XO Holdings Reports Second Quarter Financial Results

XO Holdings, Inc. (OTCBB: XOHO) today announced second quarter financial and operational results. XO Holdings generated revenue of $367.4 million for the second quarter 2008, an increase of $6.3 million, or 1.7% from the first quarter 2008, and an increase of $13.0 million, or 3.7% from the second quarter 2007.

"We are pleased to report strong second quarter results," said Carl Grivner, Chief Executive Officer of XO Holdings. "Despite a weakening economy and ongoing industry consolidation, we are growing our revenue and EBITDA. We continue to see the results from a number of initiatives that we have implemented in previous quarters, including the lighting of our long haul fiber network, developing the carrier/wholesale channel and expanding our portfolio of services to business customers. Throughout the quarter, we have routinely added customers to our long haul and local loop networks, and we continue to see market opportunities to invest our capital."

Adjusted EBITDA (a non-GAAP financial measure) was $26.1 million in the second quarter 2008, compared to $7.0 million for the first quarter 2008, and $21.8 million for the second quarter 2007. Net loss for the second quarter 2008 was $29.7 million, which was $13.2 million lower than the first quarter 2008.

Second Quarter 2008 Financial Results                   Six Months Ending
                          ----------------------------  ------------------
                                                        June 30,  June 30,
($ in millions)           Q2 2008   Q1 2008   Q2 2007     2008      2007
                          --------  --------  --------  --------  --------
Revenue                   $  367.4  $  361.1  $  354.4  $  728.5  $  704.3
Adjusted EBITDA(1)        $   26.1  $    7.0  $   21.8  $   33.0  $   59.0
   Adjusted EBITDA %(2)          7%        2%        6%        5%        8%
Net Loss                  $  (29.7) $  (42.9) $  (36.4) $  (72.6) $  (57.0)
Capital Expenditures      $   53.2  $   65.3  $   68.3  $  118.5  $  109.4
                          --------  --------  --------  --------  --------

(1) Adjusted EBITDA is a Non-GAAP financial measure. See the footnote discussion accompanying the financial statements below.

(2) Adjusted EBITDA % is Adjusted EBITDA divided by revenue. See the footnote discussion accompanying the financial statements below.

"During the second quarter, we continued to see our revenues transition from Legacy TDM services to Data and IP services," said Grivner. "On a year over year basis, our Data and IP revenues grew over 32%, which underscores the strength of XO's network and our ability to deliver scalable, high performance network services for our customers."

Second Quarter 2008 Service Revenue                       Six Months Ending
                      -------------------------- -------  -----------------
                                                % Change
                                                 Q2 2008
                                                   - Q2   June 30, June 30,
($ in millions)       Q2 2008  Q1 2008  Q2 2007    2007     2008     2007
                      -------- -------- -------- -------  -------- --------
Core Data & IP        $  163.8 $  155.1 $  123.9    32.2%  $ 316.5 $  241.7
Core Integrated Voice $   82.0 $   83.0 $   81.2     1.0%  $ 167.4 $  164.1
                      -------- -------- -------- -------  -------- --------
Core Total            $  245.8 $  238.1 $  205.1    19.8%  $ 483.9 $  405.8
Legacy TDM Services   $  121.6 $  123.0 $  149.3   (18.6%) $ 244.6 $  298.5
                      -------- -------- -------- -------  -------- --------
Total Revenue         $  367.4 $  361.1 $  354.4     3.7%  $ 728.5 $  704.3
                      -------- -------- -------- -------  -------- --------

(a) Data and IP Services, which is a subset of Core Services, includes services such as Collocation, Dedicated Internet Access, Ethernet, MTNS, Private Line, VPN, Carrier VoIP and Commercial VoIP services.

(b) Integrated/Voice Services, which is a subset of Core Services, includes services such as integrated services and carrier voice services.

(c) Legacy TDM/Other Services are very small business services, sub-T1 (e.g. dial, DSL), web hosting, interactive voice response and XO One services.

Preferred Stock Issuance

Subsequent to the 2nd quarter-end, on July 25, XO Holdings raised $780 million from our Chairman, through the issuance and sale of shares from two new series of preferred stock of which $473.1 million retired senior debt and the balance is to fund future growth initiatives and provide ongoing working capital for its business. The senior debt all would have come due in 2009. "The completion of this financing gives us the financial strength and flexibility that we need in order to support fast-growing areas of our businesses," commented Grivner. "At a time when the capital markets have tightened dramatically, we have strengthened our balance sheet and have significant cash available, which positions us to pursue opportunities that create value for our shareholders."

Sales and Product Highlights

During the second quarter of 2008, XO Communications, the subsidiary that operates XO Holdings' wireline business, added high profile customers and expanded the product line for customers of its businesses. XO's flagship Flex product continues to be exceptionally strong, with second quarter sales exceeding all previous quarters. The majority of sales for the Flex product are for high bandwidth requirements. In addition, the Company's Multiprotocol Label Switching (MPLS) products, which were launched one year ago, are already among its top five selling products. Direct Internet Access (DIA) sales, which represent another successful XO product offering, have substantially moved to higher bandwidth requirements reflecting the Company's emphasis on moving up-market.

