##### 





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, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   number: 0-30900
 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-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

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


23ITEM 1B.


Unresolved Staff Comments


30ITEM 2.


Properties


30ITEM 3.


Legal Proceedings


31ITEM 4.


Submission of Matters to a Vote of Security
    Holders


33PART IIITEM 5.


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


34ITEM 6.


Selected Financial Data


37ITEM 7.


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


38ITEM 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


54ITEM 8.


Financial Statements and Supplementary Data


54ITEM 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


54ITEM 9A.


Controls and Procedures


54ITEM 9B.


Other Information


57PART IIIITEM 10.


Directors, Executive Officers and Corporate
    Governance


57ITEM 11.


Executive Compensation


57ITEM 12.


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


57ITEM 13.


Certain Relationships and Related Transactions,
    and Director Independence


57ITEM 14.


Principal Accounting Fees and Services


57PART IVITEM 15.


Exhibits, Financial Statement Schedules


58Signatures


59




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##### 



Caution
    Regarding Forward-Looking Statements
  This Annual Report on
    Form 10-K
    (the Annual Report) contains forward-looking
    statements, as this term is defined in the Private Securities
    Litigation Reform Act of 1995. These statements can be
    identified by the use of words such as anticipate,
    believe, estimate, expect,
    plan, or other comparable words. Readers are
    cautioned not to place undue reliance on these forward-looking
    statements.
  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, among
    others, statements concerning:
  
    expectations regarding revenue, margins, expenses, capital
    expenditures and financial position in future periods;
    development of our fixed wireless communications business;
    and
    anticipated liquidity and financial resources.  Except as required by applicable law and regulations, we
    undertake no obligation to publicly update or revise 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.
  All such forward-looking statements are subject to various
    risks, uncertainties and changes in circumstances that are
    difficult to predict. Should one or more of these risks or
    uncertainties materialize, or should underlying assumptions
    prove incorrect, our actual results in future periods may differ
    materially from those expressed or implied in this document. The
    most important risks include our failure to:
  
    comply with the covenants in our Credit Facility;
    generate funds from operations sufficient to meet our cash
    requirements or execute our business strategy;
    raise additional capital through one or more offerings of
    debt and/or
    equity securities;
    prevail in our legal proceedings;
    increase the volume of traffic on our network;
    develop a market for our fixed wireless licenses; and
    achieve and maintain market penetration and revenue levels
    given the highly competitive nature of the telecommunications
    industry.  For further information regarding the risks and uncertainties
    that may affect our future results, refer to the information
    disclosed in Item 1A, Risk Factors, of this Annual
    Report.




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##### 



PART I  Item 1.
    Business  Overview
  carriers
      local exchange
    XO
    Communications
  dedicated
    Focus on Business and Carrier
    Customers.
  Focus on Data and IP Services. IP-based Voice over Internet Protocol VoIP IP-related
 1




---



##### 



IP-based IP-based IP-based IP-VPN Asynchronous Transfer Mode Frame Relay ATM IP-based IP-based MPLS IP-VPN Ethernet
  Utilize Our Network Assets. central office collocations on-network switches fiber optics Gbps capacity Mbps bandwidth router
  routers
  IP-based
    Provide Quality Services to our
    Customers.
 2




---



##### 



Leverage Nextlink Wireless Spectrum to Gain Customers and
    Reduce Network Costs.
  ILEC
  business-to-business 24-hour-a-day-7-day-a-week
    Network Transport, Data and Internet
    Services. T1
  private line point-to-point point-to-point back-up OC-192 Synchronous Optical
    Network
  Local Area Networks
  24-hour-a-day-7-day-a-week
  Converged and VoIP Services. IP-based
 3




---



##### 



Managed Services. Multi-Protocol Label Switching Virtual Private Network IP-VPN) IP-VPN site-to-site
  Interactive Voice Response
    Voice Services. interconnection
  Integrated Voice Response and
    Hosting.
  end-to-end
  Business
    Services
  end-to-end IP-based small-to-medium
 4




---



##### 



Small-to-Medium
    Business (SMB).
  Mid-Market Business.
  Enterprise.
  Government.
    Carrier
    Services
  CLECs ISPs interexchange carriers
 5




---



##### 



DS3 POP backbone IP-originated Public Switched Telephone Network
  Nextlink
  wireless backhaul LOS
    Preserve the Spectrum. local
    multipoint distribution system
  Focus on Growing Key Markets.
  Building Networks to Meet Customer
    Demand.
    (28-31 GHz
 6




---



##### 



License Number

City

State

Population

Band

License RenewalWPOL286

New York (PMSA of 5 boroughs & 3 counties)

NY

8,546,846

A3*

2/1/2016**     *
    
    31,075 to 31,225 MHz =
    150 MHz**
    
    On August 21, 2006, the FCC
    granted a request by Nextlink to extend the deadline for
    construction of the facilities in the NY A3 Block until October
    2008 to conform to the construction deadline for its other LMDS
    licenses in the New York marketplace.    LicenseNumber

City

State

Population

BandWPLM417

Atlanta

GA

3,197,171

BWPLM412

Austin

TX

899,361

BWPLM416

Baltimore

MD

2,430,563

BWPLM430

Birmingham

AL

1,200,336

AWPLM413

Boston

MA

4,133,895

BWPLM418

Chattanooga

TN

510,860

AWPLM405

Chicago

IL

8,182,076

BWPLM424

Cincinnati

OH

1,990,451

BWPLM422

Cleveland-Akron

OH

2,894,133

BWPLM410

Columbia

SC

568,754

AWPLM438

Columbus

OH

1,477,891

BWPON926

Denver

CO

2,073,952

A1(part)WPLM408

Detroit

MI

4,705,164

BWPLM398

Hartford

CT

1,123,678

BWPLM411

Hickory-Lenoir-Morganton

NC

292,409

AWPLM431

Huntsville

AL

439,832

AWPLM435

Indianapolis

IN

1,321,911

BWPLM436

Kansas City

MO

1,839,569

BWPLM434

Klamath Falls

OR

74,566

BWPLM420

Lakeland-Winterhaven

FL

405,382

BWPLM429

Lexington

KY

816,101

AWPLM401

Los Angeles

CA

14,549,810

AWPLM428

Louisville

KY

1,352,955

AWPLM423

Mansfield

OH

221,514

BWPLM433

Medford-Grants Pass

OR

209,038

BWPOH970

Milwaukee

WI

1,751,525

AWPLM419

Minneapolis-St. Paul

MN

2,840,561

AWPOH945

New Haven-Waterbury-Meriden

CT

978,311

BWPLM400

New London-Norwich

CT

357,482

BWPLM397

New York (whole BTA)

