XO Holdings Reports Third Quarter 2010 Financial Results

Total revenue for the third quarter of 2010 was $385.7 million, an increase of $3.7 million, or 1%, compared to the year-ago period. Adjusted EBITDA was $60.8 million in the third quarter of 2010, an increase of $16.7 million, or 38%, compared to the year-ago period. Net income in the third quarter of 2010 was $12.4 million, a decrease of $6.6 million, or 35% compared to net income of $19.0 million in the third quarter of 2009. The company's net income for the third quarter of 2009 principally resulted from gains from the sale of marketable securities of approximately $16.3 million.

"Our strong year-over-year EBITDA expansion and continued revenue growth within our core Broadband offerings this quarter underscore that our long-term business plan is working," said Carl Grivner, chief executive officer of XO Holdings. "We remain focused on executing upon this strategy in the future."

The third quarter of 2010

In the third quarter of 2010, XO's Broadband offerings generated $228.8 million in revenue, an increase of $25.0 million, or 12%, from the year-ago period. This increase resulted from sustained growth in XO's diverse Broadband offerings, such as IP-VPN, IP Flex, Ethernet and Dedicated Internet Access services.

The revenue growth in XO's Broadband services is partially offset by the year-over-year decline in Integrated/Voice and Legacy/TDM services, such as carrier long distance termination services. Revenue for Integrated/Voice services during the third quarter of 2010 was $51.7 million, a decrease of $13.6 million, or 21%, compared to the third quarter of 2009. Revenue for Legacy/TDM services during the third quarter of 2010 was $105.2 million, a decrease of $7.7 million, or 7%, compared to the year-ago period. This expected decline in Integrated/Voice and Legacy/TDM services reflects XO's ongoing strategy to shift away from traditional telecommunications services toward a broadband-driven business model.

The third quarter of 2010

During the third quarter of 2010, XO continued to execute upon its strategy of providing advanced communications solutions to wholesale and enterprise customers throughout the United States. From an operations standpoint, XO continued to implement its company-wide transformation plan, focused on enhancing network reach and capabilities, realizing operational efficiencies across the organization and accelerating revenue growth within its Broadband product set.

As part of this plan, XO significantly grew its market reach and expanded its network footprint across the United States during the third quarter. This included increasing its Ethernet over copper network by more than 30 percent, which expanded the company's coverage in 39 existing markets and enabled it to launch services in Charlotte, N.C., Buffalo and Rochester, N.Y. Additionally, XO expanded its network presence in the Los Angeles and Atlanta metropolitan areas. Through these network enhancements, XO is now well-positioned to deliver Ethernet services to nearly four million buildings and as many as ten million business locations within the U.S.

On October 8, 2010, XO Communications entered into a Revolving Promissory Note (the "Promissory Note") with Arnos Corp., an affiliate of Carl C. Icahn, the Chairman of XO's Board of Directors and majority shareholder, in which Arnos Corp. provided access to $50.0 million at an annual interest rate equal to the greater of LIBOR plus 525 basis points or 6.75%. The Promissory Note also includes a fee of 0.75% on undrawn amounts and matures on the earliest of (i) October 8, 2011, (ii) the date on which any financing transaction, whether debt or equity, is consummated by the company or certain of its affiliates in an amount equal to or greater than $50.0 million, or (iii) at the company's option, a date selected by the company that is earlier than October 8, 2011. As of November 15, 2010 no amounts have been drawn on this Promissory Note.

XO met its third quarter 2010 guidance and reiterates its previously stated full-year 2010 guidance for revenue, adjusted EBITDA and capital expenditures and updates its previously stated full-year 2010 guidance for the ending cash balance as follows:

XO is a leading provider of 21st century communications services for businesses and communications services providers, including 50 percent of the Fortune 500 and leading cable companies, carriers, content providers and mobile operators. Utilizing its unique and powerful nationwide IP network, extensive local metro networks and broadband wireless facilities, XO offers customers a broad range of managed voice, data and IP services in more than 80 metropolitan markets across the United States. For more information, visit www.xo.com.