• 4Q00 Revenues of $95 Million - Increased by 19 Percent Compared With 3Q00 and 142 Percent Compared with 4Q99
• Phoenix and Tampa Service Initiated -- Allegiance Telecom's 26^th and 27^th Markets
• Nine Markets Pre-Overhead EBITDA Positive in 4Q00, Driving Overall Company EBITDA Loss Margin from 68.2 Percent in 4Q99 to 31.5 Percent in 4Q00
• 2000 Year-End Revenue of $285 Million, 188 Percent Increase Compared With 1999
• Record Levels of Quarterly Installs and Orders -- New Installs of 108,000 Lines and New Orders of 152,000 Lines
• Total Lines in Service Increases to 607,700
• 84 New Collocations for a Total of 636, Addressing Approximately 16.46 Million Business Lines "On-Switch"
• CTSnet and Jump.Net Added as Subsidiaries in ISP/Web Hosting Arena
• Launched National Carrier Class Dial-IP Platform Utilizing Efficiencies of Softswitch Technology with Genuity Inc. as Lead Customer

DALLAS, Feb. 13, 2001 -- Allegiance Telecom, Inc. (Nasdaq: ALGX), an integrated communications provider (ICP), today announced results for its fourth quarter and year-end 2000. Allegiance reported fourth quarter revenues of $95 million, an increase of 19 percent compared with 3Q00. Lines sold as well as lines installed were quarterly records, with new lines sold increasing from 135,500 in 3Q00 to 152,000 lines in 4Q00. Lines installed also showed record growth, with new lines installed increasing from 91,900 in 3Q00 to 1058,000 in 4Q00. To date, Allegiance has installed 607,700 lines of which 90 percent were "on switch".

"These strong quarterly results complete a year 2000 performance highlighted by continuing explosive revenue growth with significant margin improvement, " said Royce J. Holland, chairman and CEO of Allegiance Telecom. "We expect to continue this winning combination of high octane growth and rapid network expansion with continued margin and EBITDA improvements in 2001. This rapid growth, in tandem with improved margins demonstrated in 2000 and forecasted in 2001, represents further validation of the strength of our business plan and ability to execute."

According to Holland, the Company expects 2001 to be another year of rapid revenue growth and network deployment with the following financial and operational targets:

• Revenue growth of more than 90 percent, resulting in a 2001 revenue target of approximately $550 million.
• Installation of more than 500,000-plus new lines, with a year-end 2001 total in excess of 1.1 million lines.
• Service initiation in the remaining nine markets of Allegiance's 36 market plan, and the addition of approximately 215 collocations.
• Activation of SONET fiber networks to replace leased capacity in at least 19 markets (fiber rings are already operational in Dallas, Houston and New York).
• Continued improvements in gross margins and EBITDA, with a capital expenditure budget of approximately $350 million.

Network Rollout Continues On Schedule

With the addition of new markets including Phoenix in October and Tampa in November, Allegiance's network rollout proceeded on track. The Company had 27 markets operational at the end of 2000 including Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Worth, Houston, Long Island, Los Angeles, Miami, Minneapolis/St. Paul, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, Phoenix, St. Louis, San Diego, San Francisco, San Jose, Seattle, Tampa and Washington, D.C. Nine more markets are expected to become operational in 2001, bringing Allegiance's total to 36 cities markets.

Allegiance Telecom continued to post strong gains in its addressable market during the fourth quarter, adding 84 new collocations. At the end of December, the Company was collocated in 636 central offices for unbundled loops, representing an addressable "on-switch" market of approximately 16.46 million local business access lines.

Allegiance now has 26 switches in operation, supporting the following markets: Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas/Fort Worth (2), Denver, Detroit, Houston, Los Angeles, Miami, Minneapolis/St. Paul, New York /Long Island (2), Northern New Jersey, Orange County, Philadelphia, Phoenix, St. Louis, San Diego, San Francisco/Oakland, San Jose, Seattle, Tampa and Washington, D.C.