NY

18,050,615

BWPLM421

Ocala

FL

194,833

BWPLM432

Portland

OR

1,690,930

AWPOH956

Providence-Pawtucket, New Bedford- Fall River

RI, MA

1,509,789

AWPLM437

Rochester

NY

1,118,963

B 7




---



##### 



LicenseNumber

City

State

Population

BandWPLM407

Sacramento

CA

1,656,581

AWPLM402

San Diego

CA

2,498,016

BWPLM406

San Francisco-Oakland-San Jose

CA

6,420,984

BWPLM404

San Luis Obispo

CA

217,162

AWPLM403

Santa Barbara-Santa Maria

CA

369,608

AWPLM427

Seattle-Tacoma

WA

2,708,949

AWPLM425

St. Louis

MO

2,742,114

BWPLM409

Toledo

OH

782,184

BWPLM415

Washington

DC

4,118,628

BWPOH677

Albuquerque

NM

688,612

AWPOH679

El Paso

TX

649,860

AWPOH676

Tucson

AZ

666,880

AWPOH683

Lawton-Duncan

OK

177,830

AWPOH682

Oklahoma City

OK

1,305,472

AWPOH684

Omaha

NE

905,991

AWPOH676

Tulsa

OK

836,559

AWPOH944

Albany-Schenectady

NY

1,028,615

AWPOH963

Atlanta

GA

3,197,171

AWPOH954

Austin

TX

899,361

AWPOH962

Baltimore

MD

2,430,563

AWPOH955

Boston

MA

4,133,895

AWPOH955

Buffalo-Niagara Falls

NY

1,231,795

AWPOH950

Charlotte-Gastonia

NC

1,671,037

AWPOH948

Chicago

IL

8,182,076

AWPOH953

Dallas

TX

4,329,924

AWPOH975

Des Moines

IA

728,830

AWPOH949

Detroit

MI

4,705,164

AWPOH952

Greenville-Spartanburg

NC

788,212

AWPOH943

Hartford

CT

1,123,678

AWPOH966

Houston

TX

4,054,253

AWPOH974

Indianapolis

IN

1,321,911

AWPOH979

Jacksonville

FL

1,114,847

AWPOH981

Knoxville

TN

948,055

AWPOH947

Los Angeles

CA

14,549,810

BWPOH959

Manchester-Nashua-Concord

NH

540,704

AWPOH973

Memphis

TN

1,396,390

AWPOH967

Miami-Ft. Lauderdale

FL

3,270,606

AWPLM426

Milwaukee

WI

1,751,525

BWPOH964

Minneapolis-St. Paul

MN

2,840,561

BWPOH980

Nashville

TN

1,429,309

AWPLM399

New Haven-Waterbury-Meriden

CT

978,311

AWPOH942

New York (unencumbered by PMSA)

NY

9,503,769

A 8




---



##### 



LicenseNumber

City

State

Population

BandWPOH960

Philadelphia, Wilmington (DE), Trenton (NJ)

PA

5,899,345

AWPOH971

Pittsburgh

PA

2,507,839

AWPLM414

Providence-Pawtucket, New Bedford-Fall River

RI, MA

1,509,789

BWPOH951

Raleigh-Durham

NC

1,089,423

AWPOH972

Richmond-Petersburg

VA

1,090,869

AWPOH978

Rochester

NY

1,118,963

AWPOH976

San Antonio

TX

1,530,954

AWPOH958

Springfield-Holyoke

MA

672,970

AWPOH969

St. Louis

MO

2,742,114

AWPOH946

Syracuse

NY

791,140

AWPOH965

Tampa-St. Petersburg-Clearwater

FL

2,249,405

AWPOH961

Washington

DC

4,118,628

AWPOH968

West Palm Beach-Boca Raton

FL

893,145

AWPOH957

Worcester-Fitchburg-Leominster

MA

709,705

A   A

27,500 to 28,350 MHz, 29,100 to 29,250 MHz, 31,075 to
    31,225 MHz = 1,150 MHzA1

27,500 to 28,350 MHz = 850 MHzB

31,000 to 31,075 MHz, 31,225 to 31,300 MHz =
    150 MHz     License







39GHzNumber

City

State

Population

ChannelsWPQT938

Denver-Boulder-Greeley

CO

2,073,952

BWPQT942

Las Vegas

NV

857,856

EWPQT946

Las Vegas

NV

857,856

GWPQT939

San Diego

CA

2,498,016

BWPQT944

San Diego

CA

2,498,016

FWPQT947

San Diego

CA

2,498,016

NWPQT940

San Francisco

CA

6,420,984

DWPQT945

San Francisco

CA

6,420,984

FWPQT941

Toledo

OH

782,184

EWPQT943

Toledo

OH

782,184

F   B

38,650 to 38,700 MHz, 39,350 to 39,400 = 100 MHzE

38,800 to 38,850 MHz, 39,500 to 39,550 = 100 MHzG

38,900 to 38,950 MHz, 39,600 to 39,650 = 100 MHzF

38,850 to 38,900 MHz, 39,550 to 39,600 = 100 MHzN

39,250 to 39,300 MHz, 39,950 to 40,000 = 100 MHzD

38,750 to 38,800 MHz, 39,450 to 39,500 = 100 MHz    9




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##### 



Network
    Metropolitan Fiber Networks and Local
    Facilities. route miles Incumbent Local Exchange Carrier
  Competitive Local
    Exchange Carrier
  indefeasible rights to use IRUs
 10




---



##### 



Metro Fiber





Metro FiberNetwork





NetworkState

Location

Service Market

State

Location

Service MarketAZ

Phoenix

Phoenix

MI

Detroit

DetroitCA

Los Angeles

Los Angeles

MN

Minneapolis

Greater Minneapolis/St. PaulCA

Orange County

Anaheim

MO

St Louis

St LouisCosta Mesa

NJ

New Jersey

Bergen/PassaicFullerton





Middlesex-Somerset-HunterdonGarden Grove





NewarkHuntington Beach





Jersey CityInglewood





Monmouth-OceanIrving





TrentonLong Beach

NV

Las Vegas

Las VegasOrange

NY

New York

ManhattanSanta Ana





Nassau-SuffolkCA

Sacramento

Sacramento

OH

Cleveland / Akron

Cleveland-Lorain-ElyriaCA

San Diego

San Diego





AkronCA

San Francisco

San Francisco





Canton-MassillonOakland

OH

Columbus

ColumbusFremont

OR

Portland

Portland-Vancouver, OR-WAMilpitas

PA / DE

Central PA

Allentown-Bethlehem-EastonMountain View





Harrisburg-Lebanon-CarlislePalo Alto





LancasterSanta Clara





ReadingSunnyvale





Scranton-Wilkes-Barre-HazletonCA

San Jose

San Jose





YorkCO

Denver

Denver





Wilmington-Newark, DE-MDBoulder-Longmont





DoverPA

Philadelphia

Philadelphia, PA-NJDC/VA

Washington D.C./ Northern VA

Washington, DC-MD-VA-WV

PA

Pittsburgh

PittsburghFL

Ft Lauderdale

Ft Lauderdale

TN

Memphis

Memphis, TN-AR-MSFL

Miami

Miami

TN

Nashville

NashvilleWest Palm Beach-Boca Raton

TX

Austin

Austin-San MarcoFL

Orlando

Orlando

TX

Dallas / Ft Worth

DallasTampa-St.FL

Tampa

Petersburg-Clearwater





Fort Worth-ArlingtonGA

Atlanta

Atlanta

TX

Houston

HoustonMarietta

TX

San Antonio

San AntonioIL

Chicago

Chicago

UT

Salt Lake City

Salt Lake City-Ogden 11




---



##### 



Metro Fiber





Metro FiberNetwork





NetworkState

Location

Service Market

State

Location

Service MarketMA

Boston

Boston, MA-NH





Orem/ProvoBrockton

WA

Seattle

Seattle-Bellevue-EverettLawrence, MA-NH

WA

Spokane

SpokaneLowell, MA-NH





LewistonWorcester, MA-CT





ClarkstonMD

Baltimore

Baltimore





Coeur dAlene     Inter-city Network. end-to-end
      nodes Internet Service Providers peering
    Wireless Network. point-to-point point-to-multipoint
 12




