• 1Q02 Revenues of $162.1 Million, Resulting in Annual Increase of 53.1 Percent
• 18 Markets Pre-Overhead EBITDA1 Positive in 1Q02
• Company EBITDA Loss Margin Reduced to13.4 Percent in 1Q02 from 28.3 Percent in 1Q01
• 26 New Colocations for a Total of 815, Addressing Approximately 21.12 Million Business Lines "On-Switch"
• Record Gross Number of New Installs (200,000+) With Net Installs of 124,400 Lines
• Significantly Reduced Cash Burn; Cash On Hand End of 1Q02 Is $360 Million Vs. $399 Million At End of 4Q01

DALLAS, April 30, 2002 -- Allegiance Telecom, Inc. (Nasdaq: ALGX), an integrated communications provider (ICP), today announced results for its first quarter 2002. Allegiance reported first quarter revenues of $162.1 million, an increase of 6.8 percent compared with 4Q01 and 53.1 percent compared with 1Q01. EBITDA (earnings before interest, taxes, depreciation and amortization, excluding management ownership allocation charge and non-cash deferred compensation expenses) loss margins also improved significantly to 13.4 percent with a consolidated EBITDA loss of $21.8 million for 1Q02.

"Allegiance Telecom's performance in the first quarter was solid given current economic conditions, but we believe there is still plenty of room for improvement," said Royce J. Holland, chairman and CEO of Allegiance Telecom. "On the plus side, we once again saw top line growth in excess of 50 percent on an annual basis and had a record quarter for adding new customers with more than 200,000 gross new line installs. Reducing customer account churn is a major priority in the second quarter since churn in excess of plan resulted in net installs being about 12 percent below plan during 1Q02."

"Due to Allegiance Telecom's increasing mix of integrated access lines, as well as a get-well program to fix some process deficiencies in billing disputes, trouble ticket resolution and collections, I expect us to get the churn rate back within budget over the next few months," he said.

36-City Network
Allegiance Telecom's U.S. markets include: Atlanta, Austin, Baltimore, Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Lauderdale, Fort Worth, Houston, Long Island, Los Angeles, Miami, Minneapolis/St. Paul, New York, Northern New Jersey, Oakland, Ontario/Riverside CA, Orange County, Philadelphia, Phoenix, Pittsburgh, Portland, Sacramento, St. Louis, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa, Washington D.C., West Palm Beach/Boca Raton and White Plains, NY.

Allegiance Telecom increased its addressable market during 1Q02, adding 26 new colocations. At the end of March, the Company was colocated in 815 central offices for unbundled loops, representing an addressable "on-switch" market of approximately 21.12 million local business access lines.

Allegiance has 31 telecommunications switches in operation, supporting the following markets: Atlanta, Austin, Baltimore, Boston, Chicago, Cleveland, Dallas & Fort Worth (2), Denver, Detroit, Houston, Los Angeles, Miami & Ft. Lauderdale & West Palm Beach/Boca Raton, Minneapolis/St. Paul, New York & Long Island & White Plains (2), Northern New Jersey, Orange County & Ontario/Riverside, Pittsburgh, Philadelphia, Phoenix, Portland, Sacramento, St. Louis, San Antonio, San Diego, San Francisco & Oakland, San Jose, Seattle, Tampa and Washington, D.C.

Financial and Operational Highlights
Allegiance Telecom posted a sales increase for the quarter, with lines sold increasing from 190,000 lines in 4Q01 to 210,000 in 1Q02, an increase of 10.5 percent compared with 4Q01 and an increase of 26.6 percent compared with 1Q01. Gross lines installed for 1Q02 were more than 200,000 - a new quarterly record - and net lines installed during the quarter totaled 124,400. Net lines installed were about 12 percent lower than expected, primarily due to customer account churn. Allegiance Telecom has established programs to further improve and streamline processes in billing disputes, trouble ticket resolution and collections to reduce future churn. Average revenue per line increased to $50.16 in 1Q02 from $50.08 in 4Q01.

EBITDA loss as a percent of revenue for the first quarter 2002 was 13.4 percent versus 18.2 percent in 4Q01 and 28.3 percent for 1Q01.