XO's capital infrastructure investments in Inter-city and IP networks enabled the Company to achieve significant sales into media, internet and international customers.

Network Investment Highlights

In the second quarter 2008, XO Communications announced two major advances in its Ethernet services for customers. First, XO Communications significantly expanded its network footprint of Ethernet over Copper Technology to 75 major metropolitan markets. This local loop technology enables XO Communications to serve off-net businesses to take advantage of Ethernet services at speeds from 10 Megabits/second (Mbps) to 88 Mbps for the first time.

Secondly, XO Communications demonstrated 100 Gigabits/second Ethernet (GbE) service over its long haul network. XO Communications supports customers on its nationwide network today with services including 10 Gigabits/second (Gb/s) wavelengths and 10 GbE, which demonstrates the power and scalability of its advanced optical network. In addition, XO Communications has pioneered a new rapid service delivery model with its "10 Gigs in 10 Days" guarantee, offering customers the ability to have 10 Gb/s network services provisioned in 10 business days.

Operational Highlights

XO Communications has shown significant progress in the past year on its focus of growing Core Data and IP products. During this time, the Company has also identified additional capital and operating expenditures that are necessary to improve operational efficiency, accelerate revenue growth, and significantly shift revenue mix. As a result, XO has developed a transformation plan designed to improve sales and support tools, service delivery quality and speed, and overall efficiency across the 'quote to cash' process. Dedicated teams and resources have been assigned to this transformation plan.

Nextlink Wireless Highlights

During the second quarter 2008, Nextlink, the subsidiary that operates XO Holdings' wireless business, expanded its broadband wireless service into the New York metropolitan area, including New York City, Nassau, Suffolk and Westchester counties. Nextlink's products will deliver carrier grade, high-speed connectivity up to 800 Mbps, with network redundancy and disaster recovery solutions for financial institutions, medical organizations and other businesses that operate in the New York City metropolitan area. With the addition of New York City, Nextlink carrier-grade broadband wireless services are now available in over 80 metropolitan markets.

Nextlink also announced two significant regulatory decisions during the quarter. First, Nextlink successfully demonstrated to the Federal Communications Commission (FCC) that it has met the FCC's substantial service requirements in 30 of its 91 Local Multipoint Distribution Service (LMDS) licensed markets by building wireless networks and offering services and coverage in these licensed spectrum areas. Second, the FCC granted Nextlink's request for an extension of the requirement to demonstrate substantial service until June 1, 2012 with respect to an additional 48 LMDS licenses. Nextlink is in the process of submitting filings with the FCC within the near term demonstrating substantial service requirements for its remaining LMDS licenses.

Outlook

"Overall, we have made significant progress this quarter in many areas which are important to our success. First, we have addressed our financing issue, which gives us the financial flexibility we need to achieve our growth initiatives. Next, we continue to invest in new network infrastructure, expanding our Ethernet footprint. Finally, we are developing new products, which will accelerate our transition to data and IP services," said Grivner. "As a result, we are well-positioned to continue expanding our customer base in high growth markets."

XO Holdings is reiterating its previously issued guidance for Revenue, Adjusted EBITDA and Capital Expenditures.

Metric                        2008 Financial Guidance ($ in millions)
------                        ---------------------------------------
Revenue                       $ 1,430 - 1,470
Adjusted EBITDA               $    95 - 120
Capital Expenditures          $   183 - 215

About XO Holdings

XO Holdings, Inc. (OTCBB: XOHO) is the holding company of XO Communications, LLC (XOC) and Nextlink Wireless, Inc. (Nextlink).

XO Communications, a subsidiary of XO Holdings, Inc. (OTCBB: XOHO), is a leading nationwide provider of advanced communications services and solutions for businesses, enterprises, government, carriers and service providers. Its customers include more than half of the Fortune 500, in addition to leading cable companies, carriers, content providers and mobile network operators. Utilizing its unique combination of high-capacity nationwide and metro networks and broadband wireless capabilities, XO offers customers a broad range of managed voice, data and IP services with proven performance, scalability and value in more than 75 metropolitan markets across the United States. For more information, visit www.xo.com.

Nextlink provides alternative access, backhaul and diverse network solutions and services for the carrier, business and government markets. As one of the nation's largest holders of fixed wireless spectrum, Nextlink delivers high-quality, carrier-grade broadband wireless solutions that scale to meet the demands of today's converged world of communications -- supporting next-generation mobile and wireline voice, data and video applications. For more information, visit www.nextlink.com.

Concentric, a business unit of XO Communication Services, Inc., provides enterprise-class hosted applications including web site hosting, business email, corporate domain management and perimeter email protection. Leveraging its patented Clustered Hosting Architecture, Concentric delivers superior performance, reliability, and security. For more information, visit www.concentric.com or call 866-500-9696.

XO, XOptions, XOptions Flex and all related marks are either registered trademarks or trademarks of XO Communications in the United States and/or other countries. Nextlink is a registered trademark of Nextlink Wireless, Inc. in the United States and/or other countries.