---



##### 



backhaul
    
  point-to-multipoint line-of-sight
 13




---



##### 



line-of-sight
  Competition
        point-to-point
   14




---



##### 




    IP Communications  VoIP technology enables delivery
    of voice and data telecommunications services over a single IP
    network which is less costly to operate than the existing
    PSTN.
    Fixed Broadband Wireless  There has been ongoing
    development of technical equipment and data encryption and
    compression protocols that permit the use of high bandwidth
    wireless connections between physical locations that are located
    within a
    line-of-sight
    across relatively short distances, usually three to thirteen
    miles. In addition, new protocols are under development, such as
    WiMax, which are designed to allow wireless
    last-mile
    connectivity that is not limited by
    line-of-sight
    requirements.
    Mobile Wireless Technologies  New high bandwidth
    applications, commonly referred to as 3Gbroadband
    wireless networks, allow the delivery of video and photos 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
  Regulatory
  Overview.
  rights-of-way,
    Federal Regulation.
 15




---



##### 



conduits unbundled network elements
    Unbundling of Incumbent Network
    Elements. UNEs
  FCC Regulation of Wireless
    Services.
  and/or
    License

Due for RenewalLMDS


200839 GHz


2010      16




---



##### 



Additional
    Federal Regulations
    Verizon and Qwest Petitions for Forbearance from Unbundling
    Requirements.
  VoIP. IP-enabled IP-enabled
  AT&T Declaratory Ruling
    Re:  VoIP. access
    charges
 17




---



##### 



ILEC Provision of Broadband Telecommunications Services and
    Information Services DSL
  ILEC Petitions for Forbearance from
    Regulation.
  Intercarrier Compensation Reform. reciprocal
    compensation
  Cost-based Total Element Long Run Incremental Cost
    (TELRIC) Pricing.
  VoIP 911 Regulation.
  CALEA Regulation. dial-up
 18




---



##### 



Georgia Public Service Commission Petition for Declaratory
    Ruling Regarding 271 Pricing
  AT&T Petition for Forbearance. No. 05-25.
  State and
    Local Regulation
      Wireless
    Services Affected by State Regulations
   19




---



##### 



Glossary
    3G.
  4G.
  Access Charges.
  Asynchronous Transfer Mode, or ATM.
  Backbone.
  Bandwidth.
  Capacity.
  Carrier.
  Central Offices.
  Competitive Local Exchange Carrier, or CLEC.
  Collocation.
  Conduit.
  Dark Fiber.
  Dedicated.
  Digital.
  DS3.
  DSL (digital subscriber line).
  Ethernet.
 20




---



##### 



Fiber Optics.
  Frame Relay.
  Gbps (gigabits per second).
  GHz.
  Incumbent Local Exchange Carriers, or
    ILEC.
  Indefeasible rights to use, or IRU.
  Interconnection.
  Interactive Voice Response, or IVR.
  Internet Service Providers, or ISP.
  Interexchange Carrier.
  Local Area Networks, or LAN.
  Line-of-Sight, or LOS.
  Local Exchange.
  Local Loop.
  Local Multipoint Distribution System, or
    LMDS.
  Mbps (megabits per second).
  Multi-Protocol Label Switching, or MPLS.
 21




---



##### 



Node.
  OC-n.
  Peering.
  Point-of-Presence, or POP.
  Private Line.
  Public Switched Telephone Network, or
    PSTN.
  Reciprocal Compensation.
  Route Mile.
  Router.
  Synchronous Optical Network, or SONET.
  Switch.
  T1.
  Unbundled Network Elements, or UNE. local
    loop
  Voice over Internet Protocol, or VOIP.
  Virtual Private Network.
  Wireless Backhaul.
 22




---



##### 



Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, www.sec.gov www.xo.com 1-800-SEC-0330.
  Item 1A.
    Risk
    Factors  Risks
    Related to Liquidity, Financial Resources, and
    Capitalization
  We have
    incurred a net loss 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.
         23




---



##### 



The
    financial covenants in the Credit Facility restrict our
    financial and operational flexibility, which could have an
    adverse effect on our results of operations. If we do not
    receive waivers from our lenders, we expect to be in
    non-compliance with the financial covenants in our credit
    facility, which would likely have an adverse effect on our
    business.
          and/or and/or and/or and/or
   24




---



##### 



We may
    not prevail in our claims against the ATLT, and we may not be
    successful in defending against the ATLTs
    counterclaims.
    Risks
    Related to our Wireline Operations
  Our
    rights to the use of the unlit capacity that makes up our
    network may be affected by the financial health of, or disputes
    with, our fiber providers.
    The
    failure of our operations support systems could impair our
    ability to retain customers, provision their services, or result
    in increased capital expenditures.
  and/or and/or
 25




---



##### 



We may
    not be able to continue to connect our network to ILEC networks
    or to maintain Internet peering arrangements on favorable terms,
    which would impair our growth and performance.
      We depend
    on a limited number of third-party service providers for the
    performance of several of our business operations, including
    payroll and billing services.
    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.
   26




---



##### 



Risks
    Related to our Wireless Operations
  Nextlink
    is in the early stages of development and we may not be able to
    implement its business strategy or to obtain new
    customers.
    Our
    spectrum licenses may not be renewed upon expiration, which
    could harm our business. Furthermore, the FCC may not grant an
    extension of the renewal date for Nextlinks B Band LMDS
    licenses.
      links-per-million
  license-by-license
  If any of
    our spectrum licenses are not renewed, our business, financial
    condition and results of operations could be adversely affected.
    Our business depends on the widespread adoption of
    bandwidth-intensive
    applications, such as 3G and 4G applications, and if widespread
    adoption does not occur, our business would be harmed.
   27




---



##### 



We may
    not be able to successfully execute the necessary real estate
    transactions, or to negotiate acceptable rates in those
    agreements for placing antennas and having access to necessary
    equipment.
    Additional
    spectrum may become available from the FCC, increasing the
    number of and/or viability of our competitors or even allowing
    our customers or potential customers to obtain their own
    spectrum outright, reducing their need to obtain spectrum or
    services from us.
      FCC
    Regulation of radio frequency emissions and radio frequency
    environments may increase our costs and/or limit Nextlinks
    operations.
  and/or
  Risks
    Related to Competition and our Industry
  Our
    success is highly dependent on our ability to retain and recruit
    talented employees.
   28




---



##### 



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 revenues 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.
    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 are
    subject to comprehensive and continually evolving regulation,
    which could increase our costs and adversely affect our ability
    to implement our business plan.
   29




---



##### 



04-290
  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
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   30




---



##### 



Item 3.
    Legal
    Proceedings    Allegiance
    Telecom Liquidating Trust Litigation
        true-up True-Up)
      True-Up
 31




---



##### 



Litigation
    Relating to the Wireline Sale
  No. 1862-N).
  No. 1877-N)) No. 1880-N))
     32




---



##### 



Houlihan
    Lokey Howard and Zukin Capital LLC
    Level 3
  10-K dark fiber
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   33




