Allegiance, XO Reaffirm Channel Commitment

Anticpating a mid-year close of the sale of Allegiance Telecom (Booths 406-408) assets to XO Communications Inc. (Booths 528-530), company executives expect the combination to be a formidable alternative to the Bell company’s and an ally for the channel.

Broadband service provider XO recently announced it has been selected as the winning bidder for nearly all of the assets of Dallas-based Allegiance and its subsidiaries, except for Allegiance’s customer premise equipment sales and maintenance business, its managed modem business, and certain other Allegiance assets and operations. The Channel Partners Conference and Expo marks the first appearance for XO since the acquisition began.

XO purchased the assets for approximately $311 million in cash and approximately 45.38 million shares of XO common stock. The parties submitted the agreement for approval by the U.S. Bankruptcy Court for the Southern District of New York on Feb. 19, 2004, and XO expects to finalize the transaction during the third quarter of this year.

With the Allegiance acquisition, XO will add another 100,000 customers and generate more than $1.6 billion in revenue, the company says. XO says it will have the largest network of nationwide connections to RBOCs’ networks of any other CLEC, and will double the points of presence within the 36 markets where both XO and Allegiance operate.

"We have identified approximately $60 million in network cost savings and $100 million in general and administrative costs that could be realized over time as a result of this acquisition," says Carl Grivner, CEO of XO.

Regarding agents and the indirect channel, XO and Allegiance will honor all existing agent contracts. "The channel is important to both companies and will continue to play an important role in the combined company," says Rob Westervelt, vice president of alternate channels at XO.

All of XO’s products are available for sale through agents. These are: complete voice services, including national local, dedicated and switched long distance, ISDN PRI, Centrex and a variety of value-added services such as conferencing, calling card and advanced directory; Internet access, including dedicated (T-1 to GigE speeds), DSL, dial and security services; private data networking, including private line, Ethernet, wavelength, multitransport networking service and VPN; and hosting, including telco colocation and security services.

John Dumbleton, senior vice president of wholesale services and alternate channels at Allegiance, says over the coming months executives plan to examine the best practices of both companies to create a combined company with the optimal network architecture, back-office systems and related support structures. "When the final closing occurs, we expect to hit the ground running with a combined entity that will be the premier competitor to the Bell’s local service monopoly," he says.

He adds that agent sales will remain a vital marketing channel for the newly merged company. "Our agent channel partners provide a fundamental building block of our overall marketing strategy and we have no intention of changing that."

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