300
 
     * Note: Sales Headcount includes Sales Team Managers, Account Executives
     and Sales Administrators
 
                            ALLEGIANCE TELECOM, INC.
                              PERFORMANCE METRICS
 
                                                         Actual
                                                          1999
                                             1Q       2Q       3Q       4Q
 
     Gross Margin %                          24.0%    28.2%    43.0%    39.2%
 
     SG&A as % of Rev                       276.0%   173.4%   125.5%   107.4%
     EBITDA as % of Rev                    -252.0%  -145.2%   -82.6%   -68.2%
 
     Annualized ($ in 000's)
     Average Revenue per Employee            $51.4    $65.8    $92.8    $95.0
     SG&A per Employee                       141.8    114.2    116.5    102.0
     EBITDA per Employee                    (129.5)   (95.6)   (76.6)   (64.8)
     EBITDA per Line                          (1.7)    (1.0)    (0.6)    (0.5)
     Cum. Capital Expenditures per Line        3.1      2.7      2.2      1.9
 
     Monthly:
     Average Revenue per Line               $51.76   $58.01   $70.46   $61.92
     Network Expense per Line                39.34    41.63    40.17    37.66
     SG&A per Line                          142.86   100.62    88.46    66.49
 
 
                            ALLEGIANCE TELECOM, INC.
                              PERFORMANCE METRICS
 
                                                  Actual                 Actual
                                                   2000                   2001
                                    1Q       2Q       3Q        4Q         1Q
 
     Gross Margin %                42.5%    45.1%    47.7%     50.4%      51.6%
 
     SG&A as % of Rev             101.8%    90.0%    87.2%     81.8%      79.9%
     EBITDA as % of Rev           -59.2%   -44.9%   -39.6%    -31.5%     -28.3%
 
     Annualized ($ in 000's)
     Average Revenue per Employee  $98.7   $109.9   $116.7    $122.9    $119.6
     SG&A per Employee             100.5     98.9    101.9     100.6      95.6
     EBITDA per Employee           (58.5)   (49.4)   (46.2)    (38.7)    (33.9)
     EBITDA per Line                (0.4)    (0.3)    (0.3)     (0.2)     (0.2)
     Cum. Capital Expenditures
       per Line                      1.8      1.6      1.6       1.5       1.4
 
     Monthly:
     Average Revenue per Line     $56.55   $58.17   $58.79    $57.21    $52.61
     Network Expense per Line      32.49    31.94    30.76     28.40     25.46
     SG&A per Line                 57.55    52.35    51.30     46.82     42.05
 
 
                            ALLEGIANCE TELECOM, INC.
                              MARKET FINANCIAL DATA
                             (Dollars in thousands)
                                   (Unaudited)
 
     FIRST 9 MARKETS (A)
                                                      Actual
                                                       1999
                                         1Q         2Q         3Q         4Q
 
     LINES IN SERVICE                  70,939    100,118    138,148    182,151
 
     REVENUE
       Local Service                  $15,927    $19,812    $23,999    $28,162
       Long Distance                      423        567        724        856
       Data                               393        674      1,843      2,696
       Total Revenue                  $16,743    $21,054    $26,565    $31,715
 
     GROSS MARGIN %                     39.5%      40.7%      49.5%      52.7%
 
     PRE-OVERHEAD EBITDA (B)          ($5,045)   ($4,875)   ($2,385)      $475
 
     PRE-OVERHEAD EBITDA %             -30.1%     -23.2%      -9.0%       1.5%
 
 
     ADDRESSABLE SWITCHED ACCESS
      LINES (C)                     4,561,531  5,370,951  5,923,239  6,468,292
 
     PENETRATION %                       1.6%       1.9%       2.3%       2.8%
 
                            ALLEGIANCE TELECOM, INC.
                              MARKET FINANCIAL DATA
                             (Dollars in thousands)
                                   (Unaudited)
 
     EARLY 9 MARKETS (A)
 
                                              Actual                    Actual
                                               2000                      2001
                           1Q         2Q         3Q         4Q            1Q
 
