UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
 FORM 10-K
   þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    XO Holdings, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction of
    incorporation or organization)

54-1983517(I.R.S. Employer Identification
    No.)   13865 Sunrise Valley Drive
    Herndon, Virginia 20171(Address of principal executive
    offices, including zip code)
  (703) 547-2000(Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to section 12(g) of the
    Act:
    Common Stock, par value $0.01 per share
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
    Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
  Over-the-Counter
    DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





XO
    Holdings, Inc.
  TABLE OF
    CONTENTS
   
 PagePART IITEM 1.


Business


1ITEM 1A.


Risk Factors


19ITEM 1B.


Unresolved Staff Comments


25ITEM 2.


Properties


25ITEM 3.


Legal Proceedings


25ITEM 4.


Reserved


27PART IIITEM 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


27ITEM 6.


Selected Financial Data


30ITEM 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


31ITEM 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


45ITEM 8.


Financial Statements and Supplementary Data


45ITEM 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


78ITEM 9A.


Controls and Procedures


78ITEM 9B.


Other Information


79PART IIIITEM 10.


Directors, Executive Officers and Corporate
    Governance


79ITEM 11.


Executive Compensation


79ITEM 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


79ITEM 13.


Certain Relationships and Related Transactions,
    and Director Independence


79ITEM 14.


Principal Accounting Fees and Services


79PART IVITEM 15.


Exhibits, Financial Statement Schedules


80




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##### 



Caution
    Regarding Forward-Looking Statements
  The statements contained in this Annual Report on
    Form 10-K
    that are not historical facts are forward-looking statements, as
    this term is defined in the Private Securities Litigation Reform
    Act of 1995, that involve risks and uncertainties. These
    statements can be identified by the use of words such as
    anticipate, believe,
    estimate, expect, plan,
    intend, can, may,
    could or other comparable words. Our forward-looking
    statements are based on currently available operational,
    financial and competitive information and managements
    current expectations, estimates and projections. These
    forward-looking statements include:
  
    expectations regarding revenue, expenses, capital
    expenditures and financial position in future periods;
    our ability to broaden our customer reach and expand our
    market share;
    pursuit of growth opportunities;
    the potential need to obtain future financing; and
    our ability to fund our business plan and repay our scheduled
    obligations.  Readers are cautioned that these forward-looking statements
    are only predictions and are subject to a number of both known
    and unknown risks and uncertainties. Should one or more of these
    risks or uncertainties materialize, or should our underlying
    assumptions prove incorrect, our actual results in future
    periods may differ materially from the future results,
    performance,
    and/or
    achievements expressed or implied in this document. These risks
    include any failure by us to:
  
    generate funds from operations sufficient to meet our cash
    requirements and execute our business strategy;
    prevail in our legal proceedings;
    increase the volume of traffic on our network; and
    achieve and maintain market penetration and revenue levels
    given the highly competitive nature of the telecommunications
    industry.  For a detailed discussion of risk factors affecting our
    business and operations, see Item 1A Risk
    Factors of this Annual Report. We undertake no obligation
    to update any forward-looking statements, whether as a result of
    new information, future events or otherwise. These
    forward-looking statements should not be relied on as
    representing our estimates or views as of any subsequent
    date.




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##### 



PART I  ITEM 1.
    BUSINESS  www.xo.com Form 10-K, Form 10-Q, Form 8-K,
  Overview
  Time Division Multiplexing TDM) Incumbent Local Exchange Carrier ILEC
  business-to-business
  Strategy
    Focus on Business and Carrier Customers.
  Focus on Broadband Services. state-of-the-art IP-based IP-related IP-based MPLS- IP- VPN IP-VPN, ethernet
 1




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##### 



Utilize Our Network Assets. collocations route mile fiber optics on-network capacity
  Provide Quality Services to our Customers.
  Transformation.
  Service
    Offerings
   Broadband Services. Dedicated IP-based IP-VPN bandwidth IP-VPN site-to-site
  private line dedicated transport services
    (private line) point-to-point point-to-point back-up OC-192 ATM Frame Relay Synchronous Optical Network
 2




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##### 



Mbps T1 Gbps Local Area Networks IP-based switches
  Integrated/Voice Services.
  Fixed Wireless Services. line-of-sight
  Managed Services. IP-enabled PBX Interactive Voice Response (IVR)
    Voice Services. interconnection
 3




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##### 



Hosting and Hosted Applications. Software-As-A-Service (SaaS) Clustered Technology
  Business
    Units
  end-to-end
  Business
    Services
  end-to-end IP-based small-to-medium
        Small-to-Medium
    Business (SMB).
  Mid-Market Business.
  Enterprise. IP-based
 4




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##### 



Government.
    Carrier
    Services
 Competitive Local Exchange
    Carriers (CLECs), Internet Service Providers
    (ISPs), interexchange carriers Point-of-Presence
    (POP) backbone IP-originated Public Switched Telephone Network
    (PSTN)
  Dense Wave
    Division Multi-plexing
    (DWDM) IP-VPN IP-based
  Concentric
    5




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##### 



Network
  wave division
    multiplexing advanced packet switching
    equipment
  Metropolitan Fiber Networks and Local
    Facilities.
  central office
  indefeasible rights of use IRU
 6




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##### 



Metro Fiber





Metro FiberNetwork





NetworkState

Location

Service Market

State

Location

Service MarketAZ

Phoenix

Phoenix

MN

Minneapolis

Greater Minneapolis/St. PaulCA

Los Angeles

Los Angeles

MO

St Louis

St LouisCA

Orange County

Anaheim

NC

Charlotte

CharlotteCosta Mesa

NC

Raleigh

RaleighFullerton

NJ

New Jersey

Bergen/PassaicGarden Grove





Middlesex-Somerset-HunterdonHuntington Beach





NewarkInglewood





Jersey CityIrving





Monmouth-OceanLong Beach





TrentonOrange

NV

Las Vegas

Las VegasSanta Ana

NY

New York

ManhattanCA

Sacramento

Sacramento





Nassau-SuffolkCA

San Diego

San Diego

NY

Rochester

RochesterCA

San Francisco

San Francisco

OH

Cleveland/

Cleveland-Lorain-ElyriaOakland



Akron

AkronFremont





Canton-MassillonMilpitas

OH

Columbus

ColumbusMountain View

OR

Portland

Portland-Vancouver, OR-WAPalo Alto

PA / DE

Central PA

Allentown-Bethlehem-EastonSanta Clara





Harrisburg-Lebanon-CarlisleSunnyvale





LancasterCA

San Jose

San Jose





ReadingCO

Denver

Denver





Scranton-Wilkes-Barre-HazletonBoulder-Longmont





YorkDC/VA

Washington

Washington, DC-MD-





Wilmington-Newark, DE-MDD.C./ Northern

VA-WVVAFL

Ft Lauderdale

Ft Lauderdale





DoverFL

Miami

Miami

PA

Philadelphia

Philadelphia, PA-NJWest Palm Beach-Boca

PA

Pittsburgh

PittsburghRatonFL

Orlando

Orlando

TN

Memphis

Memphis, TN-AR-MSTampa-St.

TN

Nashville

NashvilleFL

Tampa

Petersburg-Clearwater

TX

Austin

Austin-San MarcoGA

Atlanta

Atlanta Marietta

TX

Dallas/Ft Worth

Dallas
    Fort Worth-ArlingtonIL

Chicago

Chicago

TX

Houston

HoustonMA

Boston

Boston, MA-NH

TX

San Antonio

San AntonioBrockton

UT

Salt Lake City

Salt Lake City-OgdenLawrence, MA-NH





Orem/ProvoLowell, MA-NH

WA

Seattle

Seattle-Bellevue-EverettWorcester, MA-CT

WA

Spokane/Idaho

SpokaneMD

Baltimore

Baltimore





LewistonMI

Detroit

Detroit





Clarkston
    Coeur dAlene  7




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##### 



wavelengths
  Inter-city Network. end-to-end
  dark fiber
  Tbps
  IP Network. rd nodes and POPs peering
  Provider Edge (PE) Gigabit Ethernet (GE)
  Wireless Network. (28-31 GHz
 8




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point-to-multipoint Line-Of-Sight
  Competition
         9




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##### 




    IP Communications  IP technology enables delivery of
    voice and data telecommunications services over a single IP
    network which is less costly to operate than the existing PSTN.
    Mobile Wireless Technologies  New high bandwidth
    applications, commonly referred to as 3Gbroadband
    wireless networks, allow the delivery of voice and data
    (including video) via wireless connection. We believe 3G
    wireless networks together with the development of next
    generation, or 4G,wireless networks, will accelerate the
    adoption of wireless data services by both consumers and
    enterprises.  IP-based IP-enabled
  IP-based
  Regulatory
  Overview.
  rights-of-way,
 10




