Move to Accelerate Allegiance's Data, DSL and Internet Service Offerings

DALLAS, TEXAS, July 25 -- Allegiance Telecom, Inc. (Nasdaq: ALGX) today announced that it has acquired CONNECTnet, an Internet Service Provider (ISP) based in San Diego, California. Terms of the deal were not disclosed.

Founded in 1995, CONNECTnet delivers high-speed Internet products and services to small and medium-sized businesses in the San Diego metropolitan area and Orange County, Calif. Its product line includes high-speed connections to the Internet, World Wide Web hosting, DSL connectivity, e-mail and collocation services. With more than 20 employees, CONNECTnet currently provides services to approximately 4,000 small and medium-sized business customers.

Headquartered in Dallas, Texas, Allegiance Telecom is a facilities-based competitive local exchange carrier (CLEC) offering businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. The Company is targeting 36 major metropolitan areas in the U.S. with its "one-stop shopping" approach. Allegiance is operational in 24 markets, including Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Worth, Houston, Long Island, Los Angeles, Miami, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, St. Louis, San Diego, San Francisco, San Jose, Seattle and Washington D.C.

"The vast potential of the Internet has already had a profound impact on our customers, an effect that will only increase as e-commerce proliferates," said Royce Holland, chairman and CEO of Allegiance Telecom, Inc. "CONNECTnet brings an extremely attractive customer base to Allegiance, serving small and medium-sized businesses over dedicated connections. CONNECTnet is also using DSL to deliver Internet services, complementing Allegiance's own DSL products. Combining CONNECTnet's service offerings, experience and strategy with ours will better position us to achieve our plan of offering a 'one-stop shop' to small and medium-sized businesses," he said.

"CONNECTnet has found it to be in the best interests of our customers, employees, and shareholders to join with an industry leader such as Allegiance Telecom," said Tim Sears, chief executive officer of CONNECTnet. "The need for us to expand our facilities and geographical coverage lead us to partnering with a company that brings substantial assets to the table. With expertise in both the voice and data side of the business and a robust entrepreneurial tradition, we will be a service leader in this exciting market space."

Based in Dallas, Texas, Allegiance's web address is: www.allegiancetele.com. The Company's common stock is traded on the Nasdaq National Market under the symbol ALGX.