XO Communications Reports Strong Fourth Quarter Results; Annual Revenue Increase of 164 percent to $723.8 million driven by Growth of Data Sales.

RESTON, Va.--(BUSINESS WIRE)--Feb. 5, 2001

XO Communications, Inc. (Nasdaq:XOXO), one of the world's fastest growing providers of broadband communications services, today announced financial results for the quarter and year ended December 31, 2000.

Total revenue grew to $253.1 million in the fourth quarter of 2000, a 13 percent increase over revenue reported in the third quarter of 2000, and a 181 percent increase over revenue reported in the fourth quarter of 1999. Annual revenue for 2000 increased 164 percent to $723.8 million compared to $274.3 million in 1999. Of the total revenue reported in the fourth quarter of 2000, $112.9 million was derived from voice services revenue, including revenue from local, long distance voice and other enhanced voice services, and $137.8 million was attributable to data services, which includes Internet access, network access, and web hosting. Other revenue for the fourth quarter of 2000 was $2.4 million.

EBITDA loss totaled $88.7 million in the fourth quarter of 2000, compared to an EBITDA loss of $88.9 million in the third quarter of 2000, and a $59.4 million loss in the fourth quarter of 1999. Annual EBITDA loss in 2000 totaled $309.4 million compared to an EBITDA loss of $214.2 million in 1999. The EBITDA losses for 1999 and 2000 exclude the $30.9 million non-recurring restructuring charge recorded in the fourth quarter of 1999 in connection with the relocation of XO's headquarters from Bellevue, Washington to Northern Virginia and the in-process research and development charge of $36.2 million recorded in the second quarter 2000 associated with the Concentric merger.

For the year, XO recorded in other income a net gain on investment activity of $167.4 million comprised of the $225.1 million net cash gain on the sale of a strategic investment in the first quarter of 2000 offset by a $57.7 million write-down recorded in the fourth quarter of 2000 for a non-temporary decline in the value of certain investments, most of which was a non-cash related adjustment. This write-down was primarily attributable to the decline in value of investments held by Concentric Networks that were recorded at their market values at the time of the Nextlink/Concentric merger and now brings those investments more in line with Concentric's cost basis. Excluding the fourth quarter 2000 investment write-down, XO's net loss per share for the quarter and year ended December 31, 2000 was $1.29 and $3.69 respectively. Reported net loss per share for the quarter and year ended December 31, 2000 including these items was $1.45 and $3.87, respectively.

"We reported solid operating results in the fourth quarter as, once again, we were able to meet our top-line revenue growth and EBITDA objectives," said XO Chairman and CEO Dan Akerson. "This has been a monumental year for XO. In the past twelve months we introduced an exciting new brand, successfully evolved from a voice-centric company to a data-driven broadband services leader and significantly expanded our broadband networking capabilities in the United States, Canada and Europe.

"Yet, as much as we accomplished this past year, we realize we must immediately turn our focus toward our critical 2001 business objectives that include robust revenue growth; continuing our drive toward EBITDA break-even; and accelerating our on-net building initiative that is expected to drive improvements in customer provisioning and further improve our cost structure," continued Akerson.

XO recently reached another milestone in the execution of its business plan as its third "class" of markets, those launched in 1998, turned EBITDA positive (before corporate overhead) during the fourth quarter. This group of markets is comprised of all tier-one markets including Chicago, San Francisco Bay Area, New York, Atlanta, Dallas, Denver and Miami. In reaching this goal, XO again met its stated goal of turning EBITDA positive (before corporate overhead) in new markets within 30 months or less, on average, after their commercial launch.

In 2000, XO continued to expand its extensive base of broadband network assets. In addition to taking delivery of and "lighting" multiple segments within its inter-city fiber networks in the United States and Europe, XO now offers service in 60 markets and currently owns more than 700,000 miles of inter-city and metro fiber in the United States.

XO has also significantly improved its ability to provide critical "golden" or "last" mile access by expanding its broadband wireless capabilities in an additional 10 markets in the fourth quarter. XO now has operational broadband wireless capabilities in 27 markets - exceeding the company's goal of 25 by year-end - and will use this capability to expand the number of locations where it will provide customer-premise to customer-premise services across the XO network in the future. XO currently provides end-to-end service over its own network in more than 1,900 buildings throughout the United States.

XO has also made progress in efforts to position itself as a data-centric broadband leader in Europe while implementing a capital-efficient plan for its European operations. In 2000, XO agreed to purchase inter-city dark fiber connecting 21 European cities and metro dark fiber and conduits in London, Paris, Amsterdam, Brussels and Frankfurt from Level 3 for a total purchase price of $163 million. Additionally, XO will receive rights to use empty fiber conduits for future network deployment in Berlin, Dusseldorf, Hamburg and Munich. XO has also been awarded fixed wireless spectrum licenses in the United Kingdom including licenses covering the Greater London, Greater Manchester and Birmingham/West Midlands Regions in the recently completed U.K. Broadband Fixed Wireless Auction.