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##### 



Federal Regulation.
    FCC Regulation of Wireless Services.
  and/or
  Additional
    Federal Regulations
    Verizon and Qwest Petitions for Forbearance from Unbundling
    Requirements.
 11




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##### 



VoIP. IP-enabled Universal Service Fund IP-enabled
  Intercarrier Compensation Reform and Treatment of VoIP
    Services. 2012-2016 2017-2020
 12




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##### 



Universal Service Administrative
    Corporation.
  State and
    Local Regulation
   rights-of-way, rights-of-way.
  Wireless Services Affected by State
    Regulations. point-to-point
  Additional
    State and Local Regulation
 XOCS Complaints Against Verizon.
 13




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##### 



Qwest Complaints Against XO.
 14




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##### 



Glossary
    3G.
  4G.
  Access Charges.
  Advanced Packet Switching Equipment.
  Asynchronous Transfer Mode, or ATM.
  Backbone.
  Backhaul.
  Bandwidth.
  Capacity.
  Carrier.
  Central Offices.
  Competitive Local Exchange Carrier, or CLEC.
  Collocation.
  Conduit.
  Dark Fiber.
  Dedicated.
  Dense Wave
    Division Multi-plexing,
    or DWDM .
  Digital.
 15




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##### 



DS3.
  DSL (digital subscriber line).
  Ethernet.
  Fiber Optics.
  Frame Relay.
  Gbps (gigabits per second).
  GHz.
  GE or Gigabit Ethernet.
  Incumbent Local Exchange Carrier, or
    ILEC.
  Indefeasible rights to use, or IRU.
  Interconnection.
  Interactive Voice Response, or IVR.
  Internet Service Provider, or ISP.
  Interexchange Carrier.
  Local Area Network, or LAN.
  Line-of-Sight,
    or LOS.
  Local Exchange.
 16




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##### 



Local Loop. Point-of-Presence.
  Local Multipoint Distribution System, or
    LMDS.
  Mbps (megabits per second).
  MPLS Multi-Protocol Label
    Switching.
  Node.
  OC  192.
  Peering.
  Point-of-Presence,
    or POP.
  PBX, or Private Bank eXchange.
  Private Line Dedicated Transport Services, or Private
    Line.
  Provider Edge.
  Public Switched Telephone Network, or
    PSTN.
  Reciprocal Compensation.
  Route Mile.
  Router.
  SaaS, or Software-As-A-Service.
  Synchronous Optical Network, or SONET.
  Switch.
 17




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##### 



T1.
  Tbps terabits per
    second 12
  Time Division Multiplexing, or TDM.
  Unbundled Network Elements, or UNE. local
    loop
  Universal Service Fund, or USF.
  Voice over Internet Protocol, or VoIP.
  Virtual Private Network, or VPN.
  Wave Division Multiplexing, or
    WDM. 1530-1565
  Wave Division Multiplexing
    Transmission.
  Wavelength. point-to-point
  Wireless Backhaul.
 18




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##### 



Employees
    ITEM 1A.
    RISK
    FACTORS  Risks
    Related to Liquidity, Financial Resources, and
    Capitalization
  We have
    incurred a net loss from operations in the past and may not
    generate funds from operations or financing activities
    sufficient to meet all of our operating or capital cash
    requirements and, if we are unable to meet our needs for
    additional funding in the future, we may be required to limit,
    scale back or cease our operations.
    and/or
  We may
    seek additional financing to fund the redemption of shares of
    our Class A preferred stock, to acquire capital assets in
    support of our operations, to capitalize on opportunities which
    may arise to enhance our competitive position, or for general
    corporate purposes.
     19




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##### 



The
    continuing effects of recent economic conditions could
    negatively impact our operating results and financial
    condition.
    Risks
    Related to our Operations
  Our
    rights to use the fiber that makes up our network may be
    affected by the financial health of, or disputes with, our fiber
    providers.
    We depend
    on third-parties for the performance of certain network services
    and business operations.
       20




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##### 



The
    failure of one or more of our operations support centers could
    impair our ability to retain customers, provision their
    services, or result in increased capital expenditures.
  and/or and/or
  We may
    not be able to continue to connect our network to ILEC networks
    or to maintain Internet peering arrangements on favorable terms,
    which could impair our growth and performance.
    We may
    not be able to adequately protect our intellectual property or
    rights to licenses for use of
    third-party
    intellectual property, and may be subject to claims that we
    infringe the intellectual property of others, which could
    substantially harm our business.
   21




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##### 



Our
    spectrum licenses may not be renewed upon expiration, which
    could harm our business.
      Risks
    Related to Competition and our Industry
  The
    telecommunications industry is highly competitive, and has
    experienced the consolidation of many existing competitors and
    the introduction of significant new competitors. If we are not
    able to successfully compete against existing and new
    competitors, our financial condition could be materially and
    adversely affected.
    We face
    intense price competition in the market for network services
    which could result in adverse effects on our revenues, future
    cash flows, growth and profitability.
  IP-based
   22




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##### 



Our
    success is highly dependent on our ability to retain and recruit
    talented employees.
    We have
    substantial business relationships with several large
    telecommunications carriers, and some of our customer agreements
    may not continue due to bankruptcies, acquisitions, non-renewal,
    or other factors, which could materially and adversely affect
    our revenue and results of operations.
    Technological
    advances and regulatory changes are eroding traditional barriers
    between formerly distinct telecommunications markets, which
    could increase the competition we face and put downward pressure
    on prices, which could impair our results.
    We are
    subject to comprehensive and continually evolving regulation,
    which could increase our costs and adversely affect our ability
    to implement our business plan.
   23




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##### 



Risks
    Related to our Common Stock
  An entity
    owned and controlled by our Chairman is our majority
    stockholder.
    Future
    sales or issuances of our common stock could adversely affect
    our stock price and/or our ability to raise capital.
      and/or
  and/or
 24




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##### 



Our
    common stock may be affected by limited trading volume and may
    fluctuate significantly.
  Over-the-Counter Over-the-Counter and/or
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES      ITEM 3.
    LEGAL
    PROCEEDINGS   25




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##### 



Nashville
    Electric Service
  month-to-month,
  R2
    Derivative Litigation
   26




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##### 



Hillenmeyer
    Derivative Litigation
    ITEM 4.
    RESERVED   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
  mark-up,
  2009

2008Quarter

High

Low

High

LowFirst

$
0.21


$
0.14


$
2.45


$
1.06Second

$
0.48


$
0.15


$
1.30


$
0.41Third

$
0.73


$
0.27


$
0.75


$
0.32Fourth

$
0.81


$
0.46


$
0.40


$
0.12   Holders
    Dividends
   27




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##### 



Securities
    Authorized For Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Available forNumber of Shares to





Future Issuance Under Equitybe Issued upon


Weighted Average


Compensation Plans (ExcludingExercise of


Exercise Price of


Shares Reflected in ColumnPlan Category

Outstanding Options


Outstanding Options


(a))Equity compensation plans approved by
    stockholders1


7,441,639


$
5.03



8,175,813Equity compensation plans not approved by stockholders










Total


7,441,639


$
5.03



8,175,813     1
    
    Includes options issued pursuant to
    two separate components of the 2002 Stock Incentive Plan: the
    2003 Employee Retention and Incentive Plan and the 2003 Annual
    Bonus Plan.   28




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Stock
    Performance Graph
    COMPARISON OF 5
    YEAR CUMULATIVE TOTAL RETURN
 Among
    XO Holdings Inc, The NASDAQ Composite Index
 And
    The NASDAQ Telecommunications Index
  
  12/04

12/05

12/06

12/07

12/08

12/09XO Holdings Inc


100.00



59.87



141.45



68.09



5.43



19.41NASDAQ Composite


100.00



101.33



114.01



123.71



73.11



105.61NASDAQ Telecommunications


100.00



91.66



119.67



132.55



77.09



107.17  29




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##### 



ITEM 6.
    SELECTED
    FINANCIAL DATA        Years Ended December 31,2009


2008


2007


2006


2005Statement of Operations Data:Revenue

$
1,521,288


$
1,477,610


$
1,428,665


$
1,416,843


$
1,437,897Loss from operations


(47,232
)


(84,813
)


(110,137
)


(113,697
)


(128,962
)Net income
    (loss)a


21,835



(75,281
)


(117,355
)


(131,890
)


