San Diego ISP Reinforces Allegiance's Data Strategy

DALLAS, February 13, 2001-- Allegiance Telecom, Inc. (Nasdaq: ALGX) announced it has added CTSnet, a San Diego, California-based Internet service provider (ISP) supplying high-speed Internet access and data center hosting services, as a wholly-owned subsidiary. Terms of the deal were not disclosed.

Founded in 1993, CTSnet is a pioneer among Internet providers in Southern California. The former wide-area networking division of Datel Systems, Inc. provides services to more than 30,000 individual users, including 2,500 business users. CTSnet’s 60 employees have all become employees of Allegiance Telecom.

"CTSnet has extensive experience with broadband and server collocation technologies, making it an excellent fit with Allegiance's growth and expansion plans," said Royce J. Holland, chairman and CEO 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," he said.

"We carefully selected an industry leader such as Allegiance Telecom to broaden our product offerings and better serve our customers," said Bill Blue, co-founder of CTSnet. While struggling providers are eyeing acquisition as a convenient relief valve, Blue explained that CTSnet’s desire to be acquired was for a very different reason. "We have a solid, well-run, highly-regarded Internet business – everything an ISP could hope for – except for one thing: access to the kind of capital needed for advanced growth. Allegiance brings that to the table."

CTSnet’s data center expansion, for example, demonstrates the company’s confidence in its growth strategy. Located in a fiber-rich area in Kearny Mesa, the "telco-grade" hosting facility was designed by CTSnet’s senior employees. The environmentally controlled complex is the latest of its kind in the San Diego area, which until now has experienced a serious Internet server space crunch. Local high-tech companies have found it difficult to locate well-connected hosting real estate with serious amenities such as CTSnet’s private server suites, redundant power generators, and sophisticated security, seismic, and fire systems.

"Increased demand for expanded hosting facilities is what led us to partner with a company that brings substantial assets to the table," said Blue, who sees the new data center as a model infrastructure for serving Allegiance’s data products. "Now into our eighth successful year, combining our experience and Allegiance's resources only fortifies CTSnet’s leadership throughout Southern California."

Based in Dallas, Allegiance Telecom (www.allegiancetele.com) is a facilities-based integrated communications provider (ICP) that offers 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. -- and is targeting a total of 36 major metropolitan areas with its "one-stop shopping" approach. Allegiance's common stock is traded on the Nasdaq National Market under the symbol ALGX.

Since 1993, CTSnet (www.cts.com) has been providing its customers with effective connections to the Internet. As one of the oldest and most prominent Internet companies in the Southern California online market, CTSnet is a leading regional provider of Internet services in San Diego County, with over 30,000 individual users and 2,500 business clients of all sizes. Whether customers need dial-up, DSL, T1, T3, or collocation, CTSnet helps them find the right solution for their online requirements.