With much of its planned network construction now underway or complete in the United States, XO has begun to optimize its IP networks by deploying soft switch technology as the first phase of an expansive migration to packet-based switching technology. This technology is expected to enable XO to deliver the full range of traditional and enhanced local and long distance services and to increase its ability to efficiently handle an increasing amount of growing ISP traffic. Another benefit of the softswitch technology will be the expected cost savings realized from reduced equipment cost and reduced physical co-location space needs.

Over the course of the year, XO also undertook a dramatic evolution to become a full service voice and data telecommunications company. Late in the third quarter of 2000, the company launched XOptions, a unique service bundle that includes local, long distance, Internet access and web hosting, and a full suite of Ethernet services, including Gigabit Ethernet capabilities. Both product lines mark XO's shift to a broader emphasis on data services and the company's fourth quarter revenue stream reflected 54 percent data revenue versus a 25 percent data revenue stream in the fourth quarter of 1999.

Recently, XO has taken a number of steps to meet the future funding needs for its business plan. In early January, XO issued an additional $517.5 million in convertible subordinated notes. Taking that financing and its other available funding into account, XO now estimates that it has sufficient liquidity to carry it into mid-2002.

Last week, XO filed a "universal" shelf registration statement with the Securities and Exchange Commission for the potential offering by it of up to $2.0 billion in debt or equity securities. This registration statement provides XO with flexibility in obtaining additional funding by enabling it to register securities in advance and then sell them as financing needs arise and market conditions permit. Once the registration statement is declared effective by the Securities and Exchange Commission, XO may publicly offer securities at various times at prices and terms to be determined at the time of the offering.

About XO Communications

XO Communications is one of the world's leading providers of broadband communications services offering local and long distance voice communication services, Digital Subscriber Line (DSL) access, Web hosting and e-commerce service, Virtual Private Networks (VPNs), dedicated access, global transit and application infrastructure services for delivering applications over the Internet or a VPN.

XO has assembled an unrivaled set of facilities-based broadband networks and Tier One Internet peering relationships that, when complete, will serve much of the United States, Canada and Europe. In the United States, XO has more than 700,000 metro and intercity fiber miles in operation. The Company is also North America's largest holder of fixed broadband wireless spectrum, with licenses covering 95 percent of the population of the 30 largest U.S. cities and a partnership with licenses covering all of the top cities in Canada. XO has also agreed to acquire metro fiber networks in Europe to serve the London, Frankfurt, Brussels, Amsterdam and Paris markets and an 88,000 fiber-mile pan-European fiber network connecting 21 major European cities and transatlantic capacity that will eventually expand to 10 Gbps.

The statements contained in this release that are not historical facts are "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements include those describing XO's expected future operations, results of operations, networks, technology, products and services. Management wishes to caution the reader that these forward-looking statements are only predictions and are subject to risks and uncertainties and actual results may differ materially from those indicated in the forward-looking statements as a result of a number of factors. These factors include, but are not limited to, the ability of XO to market, sell and provision its services, to design and construct fiber optic networks and, install cable and facilities, including switching electronics, and to develop, install and provision LMDS equipment and interconnect that equipment with its fiber networks and to connect those networks to customers. The XO business is subject to other risks and uncertainties described from time to time in its reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 1999 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.

XO, the XO design logo are trademarks of XO Communications, Inc.

                       XO COMMUNICATIONS, INC.
                         Financial Highlights
                        (Dollars in thousands)


                            Three Months Ended         Year Ended
                               December 31,           December 31,
                            2000        1999       2000 (1)    1999
                         ---------   ---------   ---------  ---------
Revenue                  $ 253,073    $ 90,022   $ 723,826  $ 274,324
Costs and expenses:
 Operating                 159,006      65,269     476,021    221,664
 Selling, general and
  administrative           182,797      84,153     557,249    266,908
Restructuring (2)             -         30,935        -        30,935
 Stock based compensation    8,719       8,161      48,328     12,872
 Depreciation and
  amortization             260,942      29,869     617,714    108,475
 In-process research and
  development (3)             -           -         36,166       -
                          ---------  ---------    ---------  ---------
Loss from operations      (358,391)  (128,365)  (1,011,652)  (366,530)
Interest income             39,558     29,248      180,905     90,961
Interest expense          (109,565)   (92,951)    (434,122)  (283,123)
Other income (expense)(4)  (63,165)      -         163,570       -
                          ---------  ---------    ---------  ---------
Net loss                 $(491,563) $(192,068) $(1,101,299) $(558,692)
                         ========== ==========  ==========  ==========

Preferred stock dividends
 and accretion of
 preferred stock
 redemption obligation,
 including issue costs     (38,851)   (18,010)    (146,356)   (69,189)
                          ---------  ---------    ---------  ---------
Loss applicable to
  common shares          $(530,414) $(210,078) $(1,247,655) $(627,881)
                          =========  =========   =========  =========
EBITDA (5)                $(88,730)  $(59,400)   $(309,444) $(214,248)