---



##### 



Part II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
    2007


2006Quarter

High


Low


High


LowFirst

$
5.24


$
4.07


$
3.95


$
1.84Second

$
5.20


$
4.33


$
5.40


$
3.71Third

$
4.89


$
3.10


$
4.90


$
3.80Fourth

$
3.45


$
1.92


$
4.95


$
3.50   mark-up,
  Holders
    Dividends
   34




---



##### 



Stock
    Performance Graph
  Comparison
    of Five-Year Cumulative Total Returns
 Performance Graph for
 XO Holdings, Inc.
 including data to
    12/31/2007
  
 35




---



##### 



Securities
    Authorized For Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Shares to





Under Equitybe Issued upon





Compensation PlansExercise of


Weighted Average


(Excluding SharesOutstanding Options


Exercise Price of


Reflected in ColumnPlan Category

(a)


Outstanding Options


(a))Equity compensation plans approved by stockholders(1)


9,633,745


$
5.07



5,983,707Equity compensation plans not approved by stockholders










Total


9,633,745


$
5.07



5,983,707     (1)
    
    Includes options issued pursuant to
    two separate components of the 2002 Stock Incentive Plan adopted
    by the Company: the 2003 Employee Retention and Incentive Plan
    and the 2003 Annual Bonus Plan.  2002 Stock Incentive Plan Programs.
  2003 Employee Retention and Incentive Plan.
  2003 Annual Bonus Plan.
 36




---



##### 



Item 6.
    Selected
    Financial Data      Years Ended December 31,2007


2006


2005


2004(a)


2003Statement of Operations Data:Revenue(k)

$
1,428,665


$
1,416,843


$
1,437,897


$
1,300,420


$
1,110,483Loss from operations(b)(c)(e)(f)(g)(j)(l)

$
(108,436
)

$
(112,151
)

$
(126,394
)

$
(370,292
)

$
(111,858
)Net loss(b)(c)(e)(f)(g)(h)(i)(j)(l)

$
(115,654
)

$
(130,344
)

$
(146,505
)

$
(405,543
)

$
(102,554
)Net loss allocable to common
    shareholders(b)(c)(e)(f)(g)(h)(i)(j)(l)

$
(129,923
)

$
(143,830
)

$
(159,208
)

$
(410,453
)

$
(102,554
)Net loss allocable to common shareholders per common share,
    basic and diluted(b)(c)(e)(f)(g)(h)(i)(j)(l)

$
(0.71
)

$
(0.79
)

$
(0.88
)

$
(2.57
)

$
(1.07
)Balance Sheet Data:Cash, cash equivalents and marketable securities(h)(c)

$
108,960


$
170,983


$
183,988


$
251,289


$
520,612Property and equipment, net(l)

$
720,396


$
678,233


$
717,627


$
820,536


$
485,984Broadband wireless licenses, net(j)

$
35,782


$
35,782


$
40,527


$
46,854


$
53,181Other intangibles, net(b)

$
17,733


$
27,725


$
51,252


$
93,012


$
56,334Total assets(b)(c)(h)(j)

$
1,090,126


$
1,131,221


$
1,202,725


$
1,459,385


$
1,265,165Long-term obligations(d)

$
377,213


$
336,650


$
301,113


$
366,247


$
536,791Class A Convertible Preferred Stock

$
244,811


$
230,542


$
217,056


$
204,353


$
Total stockholders equity(d)

$
42,347


$
170,848


$
322,588


$
485,552


$
380,425Statement of Cash Flow Data:Net cash provided by operating activities

$
140,136


$
100,362


$
108,980


$
150


$
6,301Net cash (used in ) provided by investing activities(c)(h)

$
(193,664
)

$
(106,160
)

$
(56,223
)

$
(444,837
)

$
153,036Net cash used in (provided by) financing activities(d)

$
(6,960
)

$
(2,477
)

$
(109,908
)

$
200,116


$
5,185     (a)
    
    The selected consolidated financial
    data includes the accounts and activities of the businesses we
    acquired from Allegiance Telecom, Inc. from the acquisition date
    June 23, 2004 through December 31, 2004.(b)
    
    2004 includes a
    $212.5 million, or $1.31 per share, non-cash impairment
    charge for goodwill.(c)
    
    2003 includes a $33.5 million,
    or $0.35 per share, gain on investment sales.(d)
    
    2004 an aggregate of
    39.7 million shares were issued in a rights offering,
    yielding net proceeds of $197.6 million used to pay down
    our long-term debt and accrued interest payable.(e)
    
    2007 and 2006 includes a change in
    estimate for cost of service expenses that decreased loss from
    operations, net loss and net loss allocable to common
    shareholders $21.6 million and $14.5 million,
    respectively, or $0.12 and $0.08 per share, respectively. See
    Note 2c.(f)
    
    2007 and 2005 includes
    $9.9 million and $4.3 million, respectively, of
    expense related to changes associated with on-going litigation.
    Net loss per common share decreased $0.05 and $0.02,
    respectively, for the years ended December 31, 2007 and
    2005. See Note 2c. 37




---



##### 



(g)
    
    2006 includes a $10.6 million,
    or $0.06 per share, decrease to cost of service expense related
    to a change in estimate for disputed amounts payable to
    third-party telecommunications providers. See Note 2c.(h)
    
    2007, 2006 and 2005 includes
    $21.5 million, $5.2 million and $7.5 million,
    respectively, of investment income related to beneficial
    settlements of legal matters regarding our holding of Global
    Crossing debt securities. Net loss per common share was
    decreased $0.12, $0.03 and $0.04 for the years ended
    December 31, 2007, 2006 and 2005, respectively. See
    Note 15. Cash flow provided by investing activity increased
    $21.5 million during 2007 and $12.7 million during
    2006.(i)
    
    2004 includes a $5.8 million,
    or $0.04 per share, loss on investment sales.(j)
    
    During 2006 we determined our
    broadband wireless licenses to be indefinite lived assets and
    discontinued their periodic amortization. No amortization
    expense was recorded during 2007 or the fourth quarter of 2006.
    See Note 5.(k)
    
    2006 and 2005 includes
    $5.2 million and $4.3 million, respectively, in
    reclassifications of pass-through transactional taxes. See
    Note 2w.(l)
    
    2007 includes $13.3 million,
    or $0.07 per share, of additional depreciation expense
    associated with revisions to the depreciable lives of certain
    fixed assets. These revisions occurred in the fourth quarter of
    2007. See Note 2c.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.    
    our critical accounting policies and estimates;
    our results from operations;
    a comparison of our segment financial results;
    our liquidity and capital resources; and
    new accounting pronouncements.    Critical
    Accounting Policies and Estimates
        Revenue
    Recognition
   38




---



##### 



Cost of
    Service  Telecommunications Services
        Allowance
    for Uncollectible Accounts
     39




---



##### 



Assessment
    of Loss Contingencies
    Property
    and Equipment
        Intangible
    Assets
  Accounting for the Impairment or Disposal of Long-Lived
    Assets
  Goodwill and Other Intangible Assets
 40




---



##### 



RESULTS
    OF OPERATIONS
    %





% ofConsolidated





Consolidated


ChangeYears Ended December 31,

2007


Revenue


2006


Revenue


Dollars


PercentRevenue

$
1,428,665



100.0
%

$
1,416,843



100.0
%

$
11,822



0.8
%Cost and expensesCost of service(1)