"Allegiance Telecom significantly reduced its cash burn in the quarter, using approximately $67.3 million of its cash and short-term investments during the first quarter to fund its operations, capital expenditures and service its indebtedness. This represents a reduction of $28.6 million from the $95.9 million used to fund operations, capital expenditures and service indebtedness in the 4Q01. Furthermore, due to favorable variances in working capital changes, a tighter focus on spending, flat head count, and a strong performance in turning receivables into cash, our cash position declined by only $39.3 million. Capital expenditures were held to $39.8 million in 1Q02," said Thomas M. Lord, Allegiance executive vice president of corporate development and chief financial officer. "At March 31, 2002, Allegiance had aundrawn committed credit facility of $150 million and approximately $360 million of cash and short-term investments. This figure reflects the considerable decline in Allegiance Telecom's quarterly cash consumption," he said. "Additionally, Allegiance's borrowing costs for its senior secured credit facility dropped from 6.28 percent to 5.53 percent effective March 19, 2002."

"For the first time in the history of the company, the number of net installs for integrated access and other T-1 delivered voice and data services exceeded the net installs for unbundled network element (UNE) loop services. We expect integrated access to remain Allegiance Telecom's fastest growing product, continuing to make rapid gains in terms of our base of lines," said Tony Parella, executive vice president of Allegiance Telecom.

Days sales outstanding (DSOs) for 1Q02 was 82.9 days, a reduction of 1.1 days from the 84.0 days in 4Q01 and an improvement of 11.6 days compared with the 94.5 days from 1Q01.

Early Markets Continue To Demonstrate Move Toward Profitability
To demonstrate its progress toward profitability, Allegiance Telecom began reporting operating results in 4Q00 for nine of its markets that began service in 1998 or early 1999 that became pre- overhead EBITDA positive during the fourth quarter (before corporate overhead allocation). These nine markets were Dallas, New York, Atlanta, Fort Worth, Chicago, Los Angeles, San Francisco, Boston and Houston. In the first quarter of 2001, Philadelphia and San Diego turned pre-overhead EBITDA positive, as did Baltimore and San Jose during the second quarter. During 3Q01, Orange County became pre-overhead EBITDA positive; Northern New Jersey and Denver joined the club in 4Q01. Two additional markets, Detroit and Phoenix, became pre-overhead EBITDA positive during 1Q02, bring Allegiance's total to 18 markets that have reached the benchmark.

More information on the performance of these 18 markets is included in the 2002 1st Quarter Balance Sheet.

Regulatory Certifications
Allegiance Telecom is certificated to provide local exchange services in 24 states and Washington D.C., including Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, New Jersey, New York, Maryland, Massachusetts, Michigan, Missouri, Nevada, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Virginia, Washington State and Wisconsin.

Corporate Background
Based in Dallas, Allegiance Telecom is a facilities-based integrated communications provider (ICP) offering businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. Allegiance is currently operational in 36 U.S. markets. Allegiance's common stock is traded on the Nasdaq National Market under the symbol ALGX.

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," "plans," "will be" and "forecasts" and similar words or expressions identify forward-looking statements made by or on behalf of the Company. These forward-looking statements were derived using numerous assumptions and are subject to many uncertainties and factors that may cause the actual results of the Company to be materially different from those stated in such forward-looking statements. Examples of such uncertainties and factors include, but are not limited to, the Company's ability to timely and effectively provision new customers; the Company's ability to retain existing customers; the Company's ability to obtain additional financing should it be necessary to do so; the Company's ability to develop and maintain efficient billing, customer service and information systems; and technological, regulatory or other developments in the industry and general economy that might adversely affect the Company. Additional factors are set forth in the Company's SEC reports, including but not limited to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 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.

¹ EBITDA means earnings before deducting interest, taxes, depreciation, amortization, management ownership allocation charges and non-cash deferred compensation expenses and is not derived pursuant to generally accepted accounting principles, and therefore should not be construed as an alternative to operating income (loss), as an alternative to cash flows from operating activities, or as a measure of liquidity.