(149,073
)Net loss allocable to common
    shareholdersa


(57,807
)


(117,075
)


(131,624
)


(145,376
)


(161,776
)Net loss allocable to common shareholders per common share,
    basic and
    dilutedb


(0.32
)


(0.64
)


(0.72
)


(0.80
)


(0.89
)Balance Sheet Data:Cash, cash equivalents and marketable
    securitiesc,d,e,f


364,479



373,895



108,960



170,983



183,988Total assets


1,409,758



1,375,984



1,090,126



1,131,221



1,202,725Long-term
    obligationse,f










377,213



336,650



301,113Class A convertible preferred
    stockd


255,011



259,948



244,811



230,542



217,056Class B convertible preferred
    stocke


614,912



573,795











Class C perpetual preferred
    stocke


223,958



200,877











Total stockholders (deficit ) equity


(107,653
)


(58,469
)


33,813



164,015



306,821Statement of Cash Flow Data:Net cash provided by operating activities


148,541



71,614



139,534



97,657



108,980Net cash used in investing
    activitiesc


(16,827
)


(293,596
)


(193,062
)


(103,455
)


(56,223
)Net cash provided by (used in) financing
    activitiese,f


(25,302
)


370,654



(6,960
)


(2,477
)


(109,908
)     a
    
    2009 included $53.3 million
    gain from the sale of marketable securities and a
    $5.8 million gain related to the settlement agreement
    associated with our holding of Global Crossing debt securities.
    2008 included $35.9 million of investment gain from the
    settlement of litigation related to our holding of Allegiance
    debt securities, partially offset by a $20.9 million
    non-cash impairment of marketable securities. 2007 included
    $21.5 million of investment income from settlements of
    legal matters related to our holding of Global Crossing debt
    securities.

b
    
    2009 included $0.29 per share from
    the $53.3 million gain of the sale of marketable
    securities. 2008 included $0.20 per share from the settlement of
    litigation related to our holding of Allegiance debt securities,
    partially offset by a $0.11 per share non-cash impairment of
    marketable securities. 2007 included $0.12 per share from
    settlements of legal matters related to our holding of Global
    Crossing debt securities.c
    
    2009 included investment gains of
    $53.3 million related to the sale of marketable securities
    and $5.8 million related to the settlement agreement
    associated with the Companys holding of Global Crossing
    debt securities. 2008 included $137.2 million of payments
    for 30




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##### 



marketable securities purchases,
    partially offset by $57.4 million received from the
    settlement of litigation related to our holding of Allegiance
    debt securities. 2007 and 2006 included $21.5 million and
    $12.7 million, respectively, of investment income from
    settlements of legal matters related to our holding of Global
    Crossing debt securities.

d
    
    2009 included the Companys
    redemption and retirement of 304,314 shares of Class A
    preferred stock at an aggregate purchase price of approximately
    $18.4 million.

e
    
    2008 included proceeds of
    $75.0 million from the issuance of a promissory note to a
    related party. Subsequently, in 2008 0.8 million shares of
    Class B convertible preferred stock and Class C
    perpetual preferred stock were issued to affiliates of the
    Chairman resulting in repayment of all our promissory note and
    credit facility and net cash provided by financing activities of
    $307.0 million.

f
    
    2005 includes a voluntary payment
    of $100.0 million on our long-term obligations.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS    Executive
    Summary
           31




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##### 



8-K
          Critical
    Accounting Policies and Estimates
   32




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##### 



Revenue
    Recognition
    Receivable
    Reserves
  Sales
    Credit Reserves
      Allowance
    for Doubtful Accounts
    month-to-month
  Cost
    of Service
   33




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##### 



Assessment
    of Loss Contingencies
    Property
    and Equipment
    Impairment
    of Long-lived Assets
    Goodwill
    and Indefinite Lived-Intangible Assets
   34




---



##### 



,
   35




---



##### 



Results
    of Operations
    % of





% ofConsolidated





Consolidated


Change2009


Revenue


2008


Revenue


Dollars


PercentRevenue

$
1,521,288



100.0
%

$
1,477,610



100.0
%

$
43,678



3.0
%Cost and expensesCost of service*


879,979



57.8



871,445



58.9



8,534



1.0
%Selling, general and administrative


489,427



32.2



497,616



33.7



(8,189
)


(1.6
)%Depreciation and amortization


180,144



11.8



189,228



12.8



(9,084
)


(4.8
)%Impairment of LMDS licenses


8,282



0.5







0.0



8,282



NMLoss on disposal of assets


10,688



0.7



4,134



0.3



6,554



158.5
%Total cost and expenses


1,568,520



103.0



1,562,423



105.7



6,097



0.4
%Loss from operations


(47,232
)


(3.1
)


(84,813
)


(5.7
)


37,581



(44.3
)%Interest income


11,844



0.8



7,398



0.5



4,446



60.1
%Investment gain, net


59,986



3.9



19,187



1.3



40,799



212.6
%Interest expense, net


(1,568
)


(0.1
)


(21,322
)


(1.5
)


19,754



(92.6
)%Other income






NM



257



NM



(257
)


(100.0
)%Net income (loss) before income taxes


23,030



1.5



(79,293
)


(5.4
)


102,323



(129.0
)%Income tax benefit (expense)


(1,195
)


(0.1
)


4,012



0.3



(5,207
)


(129.8
)%Net income (loss)


21,835



1.4



(75,281
)


(5.1
)


97,116



(129.0
)%Preferred stock accretion


(79,642
)


(5.2
)


(41,794
)


(2.8
)


(37,848
)


90.6
%Net loss allocable to common shareholders

$
(57,807
)


(3.8
)%

$
(117,075
)


(7.9
)%

$
59,268



(50.6
)%   % of





% ofConsolidated





Consolidated


Change2008


Revenue


2007


Revenue


Dollars


PercentRevenue

$
1,477,610



100.0
%

$
1,428,665



100.0
%

$
48,945



3.4
%Cost and expensesCost of service*


871,445



58.9



815,012



57.0



56,433



6.9
%Selling, general and administrative


497,616



33.7



508,901



35.6



(11,285
)


(2.2
)%Depreciation and amortization


189,228



12.8



206,953



14.5



(17,725
)


(8.6
)%Loss on disposal of assets


4,134



0.3



7,936



0.6



(3,802
)


(47.9
)%Total cost and expenses


1,562,423



105.7



1,538,802



107.7



23,621



1.5
%Loss from operations


(84,813
)


(5.7
)


(110,137
)


(7.7
)


25,324



(23.0
)%Interest income


7,398



0.5



8,182



0.6



(784
)


(9.6
)%Investment gain, net


19,187



1.3



20,863



1.4



(1,676
)


(8.0
)%Interest expense, net


(21,322
)


(1.5
)


(37,681
)


(2.6
)


16,359



(43.4
)%Other income


257



NM



2,205



0.2



(1,948
)


(88.3
)%Net loss before income taxes


(79,293
)


(5.4
)


(116,568
)


(8.1
)


37,275



(32.0
)%Income tax benefit (expense)


4,012



0.3



(787
)


(0.1
)


4,799



(609.8
)%Net loss


(75,281
)


(5.1
)


(117,355
)


(8.2
)


42,074



(35.9
)%Preferred stock accretion


(41,794
)


(2.8
)


(14,269
)


(1.0
)


(27,525
)


192.9
%Net loss allocable to common shareholders

$
(117,075
)


(7.9
)%

$
(131,624
)


(9.2
)%

$
14,549



(11.1
)%     *
    
    Exclusive of depreciation and
    amortization expense  NM
    
     not meaningful 36




---



##### 



Revenue 
    2009 Compared to 2008
  IP-based IP-based
    % of





% of


Change2009


Revenue


2008


Revenue


Dollars


PercentCore servicesBroadband

$
798,349



52.5
%

$
670,616



45.4
%

$
127,733



19.0
%Integrated/Voice


271,818



17.9
%


317,423



21.5
%


(45,605
)


(14.4
)%Total core services


1,070,167



70.3
%


988,039



66.9
%


82,128



8.3
%Legacy/TDM services


451,121



29.7
%


489,571



33.1
%


(38,450
)


(7.9
)%Total revenue

$
1,521,288



100.0
%

$
1,477,610



100.0
%

$
43,678



3.0
%   Core Services. IP-enabled
  IP-based year-over-year, IP-based
  year-over-year Ethernet-Over-Copper
  IP-enabled. IP-enabled
  Legacy/TDM Services.
 37




