• 1Q01 Revenues of $105.9 Million - Increased by 11 Percent Compared with 4Q00 and 124 Percent Compared with 1Q00
• Record Levels of Quarterly Installs and Orders -- New Installs of 126,200 Lines and New Orders of 165,900 Lines
• Total Lines in Service Increases to 733,900
• 11 Markets Pre-Overhead EBITDA Positive in 1Q01, Driving Overall Company EBITDA Loss Margin from 59.2 Percent in 1Q00 to 28.3 Percent in 1Q01
• 51 New Colocations for a Total of 687, Addressing Approximately 17.81 Million Business Lines "On-Switch"
• San Antonio and Ft. Lauderdale Service Initiated -- Allegiance Telecom's 28^th and 29^th Markets
• Web Hosting Business Unit Established to Focus on Small and Medium Sized Enterprise (SME) Market
• Electronic Bonding Arrangement with Qwest; 24 of 29 Current Allegiance Markets Now Covered

DALLAS, Apr. 24, 2001 -- Allegiance Telecom, Inc. (Nasdaq: ALGX), an integrated communications provider (ICP), announced first quarter 2001 revenues of $105.9 million, an increase of 11 percent as compared with 4Q00 and 124 percent compared with 1Q00. Lines sold as well as lines installed were quarterly records, with new lines sold increasing from 152,000 in 4Q00 to 165,900 lines in 1Q01. Lines installed also showed record growth, with new lines installed increasing from 108,000 in 4Q00 to 126,200 in 1Q01. To date, Allegiance has installed 733,900 lines of which 90 percent are "on-switch."

"Despite the negative financial market environment and the large number of technology and communications companies lowering their growth targets, we are pleased to announce that we have met or exceeded our key first quarter operating and financial metrics, " said Royce J. Holland, chairman and CEO of Allegiance Telecom. "I am especially pleased with the continuing growth and margin improvement in our nine early markets, and the fact that two additional markets, Philadelphia and San Diego, joined these nine markets in becoming pre-overhead EBITDA positive in the first quarter."

With the addition of San Antonio and Ft. Lauderdale in March, Allegiance's network rollout proceeded on track. The Company had 29 markets operational at the end of 1Q01 including Atlanta, 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, Orange County, Philadelphia, Phoenix, St. Louis, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa and Washington, D.C. Seven more markets are expected to become operational in 2001, bringing Allegiance's total to 36 markets.

Allegiance Telecom continued to post strong gains in its addressable market during the first quarter, adding 51 new colocations. At the end of March, the Company was colocated in 687 central offices for unbundled loops, representing an addressable "on-switch" market of approximately 17.81 million local business access lines.

Allegiance now has 27 switches in operation, supporting the following markets: Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas/Fort Worth (2), Denver, Detroit, Houston, Los Angeles, Miami/Ft. Lauderdale, Minneapolis/St. Paul, New York /Long Island (2), Northern New Jersey, Orange County, Philadelphia, Phoenix, St. Louis, San Antonio, San Diego, San Francisco/Oakland, San Jose, Seattle, Tampa and Washington, D.C.

Allegiance Telecom posted a strong sales increase for the quarter, with lines sold increasing from 152,000 lines in 4Q00 to 165,900 in 1Q01, an increase of 9 percent compared with 4Q00 and an increase of 74 percent compared with 1Q00. Lines installed also showed significant growth, with organic lines installed increasing from 108,000 in 4Q00 to 126,200 in 1Q01, a 17 percent increase in new installs compared to 4Q00 and an increase of 74 percent compared with 1Q00.

Effective personnel recruitment efforts resulted in Allegiance's sales force growing to 1,471 people, out of a total Allegiance employee base of 3,834 as of March 31, 2001. One of the key facets of the Company's business plan is the continuous building of an end user direct sales organization, bringing Allegiance products and services directly to customers in each of the Company's operational markets.

For the first quarter ended March 31, 2001, Allegiance Telecom had consolidated revenues of $105.9 million. This represents an increase of 11 percent as compared with 4Q00 and an increase of 124 percent over 1Q00. Allegiance continues to use its capital to support the development of new and existing 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 $29.9 million and capital expenditures of $120.5 million. The Company continued on its path to profitability with EBITDA loss as a percent of revenue for the quarter at 28.3 percent, versus 31.5 percent in 4Q00 and 59.2 percent for 1Q00.

Gross margin continues to improve; for 1Q01, Allegiance Telecom's gross margin was 51.6 percent, up from 50.4 percent in 4Q00.

"Allegiance Telecom used approximately $161 million of its cash and short-term investments during the first quarter to further expand its operations, capital expenditures related to switching platforms, colocations, construction of its SONET fiber networks and its data network -- which supports the Company's product suite of local, long distance, data and Internet services -- and acquisitions," said Thomas M. Lord, Allegiance executive vice president of corporate development and chief financial officer. "At March 31, 2001, Allegiance had an undrawn committed credit facility of $500 million and more than $510 million of cash and short-term investments. We believe that this liquidity fully funds Allegiance's 36-market business plan," he said.

