XO Holdings Reports Third Quarter 2009 Financial Results

HERNDON, VA, Nov 09 (MARKET WIRE) --
XO Holdings, Inc. (OTCBB: XOHO) today announced its third quarter 2009
financial and operational results, reporting a year-over-year increase in
revenue, adjusted EBITDA (a non-GAAP financial measure) and net income.

Adjusted EBITDA was $44.1 million in the third quarter of 2009, an
increase of $0.8 million compared to the same period last year. Net
income in the third quarter of 2009 was $19.0 million, an increase of
$42.3 million compared to the $23.3 million net loss reported for the
same period last year. The company's net income for the third quarter of
2009 principally resulted from gains of approximately $16.3 million from
the sale of marketable securities.

Total revenue for the third quarter of 2009 was $382.0 million, an
increase of $8.1 million, or 2.2%, compared to the same period last year.
Compared to the second quarter 2009, total revenue decreased by $3.6
million. This decline primarily resulted from actions undertaken by XO to
increase the margins in our wholesale Long Distance products. XO
incorporated new suppliers into our network, optimized our routing and
changed prices, including increases and decreases, all resulting in a net
reduction in long distance revenues and an increase in absolute margins.

"With ongoing emphasis on expanding our broadband products within key
market segments, we continue to make progress toward reaching XO's goals
for 2009," said Carl Grivner, Chief Executive Officer of XO. "We believe
the company is well-positioned to end the financial year on a strong note
and carry that momentum into the year ahead."

Third Quarter 2009 Financial Results

% Change
Q3 2009 -
($'s in millions) Q3 2009 Q2 2009 Q3 2008 Q3 2008
--------- --------- --------- ---------
Revenue $ 382.0 $ 385.6 $ 373.9 2.2%
--------- --------- --------- ---------
Adjusted EBITDA (1) $ 44.1 $ 37.1 $ 43.3 1.8%
--------- --------- --------- ---------
Adjusted EBITDA % (2) 11.5% 9.6% 11.6% -0.4%
--------- --------- --------- ---------
Net Income (Loss) (3) $ 19.0 $ (6.0) $ (23.3) 181.6%
--------- --------- --------- ---------
Capital Expenditures $ 57.2 $ 51.4 $ 56.5 1.2%
--------- --------- --------- ---------

(1) Adjusted EBITDA is a Non-GAAP financial measure. See the footnote
discussion accompanying the financial statements.
(2) Adjusted EBITDA % is adjusted EBITDA divided by revenue. See the
footnote discussion accompanying the financial statements.
(3) The company's net income for the third quarter of 2009 principally
resulted from gains of approximately $16.3 million from the sale
of marketable securities.

Core Services

In the third quarter of 2009, the company's core offerings generated
$269.1 million in revenue, an increase of $17.9 million, or 7.1%, from
the same period last year. This revenue growth is partially offset by the
continued and expected decline in XO's traditional Legacy/TDM services,
which decreased $9.8 million, or 8.0%, compared to the same period last
year as well as the impact of the previously mentioned actions taken to
increase the margins in our wholesale Long Distance products.

Third Quarter 2009 Service Revenue

% Change
Q3 2009 -
($'s in millions) Q3 2009 Q2 2009 Q3 2008 Q3 2008
--------- --------- --------- --------
Core Broadband (1) $ 199.9 $ 195.4 $ 173.4 15.3%
--------- --------- --------- --------
Core Integrated Voice $ 69.2 $ 74.5 $ 77.8 -11.1%
--------- --------- --------- --------
Core Total $ 269.1 $ 269.9 $ 251.2 7.1%
--------- --------- --------- --------
Legacy TDM Services $ 112.9 $ 115.7 $ 122.7 -8.0%
--------- --------- --------- --------
Total Revenue $ 382.0 $ 385.6 $ 373.9 2.2%
--------- --------- --------- --------

(1) Formerly reported as "Core Data and IP Services"

Third Quarter Network and Operations Highlights

XO's results for the third quarter of 2009 are driven by the company's
continued focus on its best-in-class broadband offerings and
customer-centric approach. During the quarter, XO's Business Services and
Carrier business units implemented several product and network upgrades,
reached high-growth industry segments and equipped customers with a broad
range of innovative broadband solutions.