---



##### 



Revenue 
    2008 Compared to 2007
    % of





% of


Change2008


Revenue


2007


Revenue


Dollars


PercentCore servicesBroadband

$
670,616



45.4
%

$
530,257



37.1
%

$
140,359



26.5
%Integrated/Voice


317,423



21.5
%


337,324



23.6
%


(19,901
)


(5.9
)%Total core services


988,039



66.9
%


867,581



60.7
%


120,458



13.9
%Legacy/TDM services


489,571



33.1
%


561,084



39.3
%


(71,513
)


(12.7
)%Total revenue

$
1,477,610



100.0
%

$
1,428,665



100.0
%

$
48,945



3.4
%   Core Services.
  IP-enabled
  Legacy/TDM Services.
  COS 
    2009 Compared to 2008
  rights-of-way
 38




---



##### 



% of





% of


Change2009


Revenue


2008


Revenue


Dollars


PercentTelecommunications services

$
627,379



41.2
%

$
622,646



42.1
%

$
4,733



0.8
%Network operations


197,652



13.0
%


192,379



13.0
%


5,273



2.7
%Pass-through taxes


54,948



3.6
%


56,420



3.8
%


(1,472
)


(2.6
)%Total cost of services

$
879,979



57.8
%

$
871,445



58.9
%

$
8,534



1.0
%           COS 
    2008 Compared to 2007
    % of





% of


Change2008


Revenue


2007


Revenue


Dollars


PercentTelecommunications services

$
622,646



42.1
%

$
584,690



40.9
%

$
37,956



6.5
%Network operations


192,379



13.0
%


180,836



12.7
%


11,543



6.4
%Pass-through taxes


56,420



3.8
%


49,486



3.5
%


6,934



14.0
%Total cost of services

$
871,445



58.9
%

$
815,012



57.0
%

$
56,433



6.9
%    39




---



##### 



Selling,
    General and Administrative  2009 Compared to
    2008
      Selling,
    General and Administrative  2008 Compared to
    2007
    Depreciation
    and Amortization
       40




---



##### 



Impairment
    of LMDS Licenses
    Investment
    Gain, Net
    available-for-sale other-than-temporary
    Interest
    Expense, Net
      Capital
    Expenditures
  Capital Expenditures(dollars in thousands)

Dollars


% of Revenue2009

$
198,974



13.1
%2008

$
216,958



14.7
%2007

$
215,182



15.1
%   IP-based
 41




---



##### 



Segment
    Financial Results
    Liquidity
    and Capital Resources
    Redemption
    of Our 6% Class A Convertible Preferred Stock
      Debt
    Retirement through Issuance of Preferred Stock
   42




---



##### 



Cash
    Flow
  available-for-sale IP-based
    2009

2008

2007Cash provided by operating activities

$
148,541


$
71,614


$
139,534Cash used in investing activities

$
(16,827
)

$
(293,596
)

$
(193,062
)Cash (used in) provided by financing activities

$
(25,302
)

$
370,654


$
(6,960
)   Operating Activities.
    Investing Activities. available-for-sale
 43




---



##### 



Financing Activities.
    Capital Requirements. IP-based
  Contractual
    Obligations
    Less








More thanTotal


than 1 year


1-3 Years


3-5 Years


5 yearsCapital lease obligations

$
22.4


$
5 .8


$
4 .7


$
3 .0


$
8 .9Operating lease obligations


297.6



64.0



106.4



78.8



48.4Purchase
    obligations1


355.8



81.5



120.1



68.7



85.5Redemption of Class A preferred stock


258.8



258.8











Total contractual obligations

$
934.6


$
410.1


$
231.2


$
150.5


$
142.8     1
    
    Includes various contractual
    obligations with other telecommunications service providers
    associated with maintenance costs, software licenses and use
    fees to enable us to provide high quality telecommunications
    services to our customers under the most cost efficient rates.  Off-Balance
    Sheet Arrangements
    Recently
    Issued Accounting Pronouncements
  2009-13 Revenue Recognition (Topic 605)  Multiple
    Deliverable Revenue Arrangements.
 44




---



##### 



2010-06 Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements. 2010-06 2010-06 2010-06
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Report of Independent Registered Public
    Accounting Firm


46Consolidated Balance Sheets


48Consolidated Statements of Operations


49Consolidated Statements of Stockholders
    (Deficit) Equity


50Consolidated Statements of Cash Flows


51Notes to Consolidated Financial Statements


52Financial Statement ScheduleSchedule II  Valuation and
    Qualifying Accounts


84  45




---



##### 



Report of
    Independent Registered Public Accounting Firm     Internal Control  Integrated Framework
          Internal Control  Integrated Framework
      46




---



##### 



Report
    of Independent Registered Public Accounting Firm
               47




---



##### 



XO
    Holdings, Inc.
  Consolidated
    Balance Sheets
 (in
    thousands, except per share data)
  December 31,2009


2008ASSETSCurrent AssetsCash and cash equivalents

$
363,159


$
256,747Marketable securities


1,320



117,148Accounts receivable, net of allowance for doubtful accounts of
    $11,052 and $9,727 respectively


153,745



152,622Prepaid expenses and other current assets


29,248



41,200Total current assets


547,472



567,717Property and equipment, net


749,930



724,404Intangible assets, net


45,233



53,515Other assets


67,123



30,348Total Assets

$
1,409,758


$
1,375,984LIABILITIES, REDEEMABLE PREFERRED STOCK AND
    STOCKHOLDERS DEFICITCurrent LiabilitiesAccounts payable

$
77,344


$
93,547Accrued liabilities


220,455



221,356Total current liabilities


297,799



314,903Deferred revenue, less current portion


82,400



29,715Other liabilities


43,331



55,215Total Liabilities


423,530



399,833Class A convertible preferred stock


255,011



259,948Class B convertible preferred stock


614,912



573,795Class C perpetual preferred stock


223,958



200,877Commitments and contingenciesStockholders DeficitWarrants, common stock and additional paid in capital: par value
    $0.01 per share, 1,000,000 shares authorized; 182,075
    shares issued and outstanding


864,282



941,270Accumulated other comprehensive income (loss)


1,125



(4,844
)Accumulated deficit


(973,060
)


(994,895
)Total Stockholders  Deficit


(107,653
)


(58,469
)Total Liabilities, Redeemable Preferred Stock and
    Stockholders Deficit

$
1,409,758


$
1,375,984    48




---



##### 



XO
    Holdings, Inc.
  Consolidated
    Statements of Operations
 (in
    thousands, except per share data)
  Years Ended December 31,2009


2008


2007Revenue

$
1,521,288


$
1,477,610


$
1,428,665Costs and expensesCost of service (exclusive of depreciation and amortization)


879,979



871,445



815,012Selling, general and administrative


489,427



497,616



508,901Depreciation and amortization


180,144



189,228



206,953Impairment of LMDS licenses


8,282







Loss on disposal of assets


10,688



4,134



7,936Total costs and expenses


1,568,520



1,562,423



1,538,802Loss from operations


(47,232
)


(84,813
)


(110,137
)Interest income


11,844



7,398



8,182Investment gain, net


59,986



19,187



20,863Interest expense, net


(1,568
)


(21,322
)


(37,681
)Other income






257



2,205Net income (loss) before income taxes


23,030



(79,293
)


(116,568
)Income tax benefit (expense)


(1,195
)


4,012



(787
)Net income (loss)


21,835



(75,281
)


(117,355
)Preferred stock accretion


(79,642
)


(41,794
)


(14,269
)Net loss allocable to common shareholders

$
(57,807
)

$
(117,075
)

$
(131,624
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.32
)

$
(0.64
)

$
(0.72
)Weighted average shares, basic and diluted


182,075



182,075



182,048    49




---



##### 



XO
    Holdings, Inc.
  Consolidated
    Statements of Stockholders (Deficit) Equity
 (In
    thousands, except for share data)
   Common Stock and





Accumulated OtherAdditional Paid-In-Capital


Accumulated


ComprehensiveShares


Amount


Deficit


Income (Loss)


TotalBalance at January 1, 2007


182,001,285


$
965,394


$
(802,259
)

$
880


$
164,015Stock-based compensation and issuance of common stock through
    employee benefit plans


73,750



2,302











2,302Preferred stock accretion






(14,269
)










(14,269
)Comprehensive loss:Net loss










(117,355
)






(117,355
)Net unrealized holding losses on
    available-for-sale
    securities














(880
)


(880
)Total comprehensive loss










(117,355
)


(880
)


(118,235
)Balance at December 31, 2007


182,075,035



953,427



(919,614
)






33,813Stock-based compensation






1,445











1,445Issuance of preferred stock under stock purchase agreement






28,192











28,192Preferred stock accretion






(41,794
)










