• Revenues of $47.2 million — Increased by 20 Percent Compared With 4Q99 and 370 Percent Compared with 1Q99
• New Installs of 72,600 Lines; New Orders of 95,600 Lines
• Total Lines in Service Increases to 314,300
• 68 New Collocations for a Total of 395, Addressing Approximately 11.8 Million Business Lines "On Switch"
• Service Initiated in Denver During the First Quarter
• Implementation of Electronic Bonding with Ameritech
• Deployment of Allegiance Enterprise Portal

"This quarter marks the eighth consecutive time Allegiance Telecom has met or exceeded major operational and financial targets," said Royce J. Holland, chairman and chief executive officer of Allegiance Telecom. "Our rapid growth of new line installations is the result of the continued automation and scale-up of our back office systems. A significant achievement during the quarter was the introduction of the Allegiance Enterprise Portal, the first phase of our on-line business center providing our customers with the tools they need to mine the riches of the Internet," he said.

Network Rollout

Network rollout proceeded on track, with 20 markets operational at the end of 1Q00 including Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Detroit, Fort Worth, Houston, Long Island, Los Angeles, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, San Diego, San Francisco, San Jose and Washington, D.C. The Company also initiated service in its 21^st market, St. Louis, during the first week of April 2000. Cleveland, Miami and Seattle are slated to begin service during the second quarter, completing Allegiance’s initial 24-market plan on schedule.

In early January 2000, Allegiance announced the addition of 12 new markets to its original market plan and the expansion of a number of existing networks. The Company expects to be operational in 27 markets by the end of 2000 and in 36 markets by the end of 2001.

Strong gains in the addressable market continued for Allegiance during the first quarter. As of the end of March, the Company was collocated in 395 central offices for unbundled loops, representing an addressable "on-switch" market of approximately 11.8 million local business access lines, an increase of 16.8 percent from 4Q99.

The expanded business plan calls for total central office collocations of 990 by the end of 2001. This represents a 33 percent increase over the original plan in the number of nonresidential access lines that can be addressed "on-switch" with our collocation footprint.

At the end of 1Q00, Allegiance had 16 switches in operation, supporting the following markets: Atlanta, Baltimore, Boston, Chicago, Dallas/Fort Worth (2), Denver, Detroit, Houston, Los Angeles/Orange County, New York/Northern New Jersey/Long Island (2), Philadelphia, San Diego, San Francisco/Oakland/San Jose and Washington, D.C. A St. Louis switch came on-line in early April 2000, and switches in Cleveland, Miami, and Seattle and second switches for Northern New Jersey and Orange County are on schedule for completion in 2Q00.

Financial and Operational Highlights

Allegiance again posted strong numbers for its sales efforts for the quarter, with lines sold increasing from 75,400 in 4Q99 to 95,600 lines in 1Q00, an increase of 26 percent compared with 4Q99. Lines installed also showed significant growth, with lines installed increasing from 60,300 in 4Q99 to 72,600 in 1Q00, a 20 percent increase in new installs compared to 4Q99.

Recruitment efforts continue to be successful, with the Company’s sales force (including managers) growing to 905 people, out of a total Allegiance employee base of 2,038 as of March 31, 2000. A cornerstone of Allegiance’s business plan is the continuing development of a strong and effective direct sales force in each of the Company’s operational markets.

For the first quarter 2000, Allegiance Telecom had consolidated revenues of $47.2 million, an annual increase of 370 percent from 1Q99. Gross margin continued to improve to 42.5 percent. 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 charge and non-cash deferred compensation expenses) loss of $28.0 million and capital expenditures of $102.5 million.

"During the first quarter, Allegiance Telecom used approximately $117.4 million of its cash and short-term investments to further fund its operations and capital expenditures related to switching platforms, collocations and its data network which support the Company’s product suite of local, long distance, data and Internet services," said Thomas M. Lord, executive vice president of corporate development and chief financial officer. "At March 31, 2000, Allegiance had more than $1.1 billion of unrestricted cash and short-term investments."

Implementation of Electronic Bonding with Ameritech

Another electronic bonding agreement with an incumbent local exchange carrier (ILEC) was completed during the quarter. In March 2000, Allegiance announced a completed electronic gateway arrangement linking Allegiance operations support systems (OSS) with Ameritech for the provisioning of unbundled loops. This was Allegiance’s fourth electronic bonding arrangement with an ILEC. The Company considers these milestones to be critical to its continuing success because these electronic links improve accuracy in the ordering and provisioning process and reduce order installation times.

Allegiance Telecom’s electronic bonding model, first initiated with Bell Atlantic-North in January 1999, is a nationwide template for automating the processing of local service requests (LSRs) between CLECs and ILECs.

Allegiance On-line Business Center

The Allegiance Enterprise Portal, a customized Internet business gateway developed through a strategic alliance with Go2Net, Inc., was unveiled during 1Q00. As the first phase of the Allegiance On-line Business Center, the portal provides a comprehensive Internet start page for Allegiance customers, incorporating customizable news, communication services (including e-mail, calendaring and instant messaging) and financial information. It provides direct access to branded finance, search and small business offerings.

Development is nearing completion on the second phase of the Allegiance On-Line Business Center, which will be rolled out in the second quarter. This phase includes: (1) The Allegiance Small Business Resource Center which includes links to business, legal and financial tools and on-line access to business-to-business suppliers; and (2) a business-to-business e-commerce platform with the ability to do on-line transaction processing. The third phase, which includes application hosting, virtual private networks and other advanced Internet applications tailored to the small and medium-sized business market, will be deployed in 3Q00.

"The creation of a robust roadmap for e-commerce applications charts a direct course for Allegiance Telecom to deliver a dynamic line of value-added business applications," said Dan Yost, Allegiance president and chief operating officer. "We’ve established a dedicated team based in San Jose, Calif., to drive our e-commerce offerings targeted to the underserved small and medium-sized business market. They are creating a unique combined local platform, web hosting centers and e-commerce offerings, all driven by high-speed DSL connection options. We are determined to take a leadership role in bringing these offerings to the small and medium-sized business market."

Regulatory Certifications

Allegiance Telecom is certified to provide competitive local exchange services in 16 states and the District of Columbia, including California, Colorado, Florida, Georgia, Illinois, New Jersey, New York, Maryland, Massachusetts, Michigan, Missouri, Ohio, Pennsylvania, Texas, Virginia and Washington State. Allegiance currently has applications for CLEC authority pending in Arizona, Minnesota and Indiana.

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 36 major metropolitan areas in the U.S. with its "one-stop shopping" approach. Allegiance Telecom is currently operational in the following 21 markets: Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Detroit, Fort Worth, Houston, Long Island, Los

Angeles, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, San Diego, San Francisco, San Jose, St. Louis and Washington, D.C. The Company’s web address is:

www.allegiancetele.com. Allegiance’s common stock is traded on the Nasdaq National Market under the symbol ALGX.

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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," "will be" and "plans" 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, the Company’s continued access to necessary capital and the potential adverse impact of state and federal regulatory developments. 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.