During the third quarter of 2009, XO Business Services focused on
enhancing its product set and overall reach. It expanded its domestic and
international MPLS IP-VPN capabilities via two partner agreements, thereby
ensuring XO coverage in all 50 states and 22 countries on five continents.
Additionally, XO launched several enhancements to its business VoIP
offerings to simplify and streamline communications for multi-location
enterprises. The upgrades included expanded nationwide coverage,
innovative business continuity features, as well as a greater range of
interoperable IP-PBX platforms and SIP deployments.

From a wholesale standpoint, XO Carrier launched Ethernet Everywhere, a
service availability guarantee ensuring its carrier customers can obtain
Ethernet service anywhere within XO's coverage area. This service
guarantee is the first of its kind by any nationwide service provider. XO
also completed its third major nationwide network capacity upgrade by
deploying Infinera's ILS2 line system. This long-haul expansion more than
doubles XO's inter-city transport network capacity and addresses wholesale
customers' continuing demand for high-bandwidth transport options.

Finally, XO continued to receive national accolades for its innovative
information technology strategy. XO was ranked #14 on the InformationWeek
500, an annual listing of the nation's most innovative users of business
technology. Specifically, XO was recognized for its groundbreaking
workforce mobility initiative. The program integrated XO's customer
service, network and provisioning functions into one, easily-accessible
mobile interface thereby improving customer care response capabilities
and streamlining operations.

Corporate Highlights

Our primary capital needs are to finance the cost of operations, to
acquire capital assets in support of our operations, to fund the
redemption of our Class A preferred stock and to take advantage of
opportunities to enhance our competitive position. We believe that to
remain competitive with much larger telecom and cable companies, we will
require significant and additional capital expenditures to enhance and
operate our fiber network. We believe that cash on hand and operating
cash flow will be sufficient to finance our operational cash needs.
However, in order to maintain our competitive position, we intend to
raise additional capital and continue to explore various alternatives to
obtain additional capital. We continue to believe that these alternatives
should not include an issuance of high yield debt because such an issuance
would be deleterious to XOH for the following reasons: 1) the high cost
of such debt will negatively affect our ability to compete in the current
highly competitive telecommunications environment and 2) the unduly
burdensome restrictive covenants associated with such debt would impair
our ability to pursue potential strategic investments and to take
advantage of other opportunities which may be necessary for us to compete
in such environment. We believe that certain opportunities exist today in
the highly competitive CLEC industry that may not recur such as, but not
limited to, the acquisition of other CLECs. For all the above reasons, we
intend to seek to raise appropriate levels of capital in the near future.

On July 9, 2009, XO received a letter from ACF Industries Holding Corp.
("ACF Holding"), an entity wholly owned by Carl Icahn, the Chairman of the
company's Board of Directors, which owns the majority of the company's
common stock. The letter contained a non-binding proposal from ACF Holding
to acquire all of the company's outstanding common shares which ACF
Holding does not own, for consideration in the form of cash of $0.55 net
per share.

As reported in our recent 8-K filing, on September 28, 2009 the special
committee of the Board of Directors of XO Holdings, Inc. announced that it
has "unanimously concluded that the proposal of ACF Industries Holding
Corp., an affiliate of Carl C. Icahn and holder of a majority of the
shares of XO Holdings' common stock, to purchase all of the shares of XO
Holdings' common stock not currently held by ACF at a price of $0.55 per
share substantially undervalues the company, and, therefore, the special
committee does not support the proposal." The special committee
communicated to Mr. Icahn that it would consider a proposal that
recognizes the full value of the company and reflects the significant
benefits that would accrue to ACF as a result of full ownership. On
October 23, 2009, ACF sent a letter to the special committee pursuant to
which ACF made a non-binding proposal to increase its previously
outstanding offer to acquire all of the outstanding shares which it does
not own, to an aggregate of $0.80 net per share in cash. The offer made
on October 23, 2009 expired on October 26, 2009 at 6:00 pm (EST). The
Chairman and other related parties filed Amendment no. 22 to Schedule 13D
on November 9, 2009. Such amendment stated: "In the period following
October 26, 2009, the stated termination date of ACF Holding's $0.80 per
share offer, representatives of ACF Holding continued to discuss the
matter with members of the Special Committee and its advisors...
Representatives of ACF Holding pointed out that the CLEC industry faced
difficult times ahead and that ACF Holding believed that its offer of
$0.80 per share was fair, especially in light of the fact that it
required a majority of the minority stockholders to vote for it in order
to become effective. Representatives of ACF Holding also pointed out that
ACF Holding had raised its proposed merger price from $0.55 to $0.80 per
share without receiving a counteroffer. They also stated that the initial
offer was made when the market price for the Shares was under $0.30 per
share. In light of all of the above facts, ACF Holding is now terminating
its offer."