     LINES IN SERVICE    228,208    274,740    316,592    376,046      425,380
 
     REVENUE
       Local Service     $34,951    $39,142    $43,155    $46,088      $48,752
       Long Distance       1,287      1,582      2,144      2,553        2,879
       Data                4,956      6,446      7,963     10,413       12,537
       Total Revenue     $41,193    $47,169    $53,261    $59,054      $64,168
 
     GROSS MARGIN %         55.4%      54.7%      56.3%      57.1%        59.0%
 
     PRE-OVERHEAD
       EBITDA (B)         $4,922     $6,738     $9,103    $11,599      $14,323
 
     PRE-OVERHEAD
      EBITDA %              11.9%      14.3%      17.1%      19.6%        22.3%
 
 
     ADDRESSABLE SWITCHED ACCESS
      LINES (C)        6,990,236  7,556,349  7,887,217  8,051,487    8,383,468
 
     PENETRATION %           3.3%       3.6%       4.0%       4.7%         5.1%
 
     Notes:
     (A) Includes New York, Dallas, Ft. Worth, Atlanta, Los Angeles, San
         Francisco, Chicago, Houston, and Boston.
     (B) Represents earnings before interest, taxes, depreciation and
         amortization before corporate overhead allocation.
     (C) Includes only lines on-switch.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X52407217
 
 

SOURCE Allegiance Telecom, Inc.
    DALLAS, April 24 /PRNewswire Interactive News Release/ -- Allegiance
 Telecom, Inc. (Nasdaq:   ALGX), an integrated communications provider (ICP),
 announced first quarter 2001 revenues of $105.9 million, an increase of 11
 percent as compared with 4Q00 and 124 percent compared with 1Q00.  Lines sold
 as well as lines installed were quarterly records, with new lines sold
 increasing from 152,000 in 4Q00 to 165,900 lines in 1Q01.  Lines installed
 also showed record growth, with new lines installed increasing from 108,000 in
 4Q00 to 126,200 in 1Q01.  To date, Allegiance has installed 733,900 lines, of
 which 90 percent are "on-switch."
     "Despite the negative financial market environment and the large number of
 technology and communications companies lowering their growth targets, we are
 pleased to announce that we have met or exceeded our key first quarter
 operating and financial metrics," said Royce J. Holland, chairman and CEO of
 Allegiance Telecom.  "I am especially pleased with the continuing growth and
 margin improvement in our nine early markets, and the fact that two additional
 markets, Philadelphia and San Diego, joined these nine markets in becoming
 pre-overhead EBITDA positive in the first quarter."
 
     Network Rollout Continues On Schedule
     With the addition of San Antonio and Ft. Lauderdale in March, Allegiance's
 network rollout proceeded on track.  The Company had 29 markets operational at
 the end of 1Q01 including Atlanta, Baltimore, Boston, Chicago, Cleveland,
 Dallas, Denver, Detroit, Fort Lauderdale, Fort Worth, Houston, Long Island,
 Los Angeles, Miami, Minneapolis/St. Paul, New York, Northern New Jersey,
 Oakland, Orange County, Philadelphia, Phoenix, St. Louis, San Antonio, San
 Diego, San Francisco, San Jose, Seattle, Tampa and Washington, D.C.  Seven
 more markets are expected to become operational in 2001, bringing Allegiance's
 total to 36 markets.
     Allegiance Telecom continued to post strong gains in its addressable
 market during the first quarter, adding 51 new colocations.  At the end of
 March, the Company was colocated in 687 central offices for unbundled loops,
 representing an addressable "on-switch" market of approximately 17.81 million
 local business access lines.
     Allegiance now has 27 switches in operation, supporting the following
 markets: Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas/Fort Worth
 (2), Denver, Detroit, Houston, Los Angeles, Miami/Ft. Lauderdale,
 Minneapolis/St. Paul, New York /Long Island (2), Northern New Jersey, Orange
 County, Philadelphia, Phoenix, St. Louis, San Antonio, San Diego, San
 Francisco/Oakland, San Jose, Seattle, Tampa and Washington, D.C.
 
