DALLAS, TX, July 1, 1998 -- Allegiance Telecom, Inc. announced today that it has priced its initial public offering of 10 million shares of common stock at $15 per share and $205 million of its 12 7/8 % Senior Notes due 2008.

The common stock offering will result in net proceeds to the Company of approximately $140 million, not including the proceeds from any exercise of the overallotment option. The common stock will be traded on the Nasdaq National Market under the symbol ALGX. The common stock offering was made through Morgan Stanley Dean Witter, Salomon Smith Barney, Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co. and UBS Securities.

The Senior Note offering will result in net proceeds to the Company of approximately $125 million, including approximately $70 million of proceeds which will be placed in escrow to be used solely for payment of the first six scheduled interest payments on the Notes. The Senior Note offering was made through Morgan Stanley Dean Witter, Salomon Smith Barney, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co.

Allegiance Telecom is a competitive local exchange carrier headquartered in Dallas, Texas. The Company provides businesses with a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. Allegiance is targeting 24 major metropolitan areas with its "one-stop shopping" approach.

The offerings may be made only by a written prospectus meeting the requirements of Section 10 of the Securities Act of 1933 and this news release shall not constitute an offer to sell or the solicitation of an offer to buy. Copies of the prospectuses relating to the offerings can be obtained from Morgan Stanley Dean Witter, 1585 Broadway, New York, NY 10036 (telephone: 212-761-4000) and Salomon Smith Barney, Seven World Trade Center, New York, NY 10048 (telephone: 212-783-7000).