Acquires Web Hosting Assets Of HarvardNet, Acquires Adgrafix

DALLAS, April 16, 2001 -- Allegiance Telecom, Inc. (Nasdaq: ALGX), a leading integrated communications provider (ICP), 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.

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.

The total U.S. Web hosting services market was estimated at $3.9 billion in 2000, according to IDC, a subsidiary of International Data Group, and is expected to grow to $24.8 billion by 2004.

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.

This vibrant Web hosting and data presence, combined with Allegiance Telecom's robust voice business, provide Allegiance's target customer audience of small and medium-sized enterprises (SMEs) with a wide array of communication and Internet solutions to compete in today's fast-paced business world.

"The formation of a division focused exclusively on the Web hosting business and Internet connectivity is the most effective way for Allegiance Telecom to pursue the tremendous business opportunity of the Web. At the same time, we'll continue to execute successfully on our communications services strategy." said Royce Holland, chairman and CEO of Allegiance Telecom, Inc. "These additional new Web hosting capabilities, combined with experienced management teams, mark a tremendous step forward for us, further enhancing our company's ability to provide a full range of Internet services to our target market of small and medium-sized businesses."

"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] losses. We believe that we remain fully funded to implement our 36 market plan," Holland added. 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 is currently operational in 29 U.S. markets and expects to open seven more markets in 2001.

HarvardNet Web Hosting Assets Form Foundation for New Hosting Division

>HarvardNet, a leading provider of dedicated, managed, and colocated Web hosting and Internet connectivity services to SMEs, was a pioneer in the competitive New England marketplace. The HarvardNet employees who joined Allegiance Telecom are contributing to build Allegiance's burgeoning 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.

"Becoming part of Allegiance Telecom provides an opportunity to further the company's position as a major player in the Web hosting market," said Washburn. "The new hosting division takes great advantage of proven Web hosting talent and products at the acquired companies and creates synergies with Allegiance Telecom's ever-growing installed base of more than 100,000 small and medium-sized business customers."

Adgrafix Becomes Part Of Allegiance Telecom

Initiating its Web business in 1995, Adgrafix provides shared and dedicated Web hosting services to small and medium-sized businesses and organizations around the world. Adgrafix's virtual and dedicated Web hosting services feature enhanced software for creating secure electronic commerce sites. Adgrafix has several thousand customers located in more than 90 countries. Adgrafix's employees will also join the Allegiance Web hosting team. Adgrafix founder and president Robert Bennett will report to Mark Washburn in the newly formed Allegiance Telecom Web hosting division.

"Becoming part of Allegiance Telecom means the Adgrafix success story can continue to grow and prosper," said Bennett. "Adgrafix products meet the needs of many Allegiance Telecom communications customers."

Internet Data Centers

Allegiance's newly acquired state-of-the-art Internet data center, located in Boston, provides customers with an integrated suite of shared and dedicated server capacity, managed hosting services, colocated hosting and leased line Internet access. The high-performance, 20,000 square foot facility is designed for scalability and connectivity, and is served by multiple fiber providers and a dual power grid.

The hosting capacity of this newly acquired data center, coupled with the Internet data centers in Austin, Chicago, Dallas, Los Angeles and San Diego, create a formidable national presence for Allegiance Telecom Web hosting and Internet connectivity services.

About Allegiance Telecom

Since its founding in 1997, Allegiance Telecom has rapidly become one of the leading facilities-based integrated communications providers in the U.S. Allegiance provides its business customers with a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services and e-commerce offerings. Allegiance currently has 29 markets operational, 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. The Company's Web address is: www.allegiancetele.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.