     Financial and Operational Highlights
     Allegiance Telecom posted a strong sales increase for the quarter, with
 lines sold increasing from 152,000 lines in 4Q00 to 165,900 in 1Q01, an
 increase of 9 percent compared with 4Q00 and an increase of 74 percent
 compared with 1Q00.  Lines installed also showed significant growth, with
 organic lines installed increasing from 108,000 in 4Q00 to 126,200 in 1Q01, a
 17 percent increase in new installs compared to 4Q00 and an increase of 74
 percent compared with 1Q00.
     Effective personnel recruitment efforts resulted in Allegiance's sales
 force growing to 1,471 people, out of a total Allegiance employee base of
 3,834 as of March 31, 2001.  One of the key facets of the Company's business
 plan is the continuous building of an end user direct sales organization,
 bringing Allegiance products and services directly to customers in each of the
 Company's operational markets.
     For the first quarter ended March 31, 2001, Allegiance Telecom had
 consolidated revenues of $105.9 million.  This represents an increase of 11
 percent as compared with 4Q00 and an increase of 124 percent over 1Q00.
 Allegiance continues to use its capital to support the development of new and
 existing markets, resulting in a first quarter EBITDA (earnings before
 interest, taxes, depreciation and amortization, excluding management ownership
 allocation charge and non-cash deferred compensation expenses) loss of $29.9
 million and capital expenditures of $120.5 million.  The Company continued on
 its path to profitability with EBITDA loss as a percent of revenue for the
 quarter at 28.3 percent, versus 31.5 percent in 4Q00 and 59.2 percent for
 1Q00.
     Gross margin continues to improve; for 1Q01, Allegiance Telecom's gross
 margin was 51.6 percent, up from 50.4 percent in 4Q00.
     "Allegiance Telecom used approximately $161 million of its cash and short-
 term investments during the first quarter to further expand its operations,
 capital expenditures related to switching platforms, colocations, construction
 of its SONET fiber networks and its data network -- which supports the
 Company's product suite of local, long distance, data and Internet services --
 and acquisitions," said Thomas M. Lord, Allegiance executive vice president of
 corporate development and chief financial officer.  "At March 31, 2001,
 Allegiance had an undrawn committed credit facility of $500 million and more
 than $510 million of cash and short-term investments.  We believe that this
 liquidity fully funds Allegiance's 36-market business plan," he said.
 
     Early Markets Demonstrate Significant Strides Toward Profitability
 To demonstrate its progress toward profitability, Allegiance Telecom began
 reporting operating results in 4Q00 for nine of its markets that began service
 in 1998 or early 1999 and became pre-overhead EBITDA positive during the
 fourth quarter (before corporate overhead allocation).  These nine markets are
 Dallas, New York, Atlanta, Fort Worth, Chicago, Los Angeles, San Francisco,
 Boston and Houston.
     In 1Q01, the nine markets continued to show significant growth and margin
 improvements.  New line installations increased by almost 50,000 lines,
 resulting in an improvement of about 13 percent compared with 4Q00 and 86
 percent over 1Q00.  Likewise, revenue increased to $64.2 million, an increase
 of about 9 percent compared with 4Q00 and 56 percent more than 1Q00.  Gross
 margin improved to 59.0 percent of revenue.  Pre-overhead EBITDA was a
 positive $14.3 million, representing a pre-overhead EBITDA margin of 22.3
 percent versus 11.9 percent for 1Q00.
     Two additional markets, Philadelphia and San Diego, also became pre-
 overhead EBITDA positive in the first quarter, for a total of 11 pre-overhead
 EBITDA positive markets.
     "The continuing impressive performance of these nine markets in terms of
 revenue growth, and especially pre-overhead EBITDA margin growth, shows the
 Allegiance business plan is working as we intended," said Holland.
 "Allegiance Telecom continues its movement up the growth curve, cutting
 consolidated EBITDA loss margin from 59.2 percent in 1Q00 to 28.3 percent in
 1Q01.  As we progress in 2001, we expect to see additional markets turning
 pre-overhead EBITDA positive.  This should diminish overall company EBITDA
 loss margin to the low teens by the end of the year, positioning Allegiance to
 turn EBITDA positive during 2002."
 