810,590



56.7



822,042



58.0


$
(11,452
)


(1.4
)%Depreciation and amortization


206,953



14.5



201,222



14.2


$
5,731



2.8
%Selling, general and administrative


511,622



35.8



502,192



35.5


$
9,430



1.9
%Loss on write-down of assets


7,936



0.6



3,538



0.2


$
4,398



124.3
%Total cost and expenses


1,537,101



107.6



1,528,994



107.9


$
8,107



0.5
%Loss from operations


(108,436
)


(7.6
)


(112,151
)


(7.9
)

$
(3,715
)


(3.3
)%Interest income


8,182



0.6



8,691



0.6


$
(509
)


(5.9
)%Investment and other income


23,068



1.6



5,193



0.4


$
17,875



344.2
%Interest expense, net


(37,681
)


(2.6
)


(32,077
)


(2.3
)

$
5,604



17.5
%Net loss before income taxes


(114,867
)


(8.0
)


(130,344
)


(9.2
)

$
(15,477
)


(11.9
)%Income tax expense


(787
)


(0.1
)









$
787



NMNet loss


(115,654
)


(8.1
)


(130,344
)


(9.2
)

$
(14,690
)


(11.3
)%Preferred stock accretion


(14,269
)


(1.0
)


(13,486
)


(1.0
)

$
783



5.8
%Net loss allocable to common shareholders

$
(129,923
)


(9.1
)%

$
(143,830
)


(10.2
)%

$
(13,907
)


(9.7
)%     (1)
    
    Exclusive of depreciation and
    amortization expense  NM
    
    = not meaningful  41




---



##### 



%





% ofConsolidated





Consolidated


ChangeYears Ended December 31,

2006


Revenue


2005


Revenue


Dollars


PercentRevenue

$
1,416,843



100.0
%

$
1,437,897



100.0
%

$
(21,054
)


(1.5
)%Cost and expensesCost of service(1)


822,042



58.0



823,340



57.3


$
(1,298
)


(0.2
)%Depreciation and amortization


201,222



14.2



233,084



16.2


$
(31,862
)


(13.7
)%Selling, general and administrative


502,192



35.5



506,189



35.2


$
(3,997
)


(0.8
)%Loss on write-down of assets


3,538



0.2



1,678



0.1


$
1,860



110.8
%Total cost and expenses


1,528,994



107.9



1,564,291



108.8


$
(35,297
)


(2.3
)%Loss from operations


(112,151
)


(7.9
)


(126,394
)


(8.8
)

$
(14,243
)


(11.3
)%Interest income


8,691



0.6



8,850



0.6


$
(159
)


(1.8
)%Investment and other income


5,193



0.4



5,330



0.4


$
(137
)


(2.6
)%Interest expense, net


(32,077
)


(2.3
)


(34,291
)


(2.4
)

$
(2,214
)


(6.5
)%Net loss


(130,344
)


(9.2
)


(146,505
)


(10.2
)

$
(16,161
)


(11.0
)%Preferred stock accretion


(13,486
)


(1.0
)


(12,703
)


(0.9
)

$
783



6.2
%Net loss applicable to common shares

$
(143,830
)


(10.2
)%

$
(159,208
)


(11.1
)%

$
(15,378
)


(9.7
)%     (1)
    
    Exclusive of depreciation and
    amortization expense  Revenue 
    2007 Compared to 2006
    % of





% of


Change2007


Revenue


2006(1)


Revenue


Dollars


PercentCore servicesData and IP

$
527.1



36.9
%

$
426.6



30.1
%

$
100.5



23.6
%Integrated/Voice


324.6



22.7



356.5



25.2



(31.9
)


(8.9
)%Total core services


851.7



59.6



783.1



55.3



68.6



8.8
%Legacy/TDM services


577.0



40.4



633.7



44.7



(56.7
)


(8.9
)%Total revenue

$
1,428.7



100.0
%

$
1,416.8



100.0
%

$
11.9



0.8
%     (1)
    
    2006 revenue, as presented,
    includes $5.2 million associated with a reclassification of
    pass-through taxes for comparability with 2007 presentation.  Core Services. IP-based
   42




---



##### 



IP-enabled
  IP-based
  Legacy/TDM Services.
      Revenue 
    2006 Compared to 2005
    % of





% of


Change2006(1)


Revenue


2005(2)


Revenue


Dollars


PercentCore servicesData and IP

$
426.6



30.1
%

$
384.4



26.7
%

$
42.2



11.0
%Integrated/Voice


356.5



25.2



375.8



26.2



(19.3
)


(5.1
)%Total core services


783.1



55.3



760.2



52.9



22.9



3.0
%Legacy/TDM services


633.7



44.7



677.7



47.1



(44.0
)


(6.5
)%Total revenue

$
1,416.8



100.0
%

$
1,437.9



100.0
%

$
(21.1
)


(1.5
)%     (1)
    
    2006 and 2005 revenues, as
    presented, include $5.2 million and $4.3 million,
    respectively, associated with a reclassification of pass-through
    taxes. 43




---



##### 



Core Services.
  IP-based
  Legacy/TDM Services.
    Cost
    of Service
      % of





% of


Change2007


Revenue


2006


Revenue


Dollars


PercentTelecommunications services

$
584,689



40.9
%

$
597,027



42.1
%

$
(12,338
)


(2.1
)%Network operations


176,415



12.4



176,134



12.4



281



0.2
%Pass-through taxes


49,486



3.4



48,881



3.5



605



1.2
%Total cost of service

$
810,590



56.7
%

$
822,042



58.0
%

$
(11,452
)


(1.4
)%   % of





% of


Change2006


Revenue


2005


Revenue


Dollars


PercentTelecommunications services

$
597,027



42.1
%

$
587,904



40.9
%

$
9,123



1.6
%Network operations


176,134



12.4



183,282



12.8



(7,148
)


3.9
%Pass-through taxes


48,881



3.5



52,154



3.6



(3,273
)


(6.3
)%Total cost of service

$
822,042



58.0
%

$
823,340



57.3
%

$
(1,298
)


(0.2
)%    44




---



##### 



Selling, General and
    Administrative.
           45




---



##### 



Depreciation and Amortization.
    Loss on Write-Down of Assets.
  Investment and Other Income.
  Interest Expense, Net.
    COMPARISON
    OF SEGMENT FINANCIAL RESULTS
   46




---



##### 



XO Communications.
  % of





% ofXOC





XOC


Change2007


Revenue


2006


Revenue


Dollars


PercentRevenue

$
1,428,324



100.0
%

$
1,416,101



100.0
%

$
12,223



0.9
%Cost and expensesCost of service*


807,522



56.5



821,255



58.0


$
(13,733
)


(1.7
)%Depreciation and amortization


206,452



14.5



196,201



13.9


$
10,251



5.2
%Selling, general and administrative


502,337



35.2



490,199



34.6


$
12,138



2.5
%Loss on write-down of assets


7,257



0.5



3,531



0.2


$
3,726



105.5
%Total cost and expenses


1,523,568



106.7



1,511,186



106.7


$
12,382



0.8
%Segment loss

$
(95,244
)


(6.7
)%

$
(95,085
)