(41,794
)Comprehensive loss:Net loss










(75,281
)






(75,281
)Net unrealized holding losses on
    available-for-sale
    securities














(4,844
)


(4,844
)Total comprehensive loss










(75,281
)


(4,844
)


(80,125
)Balance at December 31, 2008


182,075,035



941,270



(994,895
)


(4,844
)


(58,469
)Stock-based compensation






683











683Redemption of preferred stock






1,971











1,971Preferred stock accretion






(79,642
)










(79,642
)Comprehensive income:Net income










21,835







21,835Net unrealized holding gain on
    available-for-sale
    securities














5,969



5,969Total comprehensive income










21,835



5,969



27,804Balance at December 31, 2009


182,075,035


$
864,282


$
(973,060
)

$
1,125


$
(107,653
)    50




---



##### 



XO
    Holdings, Inc.
  Consolidated
    Statements of Cash Flows
 (in
    thousands)
  Years Ended December 31,2009


2008


2007OPERATING ACTIVITIES:Net income (loss)

$
21,835


$
(75,281
)

$
(117,355
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activitiesDepreciation and amortization


180,144



189,228



206,953Accrued interest converted to long term debt






18,627



40,563Provision for doubtful accounts


12,891



13,271



18,166Stock-based compensation


683



1,445



1,933(Gain) loss from investments


(59,986
)


(35,928
)


(21,518
)Impairment loss on marketable securities






16,519



655Impairment of LMDS licenses


8,282







Changes in reserves and liability estimates










(26,299
)Loss on disposal of assets


10,688



4,134



7,936Changes in assets and liabilitiesAccounts receivable


(14,014
)


(34,188
)


(3,593
)Other assets


(24,823
)


(23,914
)


(3,330
)Accounts payable


(33,950
)


3,676



(3,997
)Accrued liabilities


46,791



(5,975
)


39,420Net cash provided by operating activities


148,541



71,614



139,534INVESTING ACTIVITIES:Capital expenditures


(198,974
)


(216,958
)


(215,182
)Proceeds from fixed asset sales


363



2,969



602Purchase of
    available-for-sale
    investments






(137,178
)


Proceeds from the sale of
    available-for-sale
    investments


180,930



132



Proceeds from the recovery of investments


854



57,439



21,518Net cash used in investing activities


(16,827
)


(293,596
)


(193,062
)FINANCING ACTIVITIES:Proceeds from preferred stock issuance






329,242



Proceeds from issuance of related party note






75,000



Payments on long-term debt






(22,285
)


Redemption of preferred stock


(18,411
)






Financing costs






(4,741
)


Payments on capital leases


(6,891
)


(6,562
)


(7,328
)Proceeds from employee stock option exercises










368Net cash (used in) provided by financing activities


(25,302
)


370,654



(6,960
)Net increase (decrease) in cash and cash equivalents


106,412



148,672



(60,488
)Cash and cash equivalents, beginning of period


256,747



108,075



168,563Cash and cash equivalents, end of period

$
363,159


$
256,747


$
108,075SUPPLEMENTAL DATA:Cash paid for interest

$
1,784


$
1,466


$
1,290Cash paid for income taxes

$
1,109


$
951


$
4Accrued capital expenditures and capital leases

$
45,521


$
27,773


$
44,391Non-cash debt extinguishment through issuance of preferred stock

$



$
450,758


$
Increase in additional paid in capital related to the issuance
    of preferred stock

$



$
28,192


$
    51




---



##### 



XO
    Holdings, Inc.
  Notes
    to Consolidated Financial Statements
  1.
    DESCRIPTION
    OF BUSINESS  end-to-end
  2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  a. Consolidation
   b. Estimates
   c. Cash
    and Cash Equivalents
   d. Marketable
    Securities
 available-for-sale available-for-sale other-than-temporary
  e. Property
    and Equipment, Net
  52




---



##### 



Telecommunications networks and acquired bandwidth

3-20 yearsFurniture, fixtures, equipment and other

5-7 yearsLeasehold improvements

shorter of estimated useful life or term
    of the lease     f. Goodwill
    and Indefinite Lived Intangible Assets
 ,
  g. Long-lived
    Assets
   h. Fair
    Value
  53




---



##### 



i. Asset
    Retirement Obligations
   j. Redeemable
    Preferred Stock
   k. Income
    Taxes
 Income Taxes.
    l. Revenue
    Recognition
 Services
   Installation
    Revenue
   Network
    Capacity Leases
   Sales
    Credit Reserves
  54




---



##### 



Reciprocal
    Compensation
   m. Cost
    of Service
 rights-of-way
  n. Concentrations
   o. Allowances
    for Doubtful Accounts
   p. Stock-Based
    Compensation
  55




---



##### 



q. Leases
   r. Transaction
    Based Taxes and Other Surcharges
   s. Advertising
   t. New
    Accounting Pronouncements
 2009-13 Revenue Recognition (Topic) 605)  Multiple
    Deliverable Revenue Arrangements.
  2010-06 Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements. 2010-06 2010-06 2010-06
  3.
    PRIOR
    PERIOD ADJUSTMENTS   56




---



##### 



2007Prior

AdjustedUnderutilized operating lease liability

$
20,422


$
28,953SG&A

$
507,200


$
508,901Net loss

$
(115,654
)

$
(117,355
)Accumulated deficit-beginning

$
(795,426
)

$
(802,259
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.71
)

$
(0.72
)   4.
    FAIR
    VALUE MEASUREMENTS    Quoted Prices inActive Markets(Level 1)Available-for-sale
    marketable equity securities

$
1,320     Total ImpairmentSignificant

Losses for theUnobservable

Year EndedInputs

December 31,(Level 3)

2009LMDS licenses

$
27,500


$
(8,282
)   ,
 57




---



##### 



5.
    MARKETABLE
    SECURITIES  available-for-sale
  Gross UnrealizedCost


Gains


Losses


Fair ValueDecember 31, 2009Equity securities

$
195


$
1,125


$



$
1,320Total

$
195


$
1,125


$



$
1,320December 31, 2008Equity securities

$
10,632


$



$



$
10,632Corporate debt securities


111,360



1,835



(6,679
)


106,516Total

$
121,992


$
1,835


$
(6,679
)

$
117,148   available-for-sale
  other-than-temporary
  available-for-sale other-than-temporary other-than-temporary
 58




---



##### 



6.
    PROPERTY
    AND EQUIPMENT    2009


2008Telecommunications networks and acquired bandwith

$
1,376,254


$
1,211,894Furniture, fixtures, equipment and other


410,063



371,5611,786,317



1,583,455Less: accumulated depreciation


(1,112,171
)


(931,607
)674,146



651,848Construction-in-progress,
    parts and equipment


75,784



72,556Property and equipment, net

$
749,930


$
724,404   construction-in-progress
    7.
    INTANGIBLE
    ASSETS    2009


2008Customer relationships

$
112,366


$
112,366Internally developed technology


9,521



9,521Acquired trade names


5,673



5,673$
127,560


$
127,560Less accumulated amortization


(127,560
)


(127,560
)



Broadband wireless licenses  indefinite life asset


27,500



35,782XO trade name  indefinite life asset


16,662



16,662Goodwill  indefinite life asset


1,071



1,071$
45,233


$
53,515    59




---



##### 



8.
    ACCRUED
    LIABILITIES    2009


2008Accrued compensation

$
46,284


$
60,082Deferred revenue


46,382



44,744Accrued operating taxes


40,136



43,469Accrued operating expenses


65,531



52,784Other accrued liabilities


22,122



20,277$
220,455


$
221,356   9.
    UNDERUTILIZED
    OPERATING LEASES      Balance as of January 1, 2008

$
28,953Usage, net


(7,275
)Accretion


2,499Estimate revisions


(566
)Balance as of December 31, 2008

$
23,611Usage, net


(6,366
)Accretion


2,759Estimate revisions


(1,221
)Balance as of December 31, 2009

$
18,783   10.
    ASSET
    RETIREMENT OBLIGATIONS   60




---



##### 



Balance as of January 1, 2008

$
5,607Additions


1,231Estimate revisions


851Accretion


503Balance as of December 31, 2008


8,192Additions


18Estimate revisions


(3,498
)Accretion


458Balance as of December 31, 2009

$
5,170   11.
    LONG-TERM
    DEBT TO RELATED PARTIES      12.
    REDEEMABLE
    PREFERRED STOCK  Issuance of Class A Convertible Preferred Stock
      61




---



##### 



Issuance
    of Class B Convertible Preferred Stock and Class C
    Perpetual Preferred Stock
    62