     Formation of New Allegiance Telecom Web Hosting Division
     In mid-April, Allegiance announced the creation of a centralized Web
 hosting division.  This new division is the result of the critical mass
 created by the growth in Allegiance's Internet and hosting business and
 acquisitions of several regional Internet service companies.  It will focus on
 developing, marketing, and selling national Web hosting and Internet
 connectivity services primarily to the small and medium-sized enterprise (SME)
 market.
     The new centralized Allegiance Web hosting division will market and sell
 its services, including a full-suite of shared, dedicated, managed and
 colocated hosting services and Internet connectivity services, under a
 separate brand.
     Allegiance also announced it acquired Web hosting assets, including the
 customers and world-class Internet data center, of Medford, Mass.-based
 HarvardNet.  In addition, Allegiance announced it acquired Adgrafix, a Web
 hosting services company headquartered in Sudbury, Mass.  These new
 acquisitions solidify the East Coast footprint of Allegiance's new Web hosting
 division.
     Mark Washburn, former HarvardNet president and CEO, joined Allegiance as
 senior vice president of Web hosting, responsible for operations of the newly
 created division.  He reports to Dan Yost, Allegiance president and chief
 operating officer.
     "The creation of this division, bolstered by these acquisitions, is value
 accretive to Allegiance with minimal impact on the company's short term EBITDA
 [earnings before interest, taxes, depreciation and amortization, excluding
 management ownership allocation charge and non-cash deferred compensation
 expenses] losses," said Yost.  He stressed that all of these acquisitions
 provide significant cross-marketing and cross-selling opportunities for
 Allegiance's integrated package of voice and data communications services.
 
     Implementation of Electronic Bonding with Qwest
     Allegiance Telecom and Qwest Communications International Inc. (NYSE:   Q),
 announced the completion of electronic bonding between their operations
 support systems (OSS), reducing the time required to process customer orders
 for local telephone service requests.
     Electronic bonding enables computers at different phone companies to
 communicate with each other in real-time, providing for rapid sharing of
 customer information, service requests and other data.  This enables
 Allegiance to process orders quicker and at a lower cost to better serve their
 local customers.  More important, electronic bonding with Qwest makes it
 easier for business customers in the Allegiance Telecom markets of Denver,
 Phoenix, Seattle and Minneapolis/St. Paul (and the soon-to-open Portland, Ore.
 market) to switch from one local service provider to another.
     "This accomplishment builds on Allegiance Telecom's previously successful
 electronic bonding of OSS with Verizon in New York and Massachusetts, SBC in
 Texas and Missouri, Pacific Bell in California, Ameritech in Illinois,
 Michigan and Ohio, and BellSouth in Georgia and Florida," said Yost.  "We've
 bonded electronically with Qwest for both local service requests (LSRs) for
 unbundled loops and access service requests (ASRs) for special access requests
 such as high capacity T-1 lines.  Allegiance is LSR bonded in six regional
 Bell operating company regions, encompassing 24 of Allegiance's current 29
 markets, and is ASR bonded in 100 percent of its current markets."  Yost noted
 an electronic bonding arrangement with Verizon's southern region (including
 northern New Jersey, Philadelphia, Baltimore and Washington, D.C) is in
 testing and is expected to be announced during the second quarter.
 
     Regulatory Certifications
     Allegiance Telecom is certificated to provide competitive local exchange
 services in 24 states and the District of Columbia, including Arizona,
 California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, New
 Jersey, New York, Maryland, Massachusetts, Michigan, Missouri, Nevada, North
 Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Virginia, Washington
 State and Wisconsin.
 