(6.7
)%

$
159



0.2
%Capital Expenditures

$
210,156



14.7
%

$
114,634



8.1
%

$
95,522



83.3
%     *
    
    Exclusive of depreciation and
    amortization  % of





% ofXOC





XOC


Change2006


Revenue


2005


Revenue


Dollars


PercentRevenue

$
1,416,101



100.0
%

$
1,437,691



100.0
%

$
(21,590
)


(1.5
)%Cost and expensesCost of service*


821,255



58.0



823,237



57.2


$
(1,982
)


(0.2
)%Depreciation and amortization


196,201



13.9



226,757



15.8


$
(30,556
)


(13.5
)%Selling, general and administrative


490,199



34.6



503,031



35.0


$
(12,832
)


(2.6
)%Loss on write-down of assets


3,531



0.2



1,678



0.1


$
1,853



110.4
%Total cost and expenses


1,511,186



106.7



1,554,703



108.1


$
(43,517
)


(2.8
)%Segment loss

$
(95,085
)


(6.7
)%

$
(117,012
)


(8.1
)%

$
(21,927
)


(18.7
)%Capital Expenditures

$
114,634



8.1
%

$
86,254



6.0
%

$
28,380



32.2
%     *
    
    Exclusive of depreciation and
    amortization   47




---



##### 



Nextlink.
  % of





% ofNextlink





Nextlink


Change2007


Revenue


2006


Revenue


Dollars


PercentRevenue from external customers

$
472



31.1
%

$
872



69.2
%

$
(400
)


(45.9
)%Inter-segment revenue


1,048



68.9
%


389



30.8


$
659



169.4
%Total revenue

$
1,520



100.0
%

$
1,261



100.0
%

$
259



20.5
%Cost and expensesCost of service*


4,247



279.4
%


1,306



103.6
%

$
2,941



225.2
%Depreciation and amortization


501



33.0
%


5,021



398.2
%

$
(4,520
)


(90.0
)%Selling, general and administrative


9,285



610.8
%


11,993



951.1
%

$
(2,708
)


(22.6
)%Loss on write-down of assets


679



44.7
%


7



0.6
%

$
672



9,600.0
%Total cost and expenses


14,712



967.9
%


18,327



1,453.4
%

$
(3,615
)


(19.7
)%Segment loss

$
(13,192
)


(867.9
)%

$
(17,066
)


(1,353.4
)%

$
(3,874
)


(22.7
)%Capital Expenditures

$
5,026



330.7
%

$
4,244



336.6
%

$
782



18.4
%     *
    
    exclusive of depreciation and
    amortization  Revenue.
  Cost of service (exclusive of depreciation and
    amortization).
  Depreciation and
    amortization.
  Selling, general and
    administrative.
  Loss on write-down of assets.
  Capital expenditures. on-going
 48




---



##### 



% of





% ofNextlink





Nextlink


Change2006


Revenue


2005


Revenue


Dollars


PercentRevenue from external customers

$
872



69.2
%

$
206



100.0
%

$
666



323.3
%Inter-segment revenue


389



30.8










$
389



NMTotal revenue


1,261



100.0
%


206



100.0


$
1,055



512.1
%Cost and expensesCost of service*


1,306



103.6
%


103



50.0


$
1,203



1,168.0
%Depreciation and amortization


5,021



398.2
%


6,327



3,071.4


$
(1,306
)


(20.6
)%Selling, general and administrative


11,993



951.1
%


3,158



1,533.0


$
8,835



279.8
%Loss on write-down of assets


7



0.6
%










7



NMTotal cost and expenses


18,327



1,453.4
%


9,588



4,654.4


$
8,739



91.1
%Segment loss

$
(17,066
)


(1353.4
)%

$
(9,382
)

$
(4,554.4
)

$
(7,684
)


81.9
%Capital Expenditures

$
4,244



336.6
%

$
473



229.6
%

$
3,771



797.3
%     *
    
    exclusive of depreciation and
    amortization
    NM = not meaningful  Revenue.
  Cost of service (exclusive of depreciation and
    amortization).
  Selling, general and
    administrative.
  Depreciation and
    amortization.
  Capital expenditures.
  LIQUIDITY
    AND CAPITAL RESOURCES
    Cash
    Flow
  IP-based
 49




---



##### 



IP-based
    2007


2006


2005Cash provided by operating activities

$
140,136


$
100,362


$
108,980Cash used in investing activities

$
(193,664
)

$
(106,160
)

$
(56,223
)Cash used in financing activities

$
(6,960
)

$
(2,477
)

$
(109,908
)   Year
    Ended December 31, 2007 Compared to 2006
        Year
    Ended December 31, 2006 Compared to 2005
        Credit Facility and Borrowing
    Capacity.
 50




---



##### 



and/or and/or and/or and/or
   51




---



##### 



pari passu
  Form 8-K
    Capital Requirements. IP-based
 52




---



##### 



Contractual
    Obligations
    Less than


1-3


3-5


More thanTotal


1 Year


Years


Years


5 YearsBorrowings under Credit Facility(1)

$
377.2


$



$
377.2


$



$
Capital lease obligations


23.4



6.2



3.4



3.0



10.8Operating lease obligations


333.7



63.3



105.1



77.7



87.6Purchase obligations(2)


417.2



125.7



132.6



84.6



74.3Asset retirement obligations


5.6



0.9



0.9



0.1



3.7Total contractual obligations

$
1,157.1


$
196.1


$
619.2


$
165.4


$
176.4     (1)
    
    Principal payments could be
    accelerated if certain quarterly excess cash flow targets are
    met. The entire balance could become due and payable within the
    next year if we do not comply with financial covenants and do
    not receive covenant waivers. See prior discussion in MD&A
    under subheading of Credit Facility.(2)
    
    Include 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
    New
    Accounting Pronouncements
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of Accounting Research
    Bulletin No. 51
  Fair Value Measurements FAS 157-2
  The
    Fair Value Option for Financial Assets and Financial Liabilities
 53




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk          Item 8.
    Financial
    Statements and Supplementary Data  page F-1
  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
   54




---



##### 



Internal
    Control  Integrated Framework
       55




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
    
  56




---



##### 



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   57




---



##### 



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  (a)
    Financial
    Statements    Report of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2007 and 2006


F-2Consolidated Statements of Operations for the
    Years Ended December 31, 2007, 2006 and 2005


F-3Consolidated Statements of Stockholders
    Equity for the Years Ended December 31, 2007, 2006 and
    2005


F-4Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007, 2006 and 2005


F-5Notes to Consolidated Financial Statements


F-6Financial Statement ScheduleSchedule II  Valuation and
    Qualifying Accounts for each of the three years in the period
    ended December 31, 2007*


S-1     *
    
    All other schedules are omitted because they are not applicable.  (b)
    Exhibits   58




---



##### 



SIGNATURES      /s/  Carl
    J. Grivner          Name

Title/s/  Carl
    J. GrivnerCarl
    J. Grivner

President and Chief Executive Officer, Director 
    (Principal Executive Officer)/s/  Gregory
    W. FreibergGregory
    W. Freiberg

Senior Vice President and Chief Financial Officer 
    (Principal Financial Officer)Carl
    C. Icahn