---



##### 



Terms of
    Class B Convertible Preferred Stock
          63




---



##### 



Terms of Class C Perpetual Preferred Stock
           Initial
    Recognition
    64




---



##### 



13.
    STOCKHOLDERS
    EQUITY  Warrants
   
    Series A warrants to purchase 9.5 million shares of
    the Companys common stock at an exercise price of $6.25
    per share;
    Series B warrants to purchase 7.1 million shares of
    the Companys common stock at an exercise price of $7.50
    per share; and
    Series C warrants to purchase 7.1 million shares of
    the Companys common stock at an exercise price of $10.00
    per share.    Universal
    Shelf Registration Statement
 Form S-3 No. 333-147643) S-3 S-3.
  Earnings
    (Loss) Per Share
     2009

2008

2007Stock options


7.4



9.0



9.6Warrants


23.7



23.7



23.7Class A preferred stock


55.2



56.3



53.0Class B convertible preferred stock


408.9



381.5



  65




---



##### 



14.
    SHARE-BASED
    COMPENSATION  Stock
    Incentive Plans
       Stock
    Options
   Weighted AverageNumber of


Weighted Average


RemainingShares


Exercise Price


Contractual TermOutstanding at December 31, 2008


9,022,674


$
5.05



5.4 yearsGranted






Forfeited


(573,250
)


5.14Expired


(1,007,785
)


5.14Outstanding at December 31, 2009


7,441,639


$
5.03



4.1 yearsExercisable at December 31, 2009


6,983,889


$
5.03



3.7 yearsExpected to vest at December 31, 2009


1,119,421


$
5.02



4.5 yearsAvailable for future issuance at December 31, 2009


8,175,813    66




---



##### 



Fair
    Value Determination
   2008


2007Weighted average grant date price per share of Company stock

$
1.32


$
4.55Weighted average exercise price

$
5.00


$
5.00Range of expected volatility


61.98-69.74
%


60.00-63.09
%Range of risk free interest rate


2.57-3.30
%


4.42-5.06
%Dividend yield






Expected term (in years)


6.25



6.25     Unrecognized Compensation
   15.
    EMPLOYEE
    SAVINGS AND RETIREMENT PLAN    16.
    INCOME
    TAXES   67




---



##### 



December 31,2009


2008Deferred tax assets:Provisions not currently deductible

$
71,793


$
69,266Property, equipment and other long-term assets (net)


334,281



404,853Net operating loss and capital loss carry forwards


731,228



675,836Total deferred tax assets


1,137,302



1,149,955Valuation allowance


(1,137,302
)


(1,149,955
)Net deferred tax assets






Deferred tax liabilities:Other identifiable intangibles


(6,498
)


(6,498
)Total deferred tax liabilities


(6,498
)


(6,498
)Net deferred tax liability

$
(6,498
)

$
(6,498
)         Year Ended December 31,2009


2008


2007Current income tax (benefit) expense:State

$
1,191


$
(4,013
)

$
1,116Foreign


4



1



4Total current income tax (benefit) expense


1,195



(4,012
)


1,120Deferred income tax benefitState










(333
)Total deferred income tax benefit










(333
)Total income tax (benefit) expense

$
1,195


$
(4,012
)

$
787  68




---



##### 



2009


2008


2007Statutory U.S. federal rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal benefit


12.0



4.0



4.0Reduction of state deferred tax assets










(31.7
)Other


2.4



(0.6
)


0.5Subtotal


49.4



38.4



7.8Valuation allowance for deferred tax assets


(44.4
)


(33.3
)


(8.5
)Effective income tax rate


5.0
%


5.1
%


(0.7
%)     Reconciliation
    of Unrecognized Tax Benefits (in
    thousands)
  Gross unrecognized tax benefits at January 1, 2009

$
423,298Gross amount of increases and decreases from tax
    positions  prior period


Decreases resulting from expiration of statutes of limitation


Gross unrecognized tax benefits at December 31, 2009

$
423,298     Interest
    and Penalties
   Accrued interest as of January 1, 2009

$
315Increase to accrued interest


66Accrued interest as of December 31, 2009

$
381     Possible
    Changes in Unrecognized Tax Benefits
   Open Tax
    Years
   Tax
    Allocation Agreement
  69




---



##### 



Reconsolidation
   17.
    RELATED
    PARTY TRANSACTIONS      At December 31,
    20091

At December 31,
    20082Outstanding Common Stock

Greater than 50%

Greater than 50%Series A, B and C
    Warrants3

Greater than 40%

Greater than 40%Class A Convertible Preferred
    Stock4

Greater than 80%

Greater than 70%Class B Convertible Preferred Stock

100%

100%Class C Perpetual Preferred Stock

100%

100%     1
    
    As reported in the January 4,
    2010 Form 4 for the Chairman and other parties to such
    joint filing, and the January 4, 2010, Amendment
    No. 23 to Schedule 13D filed by the Chairman and other
    parties to such joint filing.2
    
    As reported in the January 5,
    2009 Form 4 for the Chairman, and the January 5, 2009
    Amendment No. 15 to Schedule 13D filed by the Chairman
    and other parties to such joint filing. 70




---



##### 



3
    
    The terms of the Companys
    Series A, B and C Warrants provided that all such
    unexercised warrants expired on January 15, 2010.4
    
    The original terms of the
    Companys Class A preferred stock required that by
    January 15, 2010, the Company would redeem in cash and in a
    manner provided for therein all of the shares of Class A
    preferred stock then outstanding at a redemption price equal to
    100% of its liquidation preference. On February 5, 2009,
    ACF Holding agreed to extend the date on which the Company would
    be required to redeem the shares of Class A preferred stock
    held by ACF Holding (the ACF Holding Shares) from
    January 15, 2010 to a date no later than April 15,
    2010. The extension did not affect the redemption date of any of
    the shares of Class A Preferred Stock other than the ACF
    Holding Shares. Accordingly, on January 15, 2010, the
    Company redeemed all 599,137 shares of Class A
    preferred stock held by entities unaffiliated with the Chairman
    at an aggregate purchase price of approximately
    $41.4 million. As of March 31, 2010 ACF Holding is the
    holder of 100% of the remaining 3,096,549 shares of
    Class A preferred stock. The Company is required to redeem
    any outstanding ACF Holding Shares for cash at an aggregate
    liquidation preference of up to $217.4 million at a date no
    later than April 15, 2010.        18.
    SEGMENT
    INFORMATION   71




---



##### 



Form 10-K
  2008IntercompanyXOC


Nextlink


Elimination


ConsolidatedRevenue from external customers

$
1,476,061


$
1,549


$



$
1,477,610Inter-segment revenue


550



1,807



(2,357
)


Total revenue

$
1,476,611


$
3,356


$
(2,357
)

$
1,477,610Depreciation and amortization

$
188,086


$
1,142


$



$
189,228Loss from operations

$
(69,438
)

$
(15,375
)

$



$
(84,813
)Interest income














7,398Other income














257Investment gain, net














19,187Interest expense, net














(21,322
)Income tax benefit














4,012Net loss













$
(75,281
)   2007IntercompanyXOC


Nextlink


Elimination


ConsolidatedRevenue from external customers

$
1,428,050


$
615


$



$
1,428,665Inter-segment revenue


274



905



(1,179
)


Total revenue

$
1,428,324


$
1,520


$
(1,179
)

$
1,428,665Depreciation and amortization

$
206,452


$
501


$



$
206,953Loss from operations

$
(96,945
)

$
(13,192
)

$



$
(110,137
)Interest income














8,182Other income














2,205Investment gain, net














20,863Interest expense, net














(37,681
)Income tax expense














(787
)Net loss













$
(117,355
)   Major Customers.
  Form 10-K
  XOC

Nextlink

Consolidated2008

$
207,922


$
9,036


$
216,9582007

$
210,156


$
5,026


$
215,182   Form 10-K
  XOC

Nextlink

ConsolidatedDecember 31, 2008

$
1,322,891


$
53,093


$
1,375,984  72




---



##### 



19.
    COMMITMENTS
    AND CONTINGENCIES  Leases
     2010





$
64,0112011






55,6562012






50,7302013






44,4212014






34,379Thereafter






48,357Total minimum contractual payments





$
297,554       2009


2008Network assets

$
17,239


$
16,552Accumulated depreciation


(8,182
)