     Corporate Background
     Based in Dallas, Allegiance Telecom is a facilities-based integrated
 communications provider (ICP) offering businesses a complete package of
 telecommunications services, including local, long distance, international
 calling, high-speed data transmission and Internet services.  Allegiance is
 currently operational in 29 U.S. markets including: Atlanta, Baltimore,
 Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Lauderdale, Fort
 Worth, Houston, Long Island, Los Angeles, Miami, Minneapolis/St.Paul, New
 York, Northern New Jersey, Oakland, Orange County, Philadelphia, Phoenix, St.
 Louis, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa and
 Washington D.C.  The Company is targeting a total of 36 major metropolitan
 areas with its "one-stop shopping" approach.  The Company's Web address is:
 http://www.algx.com .  Allegiance's common stock is traded on the Nasdaq
 National Market under the symbol ALGX.
 
     Certain statements in this press release constitute "forward-looking
 statements" within the meaning of the Private Securities Litigation Reform Act
 of 1995, and the Company intends that such forward-looking statements be
 subject to the safe harbors created thereby. The words "believes," "expects,"
 "estimates," "anticipates," "plans," "will be" and "forecasts" and similar
 words or expressions identify forward-looking statements made by or on behalf
 of the Company.  These forward-looking statements were derived using numerous
 assumptions and are subject to many uncertainties and factors which may cause
 the actual results of the Company to be materially different from those stated
 in such forward-looking statements.  Examples of such uncertainties and
 factors include, but are not limited to, the Company's ability to timely and
 effectively provision new customers; technological, regulatory or other
 developments in the industry; and the ability to develop and maintain
 efficient billing, customer service and information systems.  Additional
 factors are set forth in the Company's SEC reports, including but not limited
 to the Annual Report on Form 10-K for the year ended December 31, 2000.  The
 Company does not undertake any obligation to update or revise any
 forward-looking statement made by it or on its behalf, whether as a result of
 new information, future events or otherwise.
 
 
                     ALLEGIANCE TELECOM, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (Dollars in thousands, except share and per share amounts)
 
                                            Three Months         Three Months
                                               Ended                 Ended
                                           March 31, 2001       March 31, 2000
                                             (unaudited)          (unaudited)
 
      Revenues                                $105,874              $47,161
      Network Costs                             51,228               27,120
        Gross Margin %                            51.6%                42.5%
 
      Selling, General and
       Administrative                           84,622               47,991
      Depreciation, Amortization and
       Noncash Compensation                     57,417               25,780
 
          Loss From Operations                 (87,393)             (53,730)
 
      Other Income (Expense)
        Interest Income                          7,048               13,454
        Interest Expense                       (15,995)             (20,994)
          Other Income (Expense), net           (8,947)              (7,540)
 
      Net Loss Applicable to Common
       Stock                                  $(96,340)            $(61,270)
 
      Net Loss Per Share, basic and
        diluted (A)                             $(0.87)              $(0.59)
 
      Weighted Average Shares
       Outstanding,
        basic and diluted (A)              111,058,599          104,095,622
 
      Other Financial Data:
      EBITDA (B)                              $(29,976)            $(27,950)
      Capital Expenditures                     120,483              102,533
 
     Notes:
     (A) The basic and diluted net loss per share reflect the three-for-two
         stock split, which occurred on February 28, 2000.
     (B) EBITDA excludes non-cash compensation expense.
 
 
                     ALLEGIANCE TELECOM, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                   (Dollars in thousands, except share amounts)
 
                                            March 31, 2001  December 31, 2000
                                             (unaudited)
                                      ASSETS
          CURRENT ASSETS:
       Cash, cash equivalents, and short-
        term investments (A)                    $510,093          $670,911
       Other current assets                      119,548            99,366
        Total current assets                     629,641           770,277
 
      PROPERTY AND EQUIPMENT
       Property and equipment                  1,045,456           907,182
       Accumulated Depreciation                 (198,704)         (162,279)
       Total property and equipment, net         846,752           744,903
 
      NON-CURRENT ASSETS (B)                     178,290           153,659
 
      TOTAL ASSETS                            $1,654,683        $1,668,839
 
 
                       LIABILITIES AND STOCKHOLDERS' EQUITY
 
      CURRENT LIABILITIES                       $149,793          $139,070
 
      LONG-TERM DEBT                             576,303           566,312
 
      OTHER LONG-TERM LIABILITIES                  7,348             4,972
 
      STOCKHOLDERS' EQUITY                       921,239           958,485
 
      TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY                                 $1,654,683        $1,668,839
 
      COMMON SHARES OUTSTANDING              113,020,934       110,059,681
 
     Notes:
     (A) Includes restricted short-term investments of $13,129 and $12,952 at
         March 31, 2001 and December 31, 2000, respectively.
     (B) Includes restricted long-term investments of $829 at March 31, 2001
         and December 31, 2000.
 