                              Footnotes
      (1) On June 16, 2000, the Company completed the acquisition of
        Concentric Network Corporation (Concentric).
        The Concentric acquisition was accounted for as a purchase:
        accordingly, the operating results of Concentric are included
        from date of acquisition.
      (2) In connection with relocating the Company's Bellevue,
        Washington headquarters to Northern Virginia, the Company
        recorded a restructuring charge in the fourth quarter 1999 of
        $30,935 ($27,939 of which was non-cash).
      (3) In connection with the Concentric acquisition, the Company
        allocated $36,166 of the purchase price to in-process research
        and development.
      (4) In the three months ended December 31, 2000, the Company
        recorded a $57,693 write-down of certain investments for a
        non-temporary decline in value, most of which was a non-cash
        write-down.  For the year ended December 31, 2000, this
        non-cash loss was offset by a $225,112 gain on the sale of a
        strategic investment resulting in a net gain for the year of
        $167,419.
      (5) EBITDA consists of net loss before other income (expense), net
        interest expense, in-process research and development charge,
        depreciation, amortization, stock based compensation, and
        restructuring charge.  EBITDA is commonly used to analyze
        companies on the basis of operating performance, leverage and
        liquidity.


                       XO COMMUNICATIONS, INC.
       Condensed Consolidated Statements of Financial Position
                        (Dollars in thousands)

                                                   As of
                                                December 31,
                                          2000 (1)         1999
                                        -----------    -----------
Cash, cash equivalents, and marketable
    securities                          $ 1,860,963    $ 1,881,764
Other current assets                        252,845        105,244
Pledged securities                           17,415         40,759
                                        -----------    -----------
    Total current assets                  2,131,223      2,027,767
Property and equipment, net               2,794,105      1,180,021
Investment in fixed wireless licenses       997,333        933,128
Other long-term assets, net                 247,838        364,764
Goodwill and other intangibles, net       2,914,876         91,428
                                        -----------    -----------
    Total assets                        $ 9,085,375    $ 4,597,108
                                        =============  ===========

Current liabilities                       $ 707,823      $ 249,217
Long-term debt                            4,396,596      3,733,342
Other long-term liabilities                  45,539         15,319
Redeemable preferred stock, net of
 issuance costs                           2,097,016        612,352
Total shareholders' equity (deficit)      1,838,401        (13,122)
                                         ------------  -----------
    Total liabilities and shareholders'
    equity (deficit)                    $ 9,085,375    $ 4,597,108
                                        =============  ============


                              Footnotes
(1) The balance sheet includes the consolidation of Concentric Network
    Corporation (Concentric), which was acquired by the Company on
    June 16, 2000.


                       XO COMMUNICATIONS, INC.
                          Operating Data (1)


                              As of     As of     As of      As of
                             Dec. 31,  Sept. 30, June 30,   March 30,
                               2000     2000      2000       2000
                            ---------  --------- --------  ---------
Route miles                   13,493     8,677     5,380      4,356
Fiber miles                  748,604   572,674   435,992    413,407
On-net buildings connected     1,947     1,761     1,738      1,485
Off-net buildings connected   51,345    47,221    43,264     31,797
Voice grade equivalents
 (in thousands)               11,211     8,916     5,566      3,337
Customers                     87,755    79,178    74,051     50,085
Revenue per customer       $     916  $    880  $    817   $    728
Voice switches operational        34        34        32         32
ATM switches operational          49        46        43          -
Managed servers                3,015     2,582     2,373          -
Hosted shared websites       218,598   212,327   189,157          -
Data centers operational           8         8         8          -
Employees                      7,400     6,757     6,155      3,872

Definitions

Route Miles - The number of miles of the telecommunications path

in which the leased or Company-owned fiber optic cables are

installed. These include metro and intercity miles.

Fiber Miles - The number of route miles installed along a

telecommunications path, multiplied by the Company's estimate of

the number of fibers along that path. These include metro and

intercity miles.

On-Net buildings connected - Buildings physically connected to the

Company's networks, excluding those connected by unbundled

incumbent local exchange carrier (ILEC) facilities.

Off-Net buildings connected - Buildings connected to the Company's

networks through leased or unbundled ILEC facilities.

Voice grade equivalents - A revenue-generating digital broadband

equivalent of 64 Kbps (DS-0 level).

Customers - The number of revenue-generating invoices within our

billing systems. This statistic excludes Europe, Las Vegas, as

well as consumer dial up and shared hosting accounts.

Revenue per customer - Represents average revenue per customer per

month. This calculation excludes both the associated revenue and

customer counts for Europe, Las Vegas, as well as consumer dial up

and shared hosting accounts.

Managed servers - The number of Company or customer owned servers

that are dedicated to hosting a single customer's websites which

reside in the Company's data centers.

Hosted shared websites - The number of websites that are hosted

for multiple customers on shared servers.

(1) All operating data, except for Revenue per customer and

Customers, for all periods presented include the statistics of

the Las Vegas network, which the Company manages and in which

the Company has a 40% membership interest.