(6,580
)Net capitalized lease assets

$
9,057


$
9,972     2010





$
5,7832011






3,1022012






1,5712013






1,5712014






1,439Thereafter






8,955Total minimum capital lease payments






22,421Less: imputed interest






(6,183
)Less: current portion of capital lease payments






(4,650
)Long-term portion of capital lease payments





$
11,588  73




---



##### 



Other
    Commitments
     2010

$
81,4982011


62,2872012


57,7702013


55,4882014


13,163Thereafter


85,629Total minimum lease payments

$
355,835     Indemnification
   Legal
    Proceedings
   Metro
    Nashville
 rights-of-way.
 74




---



##### 



Nashville
    Electric Service
 month-to-month,
  Choice
    Tel
  75




---



##### 



City of
    Memphis Franchise Fees
 BellSouth vs. City of Memphis rights-of-way. rights-of-way.
  R2
    Derivative Litigation
   Hillenmeyer
    Derivative Litigation
   Other
    Contingencies
  76




---



##### 



20.
    UNAUDITED
    SELECTED QUARTERLY DATA    Quarters Ended 2009March 31


June 30


September 30a


December 31bRevenue

$
377,825


$
385,624


$
382,000


$
375,839Cost of service *

$
220,004


$
229,565


$
217,712


$
212,698Loss from operations

$
(17,054
)

$
(16,817
)

$
(243
)

$
(13,118
)Net (loss) income

$
(4,468
)

$
(5,994
)

$
19,032


$
13,265Net (loss) income allocable to common shareholders

$
(23,976
)

$
(25,868
)

$
(910
)

$
(7,053
)Net (loss) income allocable to common shareholders per common
    share, basic and diluted

$
(0.13
)

$
(0.14
)

$



$
(0.04
)   Quarters Ended 2008March 31


June 30


September 30c


December 31dRevenue

$
361,149


$
367,370


$
373,925


$
375,166Cost of service *

$
228,345


$
213,273


$
210,926


$
218,901Loss from operations

$
(40,569
)

$
(19,933
)

$
(5,607
)

$
(18,704
)Net (loss) income

$
(44,412
)

$
(29,001
)

$
(23,330
)

$
21,462Net (loss) income allocable to common shareholders

$
(48,113
)

$
(32,757
)

$
(38,351
)

$
2,146Net (loss) income allocable to common shareholders per common
    share, basic and diluted

$
(0.26
)

$
(0.18
)

$
(0.21
)

$
0.01     *
    
    Cost of service is presented
    exclusive of depreciation and amortization in all periods.  a
    
    September 2009 quarterly Net (loss)
    income and Net (loss) income allocable to common shareholders
    increased $16.3 million, or $0.09 per share, related to net
    investment gains.b
    
    December 2009 quarterly Net (loss)
    income and Net (loss) income allocable to common shareholders
    increased $25.7 million, or $0.14 per share, related to net
    investment gains.c
    
    September 2008 quarterly Net (loss)
    income and Net (loss) income allocable to common shareholders
    increased $15.4 million, or $0.08 per share, for impairment
    of marketable securities for
    other-than-temporary
    declines in market value.d
    
    December 2008 quarterly Loss from
    operations decreased $4.0 million, or $0.02 per share, and
    Net (loss) income and Net (loss) income allocable to common
    shareholders improved by $39.9 million, or $0.22 per share,
    due to the beneficial settlement of litigation with the ATLT. 77




---



##### 



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
    Rules 13a-15(e) 15d-15(e)
  Managements
    Report On Internal Control Over Financial Reporting
    Internal
    Control  Integrated Framework
       78




---



##### 



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   79




---



##### 



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a) Financial Statements
    (b) Exhibits
    2
.1

Third Amended Plan of Reorganization of XO Communications, Inc.,
    dated July 22, 2002 (incorporated by reference to
    exhibit 2.1 filed with the Current Report on
    Form 8-K/A
    of XO Communications, Inc. filed on November 26, 2002).2
.2

Plan Supplement, dated October 23, 2003, to the Third
    Amended Plan of Reorganization of XO Communications, Inc., dated
    July 22, 2002 (incorporated by reference to
    exhibit 2.2 filed with the Current Report on
    Form 8-K/A
    of XO Communications, Inc. filed on November 26, 2002).2
.3

Order Confirming Third Amended Plan of Reorganization, dated
    November 15, 2002 (incorporated by reference to
    exhibit 99.1 filed with the Current Report on
    Form 8-K/A
    of XO Communications, Inc. filed on November 26, 2002).2
.4

Asset Purchase Agreement, dated as of February 18, 2004, by
    and among XO Communications, Inc., Allegiance Telecom, Inc., and
    Allegiance Telecom Company Worldwide (incorporated by reference
    to exhibit 10.1 filed with the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on February 24, 2004).2
.5

Agreement and Plan of Merger, dated as of February 28, 2006
    by and among XO Communications, Inc., XO Holdings, Inc. and XO
    Communications, LLC (incorporated herein by reference to
    exhibit 2.1 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on March 6, 2006).3
.1

Certificate of Incorporation of XO Holdings, Inc., as filed with
    the Secretary of State of the State of Delaware on
    October 25, 2005 (incorporated by reference to
    exhibit 3.1 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on March 6, 2006).3
.2

Bylaws of XO Holdings, Inc. (incorporated by reference to
    exhibit 3.3 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on March 6, 2006).4
.1

Series A Warrant Agreement, dated as of January 16,
    2003, by and between XO Communications, Inc. and American Stock
    Transfer & Trust Company (incorporated by
    reference to exhibit 10.1 filed with the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on January 30, 2003).4
.2

Series B Warrant Agreement, dated as of January 16,
    2003, by and between XO Communications, Inc. and American Stock
    Transfer & Trust Company (incorporated by
    reference to exhibit 10.2 filed with the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on January 30, 2003).4
.3

Series C Warrant Agreement, dated as of January 16,
    2003, by and between XO Communications, Inc. and American Stock
    Transfer & Trust Company (incorporated by
    reference to exhibit 10.3 filed with the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on January 30, 2003).4
.4

Certificate of Designation of the Powers, Preferences and
    Relative, Participating, Optional and other Special Rights of
    the 6% Class A Convertible Preferred Stock and
    Qualifications, Limitations and Restrictions thereof, as filed
    with the Secretary of State of the State of Delaware on
    February 28, 2005 (incorporated by reference to
    exhibit 3.2 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on March 6, 2006).4
.5

Certificate of Designation of the Powers, Preferences and
    Relative Participating, Optional and Other Special Rights of the
    7% Class B Convertible Preferred Stock and Qualifications,
    Limitations and Restrictions Thereof (incorporated by reference
    to exhibit 4.1 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on July 28, 2008).4
.6

Certificate of Designation of the Powers, Preferences and
    Relative Participating, Optional and Other Special Rights of the
    9.50% Class C Perpetual Preferred Stock and Qualifications,
    Limitations and Restrictions Thereof (incorporated by reference
    to exhibit 4.2 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on July 28, 2008). 80




---



##### 



10
.1

XO Communications, Inc. 2002 Stock Incentive Plan (Amended and
    Restated as of June 19, 2003) (incorporated by reference to
    Appendix A of the Companys Definitive Proxy Statement
    for its 2004 Annual Meeting of Stockholders).(1)10
.2

Registration Rights Agreement, dated as of January 16,
    2003, between XO Communications, Inc. and High River Limited
    Partnership and Meadow Walk Limited Partnership (incorporated by
    reference to exhibit 10.4 filed with the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on January 30, 2003).10
.3

Registration Rights Agreement, dated as of August 6, 2004,
    by and among XO Communications, Inc., Tramore LLC, Cardiff
    Holdings, LLC and Amalgamated Gadget, L.P. (incorporated by
    reference to exhibit 10.1 filed with the Quarterly Report
    on
    Form 10-Q
    of XO Communications, Inc. for the quarterly period ended
    June 30, 2004).10
.4

Registration Rights Agreement, dated as of June 23, 2004,
    by and among Allegiance Telecom, Inc., Allegiance Telecom
    Company Worldwide, the Allegiance Telecom Liquidating Trust, and
    XO Communications, Inc. (incorporated by reference to
    exhibit 10.5 filed with the Annual Report on
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2004).10
.5

Amendment No. 1 to Registration Rights Agreement made and
    enacted by the Company as of April 28, 2006 (incorporated
    by reference to exhibit 10.2 filed with the Current Report
    on
    Form 8-K
    filed on May 2, 2006).10
.6

Employment Term Sheet, dated as of April 30, 2003, between
    XO Communications, Inc. and Carl J. Grivner, President and Chief
    Executive Officer of XO Communications, Inc. (incorporated by
    reference to exhibit 10.1 filed with the Quarterly Report
    on
    Form 10-Q
    of XO Communications, Inc. for the quarter ended March 31,
    2003).(1)10
.7