 
                        Selected Operational Statistics
 
                 As of            As of           As of           As of
                March 31,       December 31,   September 30      March 31
                  2001             2000            2000            2000
 
      Markets
       Served   New York         New York        New York        New York
                Dallas           Dallas          Dallas          Dallas
                Atlanta          Atlanta         Atlanta         Atlanta
                Fort Worth       Fort Worth      Fort Worth      Fort Worth
                Los Angeles      Los Angeles     Los Angeles     Los Angeles
                Chicago          Chicago         Chicago         Chicago
                Boston           Boston          Boston          Boston
                Oakland          Oakland         Oakland         Oakland
                San Francisco    San Francisco   San Francisco   San Francisco
                Philadelphia     Philadelphia    Philadelphia    Philadelphia
                Washington,D.C.  Washington,D.C. Washington,D.C.Washington,D.C.
                San Jose         San Jose        San Jose        San Jose
                Orange County    Orange County   Orange County   Orange County
                Houston          Houston         Houston         Houston
                No. New Jersey   No. New Jersey  No. New Jersey  No. New Jersey
                Long Island      Long Island     Long Island     Long Island
                San Diego        San Diego       San Diego       San Diego
                Detroit          Detroit         Detroit         Detroit
                Baltimore        Baltimore       Baltimore       Baltimore
                Denver           Denver          Denver          Denver
                St.Louis         St. Louis       St. Louis
                Cleveland        Cleveland       Cleveland
                Seattle          Seattle         Seattle
                Miami            Miami           Miami
                Minneapolis/     Minneapolis/    Minneapolis/
                 St.Paul          St. Paul       St. Paul
                Phoenix          Phoenix
                Tampa            Tampa
                San Antonio
                Ft.Lauderdale
 
     # of Markets      29              27              25              20
 
     # of Switches     27              26              24              16
 
     Central Offices
     Collocated       687             636             552             395
 
     Addressable Markets (Lines)
     via
      Collocated
       Co's   17,810,000      16,460,000      14,730,000      11,800,000
 
     Sales
      Headcount    1,471           1,333           1,231             905
 
     Total
      Headcount    3,834           3,249           2,936           2,038
 
     Lines
      Installed   733,900         607,700         499,700         314,300
 
     * Note: Sales Headcount includes Sales Team Managers, Account Executives
     and Sales Administrators
 
                            ALLEGIANCE TELECOM, INC.
                              PERFORMANCE METRICS
 
                                                         Actual
                                                          1999
                                             1Q       2Q       3Q       4Q
 
     Gross Margin %                          24.0%    28.2%    43.0%    39.2%
 
     SG&A as % of Rev                       276.0%   173.4%   125.5%   107.4%
     EBITDA as % of Rev                    -252.0%  -145.2%   -82.6%   -68.2%
 
     Annualized ($ in 000's)
     Average Revenue per Employee            $51.4    $65.8    $92.8    $95.0
     SG&A per Employee                       141.8    114.2    116.5    102.0
     EBITDA per Employee                    (129.5)   (95.6)   (76.6)   (64.8)
     EBITDA per Line                          (1.7)    (1.0)    (0.6)    (0.5)
     Cum. Capital Expenditures per Line        3.1      2.7      2.2      1.9
 
     Monthly:
     Average Revenue per Line               $51.76   $58.01   $70.46   $61.92
     Network Expense per Line                39.34    41.63    40.17    37.66
     SG&A per Line                          142.86   100.62    88.46    66.49
 