About XO Holdings

XO Holdings, Inc. (OTCBB: XOHO) is the holding company of XO
Communications, LLC (XOC).

XOC 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 and extensive local metro networks and broadband wireless
facilities, XOC offers customers a broad range of managed voice, data and
IP services in 75 metropolitan markets across the United States. For more
information, visit www.xo.com.

XO, XOptions, XOptions Flex and all related marks are either registered
trademarks or trademarks of XO Communications in the United States and/or
other countries.

Cautionary Language Concerning Forward-Looking Statements

The statements contained in this release that are not historical facts are
"forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. These statements include those describing our ability to
remain an industry leader, grow our broadband products within key market
segments, progress in meeting our goals for 2009, enhance our
communications solutions, broaden our customer reach, grow our revenues,
expand our market share, continue to deliver a broad range of
high-capacity network services and mid-band Ethernet services, pursue
growth opportunities, meet the growing demand for high-speed Internet
access services, scale to multi-terabit capable router nodes and generate
funds from operations or from future financing sufficient to fund our
business plan and repay our scheduled obligations. Management cautions
the reader that these forward-looking statements are only predictions and
are subject to a number of both known and unknown risks and
uncertainties, and actual results, performance, and/or achievements of
XOC may differ materially from the future results, performance, and/or
achievements expressed or implied by these forward-looking statements as
a result of a number of factors. Other factors to consider also include
the risk factors described from time to time in the reports filed by XO
Holdings, Inc. with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the year ended December 31, 2008 and its
quarterly reports on Form 10-Q. XO Holdings, Inc. undertakes no
obligation to update any forward-looking statements, except as otherwise
required by law.

This press release contains certain non-GAAP financial measures.
Reconciliations between the non-GAAP financial measures and the GAAP
financial measures are available below in the accompanying financial
statements.

Accompanying financial statements located
at
http://www.xo.com/about/Pages/investor.aspx

XO HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)

------------------------ ------------------------
Three Months Ended Nine Months Ended
------------------------ ------------------------
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Revenue: $ 382,000 $ 373,925 $ 1,145,448 $ 1,102,444

Cost of service
(exclusive of
depreciation and
amortization) 217,712 210,925 667,281 652,540
Selling, general and
administrative (1) 120,331 119,964 369,418 375,531
Depreciation and
amortization 43,288 47,847 129,593 140,515
Impairment of LMDS
Licenses - - 8,282 -
Loss (gain) on disposal
of assets 912 796 4,989 (37)
----------- ----------- ----------- -----------
Total costs and
expenses 382,243 379,532 1,179,563 1,168,549
----------- ----------- ----------- -----------
Loss from operations (243) (5,607) (34,115) (66,105)

Investment gain (loss),
net 16,271 (15,408) 34,291 (11,302)
Interest income 3,246 1,851 10,707 3,528
Other income - 3 - 255
Interest expense, net 310 (3,871) (951) (22,135)
----------- ----------- ----------- -----------

Net income (loss)
before income taxes 19,584 (23,032) 9,932 (95,759)

Income tax expense (552) (299) (1,362) (983)
----------- ----------- ----------- -----------

Net income (loss) 19,032 (23,331) 8,570 (96,742)

Preferred stock
accretion (19,942) (15,021) (59,325) (22,478)
----------- ----------- ----------- -----------