Chairman of the Board of DirectorsKeith
    Meister

Director/s/  Adam
    DellAdam
    Dell

Director/s/  Fredrik
    GradinFredrik
    Gradin

DirectorVincent
    J. Intrieri

Director/s/  Robert
    L. KnaussRobert
    L. Knauss

Director/s/  Peter
    K. SheaPeter
    K. Shea

Director  59




---



##### 



EXHIBIT INDEX
  2
.1

Third Amended Plan of Reorganization of XO Communications, Inc.,
    dated July 22, 2002 (incorporated by reference to
    exhibit 2.1 of
    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 of
    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 of
    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 of
    Form 8-K
    of XO Communications, Inc., filed on February 24, 2004).2
.5

Equity Purchase Agreement, dated as of November 4, 2005, by
    and among the XO Holdings, Inc., XO Communications, Inc. and Elk
    Associates LLC (incorporated by reference to exhibit 2.1 of
    Form 8-K
    of XO Communications, Inc., filed on November 9, 2005).2
.6

Agreement and Plan of Merger, dated as of February 28, 2006
    by and among XO Communications, Inc., XO Holdings, Inc. and XO
    Communications, LLC*2
.7

Amendment No. 1 to Equity Purchase Agreement, dated as of
    March 1, 2006, by and among XO Holdings, Inc., XO
    Communications, LLC (as successor by merger to XO
    Communications, Inc.) and Elk Associates LLC*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*3
.2

Certificate of Designation of the Powers, Preferences and
    Relative, Participating, Optional and other Special Rights of
    the 6% Class A Convertible Preferred Sock and
    Qualifications, Limitations and Restrictions thereof, as filed
    with the Secretary of State of the State of Delaware on
    February 28, 2005*3
.3

Bylaws of XO Holdings, Inc.*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 of
    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 of
    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 of
    Form 8-K
    of XO Communications, Inc., filed on January 30, 2003).10
.1

XO Communications, Inc. 2002 Stock Incentive Plan (incorporated
    by reference to exhibit 10.1.1 of
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2002).**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 of
    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 of
    Form 10-Q
    filed by 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 of
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2004)10
.5

Tax Allocation Agreement, dated as of January 16, 2003,
    between XO Communications, Inc. and Starfire Holding Corporation
    (incorporated by reference to exhibit 10.5 of
    Form 8-K
    of XO Communications, Inc., filed on January 30, 2003).10
.6

Employment Term Sheet, dated as of April 30, 2003,
    delivered by XO Communications, Inc. to Carl J. Grivner,
    President and Chief Executive Officer of XO Communications, Inc.
    (incorporated by reference to exhibit 10.1 of
    Form 10-Q
    of XO Communications, Inc. for the quarter ended March 31,
    2003).** 60




---



##### 



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 of
    Form 10-Q
    of XO Communications, Inc. for the quarter ended March 31,
    2003).**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 of
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2003).**10
.9

Indemnification Agreement by and between Robert Knauss and XO
    Communications, Inc., dated as of November 2, 2004.
    (incorporated by reference to exhibit 10.2 of
    Form 10-Q
    of XO Communications, Inc. for the quarter ended
    September 30, 2004).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 of
    Form 10-Q
    of XO Communications, Inc. for the quarter ended
    September 30, 2004).10
.11

Indemnification Agreement by and between Fredrik Gradin and XO
    Communications, Inc., dated as of November 2, 2004.
    (incorporated by reference to exhibit 10.3 of
    Form 10-Q
    of XO Communications, Inc. for the quarter ended
    September 30, 2004).10
.12

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 of
    Form 10-Q
    of NEXTLINK Communications, Inc. and NEXTLINK Capital, Inc. for
    the quarter ended September 30, 1998).10
.13

Master Agreement, dated August 8, 2002, between
    Level 3 Communications, Inc. and XO Communications, Inc.
    (incorporated by reference to exhibit 10.4.2 of
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2002).10
.14

Amended and Restated Credit and Guaranty Agreement, dated as of
    January 16, 2003, among XO Communications, Inc., certain
    subsidiaries of XO Communications, Inc., the Lenders party
    thereto from time to time, and Mizuho Corporate Bank, as
    Administrative Agent (incorporated by reference to
    exhibit 10.5 of
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2002).10
.15

Agreement, dated as of May 9, 2005, by and between XO
    Communications, Inc., Arnos Corp., High River Limited
    Partnership, and Cardiff Holding LLC. (incorporated by reference
    to exhibit 10.1 of
    Form 10-Q
    of XO Communications, Inc. for the quarter ended March 31,
    2005).10
.16

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 of
    Form 8-K
    of XO Communications, Inc., filed on November 9, 2005).10
.17

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 of
    Form 8-K
    of XO Communications, Inc. filed on November 9, 2005).10
.18

Ratification and Amendment Agreement, dated as of March 1,
    2006, by and among XO Communications, LLC (as successor by
    merger to XO Communications, Inc.), certain subsidiaries of XO
    Communications, LLC, as guarantors, XO Holdings, Inc., as
    guarantor, LMDS Holdings, Inc., as guarantor, V&K Holdings,
    Inc., as guarantor, Arnos Corp., as Requisite Lenders, and
    Mizuho Corporate Bank, Ltd., as administrative agent.
    (incorporated by reference to exhibit 10.2 of
    Form 8-K
    filed on March 06, 2006).10
.19

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 of
    Form 8-K
    filed on March 06, 2006).10
.20

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 of
    Form 8-K
    of XO Communications, Inc. filed on June 8, 2005).**10
.21

Waiver Agreement, dated as of April 28, 2006, between the
    Company, its subsidiaries and Arnos Corp., as Requisite Lender
    (incorporated by reference to exhibit 10.1 of
    Form 8-K
    filed on May 2, 2006).10
.22

Amendment No. 1 to Registration Rights Agreement made and
    enacted by the Company as of April 28, 2006 (incorporated
    by reference to exhibit 10.1 of
    Form 8-K
    filed on May 2, 2006).10
.23

Waiver Agreement, dated March 30, 2006, between the
    Company, its subsidiaries and Arnos Corp., as Requisite Lender
    (incorporated by reference to exhibit 10.1 of
    Form 8-K
    filed on March 31, 2006). 61




---



##### 



10
.24

Waiver Agreement, dated as of November 3, 2006, between the
    Company, its subsidiaries and Arnos Corp., as Requisite Lender
    (incorporated by reference to exhibit 10.6 of
    Form 10-Q
    for the quarter ended September 30, 2006).10
.25

Waiver with Respect to Amended and Restated Credit and Guaranty
    Agreement, dated as of March 6, 2007, between the Company,
    its subsidiaries and Arnos Corp., as Requisite Lender
    (incorporated by reference to exhibit 10.1 of
    Form 8-K
    filed on March 9, 2007).10
.26

Lease Agreement dated February 28, 2007, between the
    Company and Presidents Park II, LLC. (incorporated by reference
    to exhibit 10.27 of
    Form 10-K
    for the year ended December 31, 2006).***10
.27

Waiver with Respect to Amended and Restated Credit Guaranty
    Agreement dated as of May 7, 2007, between XO
    Communications, LLC, its subsidiaries and Arnos Corp., as
    Requisite Lenders (incorporated by reference to
    exhibit 10.7 of
    Form 10-Q
    for the quarter ended March 31, 2007)10
.28