Change in Control Agreement by and between XO Communications,
    Inc. and Carl J. Grivner, President and Chief Executive Officer
    of XO Communications, Inc. (incorporated by reference to
    exhibit 10.2 filed with the Quarterly Report on
    Form 10-Q
    of XO Communications, Inc. for the quarter ended March 31,
    2003).(1)10
.8

Employment Agreement, effective as of September 25, 2000,
    by and between Wayne M. Rehberger and XO Communications, Inc.
    (incorporated by reference to exhibit 10.10 filed with the
    Annual Report on
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2003).(1)10
.9

Change in Control Severance Plan for Certain Covered Executives
    (Director and Above) of XO Communications, Inc., dated as of
    June 2, 2005. (incorporated by reference to
    exhibit 10.1 filed with the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on June 8, 2005).(1)10
.10

Indemnification Agreement by and between Adam Dell and XO
    Communications, Inc., dated as of November 2, 2004
    (incorporated by reference to exhibit 10.1 filed with the
    Quarterly Report on
    Form 10-Q
    of XO Communications, Inc. for the quarter ended
    September 30, 2004).10
.11

Indemnification Agreement by and between Robert Knauss and XO
    Communications, Inc., dated as of November 2, 2004
    (incorporated by reference to exhibit 10.2 filed with the
    Quarterly Report on
    Form 10-Q
    of XO Communications, Inc. for the quarter ended
    September 30, 2004).10
.12

Indemnification Agreement by and between Fredrik Gradin and XO
    Communications, Inc., dated as of November 2, 2004
    (incorporated by reference to exhibit 10.3 filed with the
    Quarterly Report on
    Form 10-Q
    of XO Communications, Inc. for the quarter ended
    September 30, 2004).10
.13

Cost Sharing and IRU Agreement, dated July 18, 1998,
    between Level 3 Communications, LLC and XO Intercity
    Holdings No. 2, LLC (f/k/a INTERNEXT LLC) (incorporated by
    reference to exhibit 10.8 filed with the Quarterly Report
    on
    Form 10-Q
    of NEXTLINK Communications, Inc. and NEXTLINK Capital, Inc. for
    the quarter ended September 30, 1998).10
.14

Master Agreement, dated August 8, 2002, between
    Level 3 Communications, Inc. and XO Communications, Inc.
    (incorporated by reference to exhibit 10.4.2 filed with the
    Annual Report on
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2002).10
.15

Stockholder Agreement, dated as of November 4, 2005, by and
    between XO Communications, Inc. and Cardiff Holdings LLC
    (incorporated by reference to exhibit 10.1 filed with the
    Current Report on
    Form 8-K
    of XO Communications, Inc. filed on November 9, 2005).10
.16

Guaranty, dated as of November 4, 2005, by and between
    Thornwood Associates Limited Partnership and XO Communications,
    Inc. (incorporated by reference to exhibit 10.2 filed with
    the Current Report on
    Form 8-K
    of XO Communications, Inc. filed on November 9, 2005). 81




---



##### 



10
.17

Assignment and Assumption Agreement, dated as of
    February 28, 2006, by and among XO Communications, Inc. and
    XO Holdings, Inc. (incorporated by reference to
    exhibit 10.1 filed with the Current Report on
    Form 8-K
    filed on March 06, 2006).10
.18

Lease Agreement dated February 28, 2007, between the
    Company and Presidents Park II, LLC (incorporated by reference
    to exhibit 10.27 filed with the Annual Report on
    Form 10-K
    for the year ended December 31, 2006).(2)10
.19

Stipulation and Agreement of Compromise, Settlement and Release,
    approved by the Delaware Court of Chancery on March 31,
    2008, among XO Holdings, Inc. and certain minority stockholders
    (incorporated by reference to exhibit 10.2 filed with the
    Current Report on
    Form 10-Q
    for the quarter ended March 31, 2008).10
.20

Stock Purchase Agreement dated as of July 25, 2008 by and
    between XO Holdings, Inc., Arnos Corp., Barberry Corp., High
    River Limited Partnership and ACF Industries Holding Corp.
    (incorporated by reference to exhibit 10.1 filed with the
    Current Report on
    Form 8-K
    of XO Holdings, Inc.).10
.21

Registration Rights Agreement dated as of July 25, 2008 by
    and between XO Holdings, Inc., Arnos Corp., Barberry Corp., High
    River Limited Partnership and ACF Industries Holding Corp.
    (incorporated by reference to exhibit 10.2 filed with the
    Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on July 28, 2008).10
.22

Tax Allocation Agreement dated as of July 25, 2008 by and
    between XO Holdings, Inc. and Starfire Holding Corporation
    (incorporated by reference to exhibit 10.3 filed with the
    Current Report on
    Form 8-K
    of XO Holdings, Inc. filed on July 28, 2008).10
.23

Undertaking dated August 28, 2008 by Starfire Holding
    Corporation for the benefit of XO Holdings, Inc. (incorporated
    by reference to exhibit 10.1 filed with the Current Report
    on
    Form 8-K
    filed on August 29, 2008).10
.24

XO Holdings, Inc. 2008 Annual Executive Bonus Plan (incorporated
    by reference to exhibit 10.8 filed with the Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2008).(1)10
.25

Settlement Agreement and Mutual Release In re Allegiance
    Telecom, Inc. et al., Debtors, dated October 21, 2008
    (incorporated by reference to exhibit 10.9 filed with the
    Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2008).10
.26

XO Holdings, Inc. 2009 Executive Bonus Plan (incorporated by
    reference to exhibit 10.1 filed with the Quarterly Report
    on
    Form 10-Q
    of XO Holdings, Inc. for the quarter ended March 31,
    2009).(1)10
.27

Employment Agreement, dated as of January 5, 2009, by and
    between XO Holdings, Inc. and Daniel J. Wagner (incorporated by
    reference to exhibit 10.1 filed with the Current Report on
    Form 8-K
    of XO Holdings, Inc., filed on January 20, 2009).(1)10
.28

Redacted version of Master Professional Services Agreement,
    executed April 31, 2009 and effective as of March 30,
    2009, by and between XO Communications Services, Inc. on behalf
    of itself, its operating affiliates and subsidiaries and Thomas
    Cady (incorporated by reference to exhibit 10.3 filed with
    the Quarterly Report on
    Form 10-Q
    of XO Holdings, Inc. for the quarter ended June 30,
    2009).(2)14
.1

XO Business Ethics (incorporated by reference to
    exhibit 14.1 filed with the Current Report on
    Form 8-K/A
    filed on May 2, 2006).21
.1

Subsidiaries of XO Holdings, Inc. (filed herewith).23
.1

Consent of Grant Thornton LLP (filed herewith).23
.2

Consent of KPMG LLP (filed herewith).31
.1

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act, as amended (filed herewith).31
.2

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act, as amended (filed herewith).32
.1

Certifications of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (filed
    herewith).     (1)
    
    Management contracts and
    compensatory plans and arrangements required to be filed
    pursuant to Item 15 (c).(2)
    
    Portions of this exhibit have been
    omitted and were filed separately with the Securities and
    Exchange Commission pursuant to the Registrants application
    requesting confidential treatment under Rule 406 of the
    Securities Act. 82




---



##### 



SIGNATURES
      March 31, 2010

/s/  Carl
    J. GrivnerCarl
    J. Grivner
    President and Chief Executive Officer
    (Principal Executive Officer)     Name

Title/s/  Carl
    J. GrivnerCarl
    J. Grivner

President and Chief Executive Officer, Director (Principal
    Executive Officer)/s/  Laura
    W. ThomasLaura
    W. Thomas

Senior Vice President and Chief Financial Officer (Principal
    Financial Officer)/s/  Keith
    MeisterKeith
    Meister

Director/s/  Vincent
    J. IntrieriVincent
    J. Intrieri

Director/s/  Robert
    L. KnaussRobert
    L. Knauss

Director/s/  David
    SchechterDavid
    Schechter

Director  83




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##### 



XO
    Holdings, Inc.Schedule II
    Valuation and Qualifying Accounts
    For The Years Ended December 31, 2009, 2008 and 2007
    (in thousands)
  AdditionsCharged to


Charged toBeginning


Costs and


Other





EndingBalance


Expenses


Accounts


Deductions


BalanceAllowance for doubtful accounts2007

$
16,754


$
18,166


$



$
(24,804
)

$
10,1162008

$
10,116


$
13,271


$



$
(13,660
)

$
9,7272009

$
9,727


$
12,891


$



$
(11,566
)

$
11,052    84