• New Installs of 33,400 Lines; 95.5% Were "On-Switch"
• Total Lines in Service Increases to 81,100
• 51 New Collocations for a Total of 152
• 3 New Markets in Service for a Total of 12
• 96% of New Lines Sold Were "On-Switch"
• Annualized Revenue Run Rate of Nearly $95 Million
• DSL Rollout
• All Markets Fully Funded with $1 Billion in Liquidity

DALLAS, TEXAS, April 21, 1999 - Allegiance Telecom, Inc. (Nasdaq: ALGX), a competitive local exchange carrier (CLEC), today announced results for its first quarter. Allegiance reported first quarter revenues of $10 million, an increase of 79% over 4Q98 revenues of $5.6 million. Lines sold as well as lines installed continued to exceed plan, with new lines sold increasing from 43,100 in 4Q98 to 50,000 lines in 1Q99- 96% of the new lines sold were "on-switch." Lines installed also showed rapid growth, with new lines installed increasing from 21,800 in 4Q98 to 33,400 in 1Q99-95.5% of the new installs were "on-switch." Bookings through March 31, 1999 resulted in an annualized recurring revenue run rate of $95 million.

"I am extremely pleased with another quarter of outstanding execution of our business plan with two significant highlights: 1) our third consecutive quarter of approximately 50% growth in new lines installed; and 2) the overwhelming percentage of new installs and sales that are 'on-switch,'" said Royce Holland, chairman and chief executive officer of Allegiance Telecom. "On the financing front, April was highlighted by the closing of our $225 million senior secured revolving credit facility and an equity offering which brought in gross proceeds of $449.4 million. We are tremendously pleased to be fully funded for all 24 of our targeted markets and have one of the strongest financial positions in the industry."

"As part of our focus on providing small and medium sized businesses the tools to prepare for an e-commerce environment, we are poised to formally announce our entry into the DSL market tomorrow."

Network Rollout

Network rollout is proceeding on track, with 12 markets operational as of March 31, 1999, including Atlanta, Boston, Chicago, Dallas, Fort Worth, Los Angeles, New York, Oakland, Philadelphia, San Francisco, San Jose and Washington, D.C. Allegiance recently initiated service in the Houston metropolitan area. The Company also plans to initiate service in Orange County and Northern New Jersey in the second quarter of 1999.

Allegiance continued to see strong gains in its addressable market during the first quarter. As of March 31, 1999, the Company is collocated in 152 central offices for unbundled loops, with access to one additional central office for T1 hub service. This represents an addressable "on-switch" market of approximately 5.3 million local business access lines, an increase of 47% from 4Q98. In addition, Allegiance has 166 collocations that are in process.

At the end of 1Q99, Allegiance had nine switches in operation, supporting the following markets: Atlanta, Boston, Chicago, Dallas/Fort Worth, Los Angeles, New York, Philadelphia, Oakland/San Jose/San Francisco and Washington, D.C. Allegiance completed the installation of its Houston switch in April and is in the process of installing switches in Baltimore and San Diego, as well as second switches in Dallas and New York to expand capacity in these markets.

Financial and Operational Highlights

Allegiance again had significant success in its sales efforts, with lines sold increasing from 43,100 in 4Q98 to 50,000 lines in 1Q99, an increase of 16% over 4Q98. Lines installed also showed rapid growth, with lines installed increasing from 21,800 in 4Q98 to 33,400 in 1Q99, an increase of 51% over 4Q98. Bookings through March 31, 1999, resulted in an annualized recurring revenue run rate of nearly $95 million.

The Company's recruitment of its sales force remains on track. Sales force, including managers, grew to 408 people, out of a total Allegiance employee base of 908, as of March 31, 1999. Allegiance continues to believe that one of the keys to achieving its goals is the capturing and retaining of customers through a direct sales force.

Allegiance continues to use its capital to support the development of new markets, resulting in a first quarter EBITDA (earnings before interest, taxes, depreciation and amortization, excluding management ownership allocation charges and non-cash deferred compensation expenses) loss of $25 million and capital expenditures of $61 million.

Continued Increase of "On-Switch" Services

As switches are brought on stream and collocations achieved, the proportion of circuits initially provisioned on Allegiance facilities continues to increase -96% of the new installs were "on-switch," compared to 83% in 4Q98. In the first quarter, of the 50,000 lines sold, 96% were "on-switch," compared to 91% in 4Q98. In addition, 92% of the total lines sold were "on-switch," compared to a cumulative total of 78% at the end of 1998.