Financial and Operational Highlights

Allegiance Telecom again posted a strong sales increase for the quarter, with lines sold increasing from 135,500 lines in 3Q00 to 152,000 in 4Q00, an increase of 12 percent compared with 3Q00 and an increase of 102 percent compared with 4Q99. Lines installed also showed significant growth, with organic lines installed increasing from 91,900 in 3Q00 to 108,000 in 4Q00, an 18 percent increase in new installs compared to 3Q00 and an increase of 79 percent compared with 4Q99.

For the fourth quarter and for the year ended December 31, 2000, Allegiance Telecom had consolidated revenues of $95 million and $285 million, respectively. This represents an increase of 19 percent as compared with 3Q00 and an annual increase of 188 percent over 1999. Allegiance continues to use its capital to support the development of new markets, resulting in a fourth 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 $101.8 million. The Company continued on its path to profitability with EBITDA loss as a percent of revenue for the quarter at 31.5 percent, versus 39.6 percent in 3Q00 and 68.2 percent for 4Q99. For the full year 2000, Allegiance posted an EBITDA loss of negative $117.9 million and total capital expenditures of $445.52 million.

Gross margin continues to improve; for 4Q00, Allegiance Telecom's gross margin was 50.4 percent, up from 47.7 percent in 3Q00.

"Allegiance Telecom used approximately $185.2 million of its cash and short-term investments during the fourth quarter to further expand its operations, capital expenditures related to switching platforms, collocations, 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 December 31, 2000, Allegiance had an undrawn committed credit facility of $500 million and more than $670 million of cash and short-term investments. We believe that this liquidity fully funds Allegiance's 36-market business plan."

Early Markets Demonstrate Significant Strides Toward Profitability

To demonstrate its progress toward profitability, Allegiance Telecom is reporting operating results for nine of its markets that began service in 1998 or early 1999 and achieved positive pre-overhead EBITDA 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 4Q00, the nine markets achieved revenue of $59 million, with a gross margin of 57.1 percent. Pre-overhead EBITDA was a positive $11.6 million, representing a pre-overhead EBITDA margin of 19.6 percent versus 1.5 percent for 4Q99.

Market penetration in the nine markets increased to 4.7 percent based on addressable switched access lines. Based on a rough estimate of ILEC total equivalent access lines (see Note 1), Allegiance's market share in the nine markets is estimated in 2.5 to 3.0 percent range.

"The success of these nine markets in terms of revenue growth, and especially pre-overhead EBITDA margin growth, clearly demonstrates the leverage in the Allegiance business plan and provides a clear path to profitability for the Company," said Holland. "Despite continued explosive growth, Allegiance cut consolidated EBITDA loss margin by more than half during 2000 to 31.5 percent in the fourth quarter. In 2001, we expect to see other markets turning pre-overhead EBITDA positive, thereby driving the overall company EBITDA loss margin to the low teens by the end of the year and positioning Allegiance to turn EBITDA positive during 2002."

Two ISPs Become Part of Allegiance Telecom

Allegiance announced it has added CTSnet, a San Diego, California-based Internet service provider (ISP) supplying Internet access, Web hosting and collocation services, and Jump.Net, an Austin, Texas-based ISP and collocation provider, as wholly-owned subsidiaries. Terms of the agreements were not disclosed.

Founded in 1993, CTSnet (www.cts.com) is a pioneer one of the oldest and most prominent among Internet providers in Southern California. The former wide-area networking division of Datel Systems, Inc. provides Internet access and related services. CTSnet has 60 employees who have become employees of access and related services. CTSnet has 60 employees who have all become employees of Allegiance Telecom. As one of the oldest and most prominent companies in the Southern California online market, CTSnet is a leading regional provider of Internet services in San Diego County. Allegiance Telecom. As a pioneer in the Southern California online market, CTSnet is a leading regional provider of Internet services in San Diego County. Whether customers need basic access, DSL (digital subscriber line), T-1, T-3, or collocation, CTSnet helps them find the right solution for their online requirements.