Net income (loss)
allocable to common
shareholders $ (910) $ (38,352) $ (50,755) $ (119,220)
=========== =========== =========== ===========

Net income (loss)
allocable to common
shareholders per
common share, basic $ (0.00) $ (0.21) $ (0.28) $ (0.65)
=========== =========== =========== ===========

Weighted average
shares, basic 182,075 182,075 182,075 182,075
=========== =========== =========== ===========

Total adjusted EBITDA
(2) $ 44,085 $ 43,325 $ 109,298 $ 75,558
=========== =========== =========== ===========

XO HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)

As of As of
September 30, December 31,
2009 2008
------------- -------------
(Unaudited)

Cash and cash equivalents $ 263,276 $ 256,747
Marketable and other securities 84,728 117,148
Accounts receivable, net 169,590 152,622
Other current assets 49,145 41,200
Property and equipment, net 741,597 724,404
Broadband wireless licenses and other
intangibles, net 45,233 53,515
Prepaid expenses and other assets, net 54,831 30,348
------------- -------------
Total assets $ 1,408,400 $ 1,375,984
============= =============

Accounts payable and other current
liabilities $ 299,656 $ 314,903
Other long-term liabilities 111,274 84,930
Class A convertible preferred stock 251,216 259,948
Class B convertible preferred stock 604,363 573,795
Class C perpetual preferred stock 217,983 200,877
Total stockholders' deficit (76,092) (58,469)
------------- -------------
Total liabilities, preferred stock and
stockholders' deficit $ 1,408,400 $ 1,375,984
============= =============

XO HOLDINGS, INC.
Reconciliation of Net Loss to Adjusted EBITDA
(Dollars in thousands)

---------------------------------- ----------------------
Three Months Ended Nine Months Ended
---------------------------------- ----------------------
September September September September
30, June 30, 30, 30, 30,
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Net income
(loss) before
income taxes $ 19,584 $ (5,476) $ (23,032) $ 9,932 $ (95,759)

Depreciation
and
amortization 43,288 42,910 47,847 129,593 140,515

Loss (gain) on
disposal of
assets 912 2,562 796 4,989 (37)

Impairment of
LMDS licenses - 8,282 - 8,282 -

Investment
(gain) loss,
net (16,271) (8,262) 15,408 (34,291) 11,302

Interest
(income)
expense, net (3,556) (3,079) 2,020 (9,756) 18,607

Other income - - (3) - (255)

---------- ---------- ---------- ---------- ----------
EBITDA 43,957 36,937 43,036 108,749 74,373

Stock-based
compensation 128 167 289 549 1,185

---------- ---------- ---------- ---------- ----------
Adjusted EBITDA
(2) $ 44,085 $ 37,104 $ 43,325 $ 109,298 $ 75,558
========== ========== ========== ========== ==========

(1) In the fourth quarter of 2008, the Company determined that during each
period between 2004 and the third quarter of 2008, it had incorrectly
calculated the net present value for its underutilized operating
leases. As a result, the Company's underutilized operating lease
liability was understated by $9.3 million as of September 30, 2008 and
the net loss was understated by an immaterial amount for the three
months ended September 30, 2008 and was understated by $0.8 million for
the nine months ended September 30, 2008. In addition, the Company
recorded an immaterial prior period adjustment in December 2008.
(2) Adjusted EBITDA is defined as net income or loss before depreciation,
amortization, (gain)/loss on disposal of assets, impairment of assets,
interest expense, interest income, investment gains or losses, income
tax expense or benefit, cumulative effect of change in accounting
principle, and stock-based compensation. Adjusted EBITDA is not
intended to replace operating income (loss), net income (loss), cash
flow, and other measures of financial performance reported in
accordance with generally accepted accounting principles in the United
States. Rather, Adjusted EBITDA is an important measure used by
management to assess operating performance of the Company. Adjusted
EBITDA as defined here may not be comparable to similarly titled
measures reported by other companies due to differences in accounting
policies. Additionally, adjusted EBITDA as defined here does not have
the same meaning as EBITDA as defined in our SEC filings.

Contact:
Courtney Harper/Cassidy Neveux/Charlotte Walker
Reputation Partners (for XO Communications)
T: 312-819-5722

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