DSL Rollout

Allegiance is planning to formally announce its entry into the DSL market tomorrow at its analyst meeting in Dallas. The Company believes that with the scope of its existing networks, the number of collocations it has in service and its extensive direct sales force, it is well positioned to commercialize DSL and bring its customers the tools they need to prepare for an e-commerce environment.

Data and Internet Services Rollout

Allegiance continued to develop and rollout Internet and data services during the first quarter with its second phase offerings. The second phase of the product lines included deploying 56k business dial-up access products to all markets, bundling Internet access (dial-up and dedicated) with electronic mail, web site hosting and domain name service. In addition, dedicated access services were expanded, including providing on-line managed network services.

Further Implementation of Electronic Bonding

Allegiance has moved forward in implementing electronic bonding with an additional Bell company, Southwestern Bell. As expected, the project interval was reduced by 50%, compared to implementation with Bell Atlantic, since the electronic gateway had already been developed and tested. Allegiance is currently in the limited production phase with Southwestern Bell and expects to move into full production in May. As was true with Bell Atlantic, electronic bonding of Allegiance's back office system with Southwestern Bell in Texas gives Allegiance the ability to significantly reduce the amount of time from initial order entry to installation. Instead of taking approximately 25 business days for a customer to switch local carriers (without electronic bonding), electronic bonding is the key to shortening that timeframe to approximately five business days. Allegiance and Pacific Bell are discussing the possibility of using this same template to pass service requests between these parties.

The lack of electronic bonding between facilities-based carriers has been widely recognized as the principal bottleneck in realizing the competitive local service marketplace envisioned by the Telecommunications Act of 1996. Allegiance believes that its unprecedented arrangement will become a nationwide model for enhancing the ability of competitive carriers to process customer orders more swiftly and accurately.

Financing Update

"In April, Allegiance achieved a significant milestone with the closing of its $225 million senior secured revolving credit facility," said Tom Lord, executive vice president of corporate development and CFO for Allegiance Telecom. "This facility, which was syndicated through 16 financial institutions, was put in place to assure the Company had access to capital to continue funding its 24-market business plan. Interest rates under the facility are initially expected to be LIBOR +3.75%. Compared to a traditional high-yield debt offering, the Company believes it was able to save approximately 200-250 basis points. Additionally, since the Company does not currently need to draw the funds under this facility, we are able to avoid the negative carry associated with cash-pay high-yield bonds."

On April 20, 1999, Allegiance completed an equity offering of 14,676,000 shares, priced at $38 per share. The Company offered 11,826,000 shares and selling shareholders offered 2,850,000 additional shares. Net proceeds to Allegiance were $430.3 million and gross proceeds were $449.4 million. The total offering size, including the selling stockholder shares, was $557.7 million.

"This offering was the third largest ever for any CLEC, ICP, CAP or data CLEC since the competitive telecom industry's origin in the early 90s. For Allegiance to be fully funded with over $1 billion in capital raised is a significant event for the Company. With no financial impediments in place, we will aggressively deploy this capital to rapidly complete the build out of our 24-market business plan," Lord added.

Regulatory Certifications

Allegiance is certified to provide competitive local exchange services in the District of Columbia and 13 states, including California, Colorado, Georgia, Illinois, New Jersey, New York, Maryland, Massachusetts, Michigan, Pennsylvania, Texas, Virginia and Washington State.

Corporate Background

Allegiance Telecom, Inc. was founded in April 1997 by a management team led by Royce J. Holland, the former president and COO of MFS Communications Company, Inc., and Thomas M. Lord, former managing director of Bear, Stearns & Co. Inc., where he specialized in the telecommunications, information services and technology industries.

Allegiance offers businesses 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 in the U.S. with its "one-stop shopping" approach. The Company's web address is: www.allegiancetele.com.

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" and "will be" and similar words or expressions identify forward-looking statements made by or on behalf of the Company. These forward-looking statements are subject to many uncertainties and factors which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties and factors include, but are not limited to, the extent to which the Company can achieve "electronic bonding" with ILECs, the Company's ability to timely and effectively provision new customers and the Company's continued access to necessary capital. Additional factors are set forth in the Company's Annual Report on Form 10-K. 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.