 
                            ALLEGIANCE TELECOM, INC.
                              PERFORMANCE METRICS
 
                                                  Actual                 Actual
                                                   2000                   2001
                                    1Q       2Q       3Q        4Q         1Q
 
     Gross Margin %                42.5%    45.1%    47.7%     50.4%      51.6%
 
     SG&A as % of Rev             101.8%    90.0%    87.2%     81.8%      79.9%
     EBITDA as % of Rev           -59.2%   -44.9%   -39.6%    -31.5%     -28.3%
 
     Annualized ($ in 000's)
     Average Revenue per Employee  $98.7   $109.9   $116.7    $122.9    $119.6
     SG&A per Employee             100.5     98.9    101.9     100.6      95.6
     EBITDA per Employee           (58.5)   (49.4)   (46.2)    (38.7)    (33.9)
     EBITDA per Line                (0.4)    (0.3)    (0.3)     (0.2)     (0.2)
     Cum. Capital Expenditures
       per Line                      1.8      1.6      1.6       1.5       1.4
 
     Monthly:
     Average Revenue per Line     $56.55   $58.17   $58.79    $57.21    $52.61
     Network Expense per Line      32.49    31.94    30.76     28.40     25.46
     SG&A per Line                 57.55    52.35    51.30     46.82     42.05
 
 
                            ALLEGIANCE TELECOM, INC.
                              MARKET FINANCIAL DATA
                             (Dollars in thousands)
                                   (Unaudited)
 
     FIRST 9 MARKETS (A)
                                                      Actual
                                                       1999
                                         1Q         2Q         3Q         4Q
 
     LINES IN SERVICE                  70,939    100,118    138,148    182,151
 
     REVENUE
       Local Service                  $15,927    $19,812    $23,999    $28,162
       Long Distance                      423        567        724        856
       Data                               393        674      1,843      2,696
       Total Revenue                  $16,743    $21,054    $26,565    $31,715
 
     GROSS MARGIN %                     39.5%      40.7%      49.5%      52.7%
 
     PRE-OVERHEAD EBITDA (B)          ($5,045)   ($4,875)   ($2,385)      $475
 
     PRE-OVERHEAD EBITDA %             -30.1%     -23.2%      -9.0%       1.5%
 
 
     ADDRESSABLE SWITCHED ACCESS
      LINES (C)                     4,561,531  5,370,951  5,923,239  6,468,292
 
     PENETRATION %                       1.6%       1.9%       2.3%       2.8%
 
                            ALLEGIANCE TELECOM, INC.
                              MARKET FINANCIAL DATA
                             (Dollars in thousands)
                                   (Unaudited)
 
     EARLY 9 MARKETS (A)
 
                                              Actual                    Actual
                                               2000                      2001
                           1Q         2Q         3Q         4Q            1Q
 
     LINES IN SERVICE    228,208    274,740    316,592    376,046      425,380
 
     REVENUE
       Local Service     $34,951    $39,142    $43,155    $46,088      $48,752
       Long Distance       1,287      1,582      2,144      2,553        2,879
       Data                4,956      6,446      7,963     10,413       12,537
       Total Revenue     $41,193    $47,169    $53,261    $59,054      $64,168
 
     GROSS MARGIN %         55.4%      54.7%      56.3%      57.1%        59.0%
 
     PRE-OVERHEAD
       EBITDA (B)         $4,922     $6,738     $9,103    $11,599      $14,323
 
     PRE-OVERHEAD
      EBITDA %              11.9%      14.3%      17.1%      19.6%        22.3%
 
 
     ADDRESSABLE SWITCHED ACCESS
      LINES (C)        6,990,236  7,556,349  7,887,217  8,051,487    8,383,468
 
     PENETRATION %           3.3%       3.6%       4.0%       4.7%         5.1%
 
     Notes:
     (A) Includes New York, Dallas, Ft. Worth, Atlanta, Los Angeles, San
         Francisco, Chicago, Houston, and Boston.
     (B) Represents earnings before interest, taxes, depreciation and
         amortization before corporate overhead allocation.
     (C) Includes only lines on-switch.
 
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 SOURCE  Allegiance Telecom, Inc.