Based in northwest Austin for more than five years, Jump.Net (www.jump.net) has carved a market niche with reliable Internet connectivity, enhanced Internet services and top-notch technical support to subscribers, Web hosting and collocation customers nationwide. As the newest member of the Allegiance Telecom portfolio of companies, Jump.Net will continue to offer its suite of products and services with its existing management team and employees. Jump.Net has 75 employees who have become employees of Allegiance Telecom.

One of Texas' original digital subscriber line (DSL) providers, Jump.Net is one of the few providers in Texas to offer a 100 percent reliability guarantee across all service areas. "Both CTSnet and Jump.Net have extensive experience with broadband access and server collocation technologies, making them an excellent fit with Allegiance's growth and expansion plans," said Dan Yost, President and COO of Allegiance Telecom. 'In combination with several recent additions of similar Internet service companies, Allegiance is even better positioned to provide extensive Internet, Web hosting and e-commerce services for our target market of small and medium-sized businesses."

"By joining with an industry leader such as Allegiance Telecom, CTSnet has the ability to broaden our product offerings and better service our customers' needs," said Bill Blue, co-founder of CTS. "Increased demand for expanded hosting facilities led us to partner with a company that brings substantial assets to the table. Allegiance's capabilities and resources fortifies CTSnet's leadership throughout Southern California."

"We look forward to expanding Jump.Net with Allegiance's extensive resources and capabilities," said Kenneth Smith, co-founder of Jump.Net. "This relationship has tremendous positive implications and mutual benefits for the growth and product diversity of both companies."

Debut of National Carrier Class Dial-IP Platform Applying Softswitch Technology

Allegiance announced it has launched a national carrier class dial-IP platform utilizing the efficiencies of softswitch technology. This new platform is able to segregate data calls from the voice switched network, increasing the reliability of data communications. As data traffic is separated, capacity on Allegiance's voice network is expanded. The cost of providing data calling services such as dial-up Internet access and corporate virtual private networks (VPNs) will be reduced via packet switching, as compared with traditional circuit switched provisioning. In connection with this launch, Allegiance announced that Genuity Inc. (Nasdaq: GENU), one of the largest Internet infrastructure providers in the world, has signed on as the lead customer of the new service platform.

"Our softswitch technology is the next giant step in the evolution of Allegiance’s customer-oriented network infrastructure," said Royce J. Holland. "This is an important bridge between our circuit and packet switch platforms, allowing Allegiance Telecom to efficiently provide an integrated package of communications services to small and medium-sized businesses and to larger Internet infrastructure companies such as Genuity."

Regulatory Certifications

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.

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 27 U.S. markets including: Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Worth, Houston, Long Island, Los Angeles, Miami, Minneapolis/St.Paul, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, Phoenix, St. Louis, 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.allegiancetele.com. Allegiance's common stock is traded on the Nasdaq National Market under the symbol ALGX.

Note 1 -- Most incumbent local exchange carriers (ILECs) do not include data lines in their reports to the FCC for switched access lines and generally count a high capacity T-1 as a single access line, regardless of the number of channels purchased by the customer. BellSouth, in its 10Q, has begun reporting access line equivalents which "are calculated by converting data circuits(ISDN, ADSL, DS-0, DS-1 and DS-3) and SONET-based (optical) services to the equivalent of a switched access line based on transport capacity." BellSouth then calculates total equivalent access lines by adding switched access lines and access line equivalents. Allegiance believes that ILEC reports for switched access lines understate the addressable market, and that BellSouth's report for total equivalent access lines overstates the addressable market. Therefore, we are including both measures to provide estimates of the upper and lower bounds for Allegiance's market share.

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. The Company’s estimates of its fourth quarter 2000 and year-end results as well as its projections of 2001 results are also forward-looking statements. 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; and, in the case of the fourth quarter 2000 and year-end estimates, the actual results achieved by the Company as sfinally determined after the close of such quarter and year and the preparation of the financial statements ther. efore. 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, 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.