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 and became pre-overhead EBITDA positive during the fourth quarter (before corporate overhead allocation). These nine markets are Dallas, New York, Atlanta, Fort Worth, Chicago, Los Angeles, San Francisco, Boston and Houston.

In 1Q01, the nine markets continued to show significant growth and margin improvements. New line installations increased by almost 50,000 lines, resulting in an improvement of about 13 percent compared with 4Q00 and 86 percent over 1Q00. Likewise, revenue increased to $64.2 million, an increase of about 9 percent compared with 4Q00 and 56 percent more than 1Q00. Gross margin improved to 59.0 percent of revenue. Pre-overhead EBITDA was a positive $14.3 million, representing a pre-overhead EBITDA margin of 22.3 percent versus 11.9 percent for 1Q00.

Two additional markets, Philadelphia and San Diego, also became pre-overhead EBITDA positive in the first quarter, for a total of 11 pre-overhead EBITDA positive markets.

"The continuing impressive performance of these nine markets in terms of revenue growth, and especially pre-overhead EBITDA margin growth, shows the Allegiance business plan is working as we intended," said Holland. "Allegiance Telecom continues its movement up the growth curve, cutting consolidated EBITDA loss margin from 59.2 percent in 1Q00 to 28.3 percent in 1Q01. As we progress in 2001, we expect to see additional markets turning pre-overhead EBITDA positive. This should diminish overall company EBITDA loss margin to the low teens by the end of the year, positioning Allegiance to turn EBITDA positive during 2002."

In mid-April, Allegiance announced the creation of a centralized Web hosting division. This new division is the result of the critical mass created by the growth in Allegiance's Internet and hosting business and acquisitions of several regional Internet service companies. It will focus on developing, marketing, and selling national Web hosting and Internet connectivity services primarily to the small and medium-sized enterprise (SME) market.

The new centralized Allegiance Web hosting division will market and sell its services, including a full-suite of shared, dedicated, managed and colocated hosting services and Internet connectivity services, under a separate brand.

Allegiance also announced it acquired Web hosting assets, including the customers and world-class Internet data center, of Medford, Mass.-based HarvardNet. In addition, Allegiance announced it acquired Adgrafix, a Web hosting services company headquartered in Sudbury, Mass. These new acquisitions solidify the East Coast footprint of Allegiance's new Web hosting division.

Mark Washburn, former HarvardNet president and CEO, joined Allegiance as senior vice president of Web hosting, responsible for operations of the newly created division. He reports to Dan Yost, Allegiance president and chief operating officer.

"The creation of this division, bolstered by these acquisitions, is value accretive to Allegiance with minimal impact on the company's short term EBITDA [earnings before interest, taxes, depreciation and amortization, excluding management ownership allocation charge and non-cash deferred compensation expenses] losses," said Yost. He stressed that all of these acquisitions provide significant cross-marketing and cross-selling opportunities for Allegiance's integrated package of voice and data communications services.

Allegiance Telecom and Qwest Communications International Inc. (NYSE:Q), announced the completion of electronic bonding between their operations support systems (OSS), reducing the time required to process customer orders for local telephone service requests.

Electronic bonding enables computers at different phone companies to communicate with each other in real-time, providing for rapid sharing of customer information, service requests and other data. This enables Allegiance to process orders quicker and at a lower cost to better serve their local customers. More important, electronic bonding with Qwest makes it easier for business customers in the Allegiance Telecom markets of Denver, Phoenix, Seattle and Minneapolis/St. Paul (and the soon-to-open Portland, Ore. market) to switch from one local service provider to another.

"This accomplishment builds on Allegiance Telecom's previously successful electronic bonding of OSS with Verizon in New York and Massachusetts, SBC in Texas and Missouri, Pacific Bell in California, Ameritech in Illinois, Michigan and Ohio, and BellSouth in Georgia and Florida," said Yost. "We've bonded electronically with Qwest for both local service requests (LSRs) for unbundled loops and access service requests (ASRs) for special access requests such as high capacity T-1 lines. Allegiance is LSR bonded in six regional Bell operating company regions, encompassing 24 of Allegiance's current 29 markets, and is ASR bonded in 100 percent of its current markets." Yost noted an electronic bonding arrangement with Verizon's southern region (including northern New Jersey, Philadelphia, Baltimore and Washington, D.C) is in testing and is expected to be announced during the second quarter.

Allegiance Telecom is certificated to provide competitive local exchange services in 24 states and the District of Columbia, 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.

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 29 U.S. markets including: Atlanta, 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, Orange County,

Philadelphia, Phoenix, St. Louis, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa and Washington D.C. The Company is targeting a total of 36 major metropolitan areas with its "one- stop shopping" approach. The Company's Web address is: www.algx.com.

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 which 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; technological, regulatory or other developments in the industry; and the ability to develop and maintain efficient billing, customer service and information systems. Additional factors are set forth in the Company's SEC reports, including but not limited to the Annual Report on Form 10-K for the year ended December 31, 2000. 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.