Primary Target of Salesforce is Small and Medium-Sized Businesses

DALLAS, TEXAS, December 21, 1998 - Allegiance Telecom, Inc. (Nasdaq: ALGX) announced today that it initiated service in the Oakland metropolitan area. The Company will serve the Oakland area through a facilities-based network, with services throughout the surrounding suburbs.

Allegiance is a competitive local exchange carrier (CLEC) 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 24 major metropolitan areas in the U.S. with its "one-stop shopping" approach. In addition to the Oakland area, Allegiance is operational in Atlanta, Chicago, Dallas, Fort Worth, Los Angeles, New York and San Francisco.

"Allegiance is excited to begin offering a reliable choice in telecom services to small and medium-sized businesses," said Tony Parella, National Vice President of Field Sales. "Allegiance will provide unique value by offering a 'one-stop shop' for all communication needs - packaged with consolidated billing arrangements and superior customer service. Users of voice, data and Internet services will now have an expanded choice for their communications needs, similar to the choices customers can now make when selecting a long distance phone company."

Initially, the Oakland salesforce will be located in Allegiance's downtown San Francisco office at 475 Sansome, Suite 2001.

Allegiance is a competitive local exchange carrier headquartered in Dallas, Texas. The Company's web address is www.allegiancetele.com. Allegiance's common stock is traded on the Nasdaq National Market under the symbol ALGX.

NOTE TO EDITOR: Royce Holland, chairman and CEO of Allegiance Telecom, was one of the original founders of MFS Communications Company, the first major competitor to the Bell System. As president of MFS, Holland was an industry leader in developing the competitive provisions of the Telecommunications Act of 1996, which opened the local exchange market to competition throughout the U.S. Under Holland's leadership, MFS grew from a privately held start-up operation to one of the Nasdaq 100 Index companies with annual revenue of approximately $1 billion and a market value of approximately $13 billion.