Waiver with Respect to Amended and Restated Credit Guaranty
    Agreement dated as of August 8, 2007, between XO
    Communications, LLC, its subsidiaries and Arnos Corp., as
    Requisite Lenders (incorporated by reference to
    exhibit 10.2 of
    Form 10-Q
    for the quarter ended June 30, 2007)10
.29

Waiver with Respect to Amended and Restated Credit Guaranty
    Agreement dated as of November 5, 2007, between XO
    Communications, LLC, its subsidiaries and Arnos Corp., as
    Requisite Lenders (incorporated by reference to
    exhibit 10.3 of
    Form 10-Q
    for the quarter ended September 30, 2007)10
.30

Summary of FY2007 Cash Bonuses for Named Executive Officers
    (filed herewith)10
.31

Waiver with Respect to Amended and Restated Credit Guaranty
    Agreement dated as of March 13, 2008, between XO
    Communications, LLC, its subsidiaries and Arnos Corp., as
    Requisite Lenders (filed herewith)10
.32

Note Purchase Agreement dated March 13, 2008 between XO
    Communications, LLC and Arnos Corp. (incorporated by reference
    to exhibit 10.2 of
    Form 8-K
    filed on March 17, 2008)10
.33

Guaranty Agreement dated March 13, 2008 by
    XO Holdings, Inc.; Telecommunications of Nevada, LLC;
    V&K Holdings, Inc.; XO International Holdings, Inc.;
    XO International, Inc.; XO Services, Inc.; and XO Nevada Merger
    Sub, Inc., (incorporated by reference to exhibit 10.3 of
    Form 8-K
    filed on March 17, 2008)10
.34

Waiver with Respect to the Note Purchase Agreement dated
    March 13, 2008 between XO Communications, LLC and Arnos
    Corp. (incorporated by reference to exhibit 10.1 of
    Form 8-K
    filed on March 17, 2008).14
.1

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

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

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)     *
    
    Incorporated by reference to
    Form 8-K
    filed on March 6, 2006.**
    
    Management contracts and compensatory plans and arrangements
    required to be filed pursuant to Item 15 (c).***
    
    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. 62




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM          Share-Based Payment Considering the Effects of
    Prior Year Misstatements in Current Year Financial
    Statements.
  Internal Control  Integrated Framework
  
  F-1




---



##### 



XO
    Holdings, Inc.
  Consolidated
    Balance Sheets
 (In
    thousands, except for share and per share data)
  December 31,


December 31,2007


2006ASSETSCurrent AssetsCash and cash equivalents

$
108,075


$
168,563Marketable securities


885



2,420Accounts receivable, net of allowance for doubtful accounts of
    $10,116 and $16,754 at December 31, 2007 and 2006,
    respectively


131,705



146,278Prepaid expenses and other current assets


30,928



30,859Total current assets


271,593



348,120Property and equipment, net


720,396



678,233Goodwill and intangible assets, net


53,515



63,507Other assets


44,622



41,361Total Assets

$
1,090,126


$
1,131,221LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
    STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable

$
106,488


$
98,860Other current liabilities


252,217



235,891Total current liabilities


358,705



334,751Long-term debt and accrued interest payable to related parties


377,213



336,650Other long-term liabilities


67,050



58,430Total Liabilities


802,968



729,831Class A Convertible Preferred Stock


244,811



230,542Commitments and contingencies






Stockholders EquityPreferred Stock: par value $0.01 per share,
    200,000,000 shares authorized; 4,000,000 shares of
    Class A Convertible Preferred Stock issued and outstanding
    on December 31, 2007 and 2006






Warrants, common stock and additional paid in capital: par value
    $0.01 per share, 1,000,000,000 shares authorized;
    182,075,035 shares issued and outstanding on
    December 31, 2007 and 182,001,285 shares issued and
    outstanding on December 31, 2006


953,427



965,394Accumulated other comprehensive income






880Accumulated deficit


(911,080
)


(795,426
)Total Stockholders Equity


42,347



170,848Total Liabilities, Convertible Preferred Stock and
    Stockholders Equity

$
1,090,126


$
1,131,221    F-2




---



##### 



XO
    Holdings, Inc.
  Consolidated
    Statements of Operations
 (In
    thousands, except for share and per share data)
  Years Ended December 31,2007


2006


2005Revenue

$
1,428,665


$
1,416,843


$
1,437,897Cost and expensesCost of service (exclusive of depreciation and amortization)


810,590



822,042



823,340Depreciation and amortization


206,953



201,222



233,084Selling, general and administrative


511,622



502,192



506,189Loss on write-down of assets


7,936



3,538



1,678Total costs and expenses


1,537,101



1,528,994



1,564,291Loss from operations


(108,436
)


(112,151
)


(126,394
)Interest income


8,182



8,691



8,850Investment and other income


23,068



5,193



5,330Interest expense, net


(37,681
)


(32,077
)


(34,291
)Net loss before income taxes


(114,867
)


(130,344
)


(146,505
)Income tax expense


(787
)






Net loss


(115,654
)


(130,344
)


(146,505
)Preferred stock accretion


(14,269
)


(13,486
)


(12,703
)Net loss allocable to common shareholders

$
(129,923
)

$
(143,830
)

$
(159,208
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.71
)

$
(0.79
)

$
(0.88
)Weighted average shares, basic and diluted


182,048,182



181,970,946



181,933,035    F-3




---



##### 






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








Accumulated OtherCapital


Deferred


Accumulated


ComprehensiveShares


Amount


Compensation


Deficit


Income


TotalBalance at January 1, 2005


181,933,035


$
989,511


$
(574
)

$
(508,097
)

$
4,712


$
485,552Amortization of deferred compensation, net of forfeitures






(361
)


497











136Preferred stock accretion






(12,703
)














(12,703
)Comprehensive loss:Net loss














(146,505
)






(146,505
)Other comprehensive loss  unrealized holding losses
    arising during the year, net


















(3,892
)


(3,892
)Total comprehensive loss






















(150,397
)Balance at December 31, 2005


181,933,035



976,447



(77
)


(654,602
)


820



322,588Cumulative effect of the application of SAB 108 as of
    January 1, 2006














(10,480
)






(10,480
)Adjusted Balance at January 1, 2006


181,933,035



976,447



(77
)


(665,082
)


820



312,108Issuance of common stock through employee benefit plans


68,250



2,510















2,510Amortization of deferred compensation, net of forfeitures






(77
)


77











Preferred stock accretion






(13,486
)














(13,486
)Comprehensive loss:Net loss














(130,344
)






(130,344
)Other comprehensive income  unrealized holding gains
    arising during the year, net


















60



60Total comprehensive loss






















(130,284
)Balance at December 31, 2006


182,001,285



965,394







(795,426
)


880



170,848Issuance of common stock through employee benefit plans


73,750



2,302















2,302Preferred stock accretion






(14,269
)














(14,269
)Comprehensive loss:Net loss














(115,654
)






(115,654
)Other comprehensive income  losses due to other than
    temporary impairment recognized during the year


















(880
)


(880
)Total comprehensive loss






















(116,534
)Balance at December 31, 2007


182,075,035


$
953,427


$



$
(911,080
)

$



$
42,347    F-4




---



##### 





XO
    Holdings, Inc.
  Consolidated
    Statements of Cash Flows
 (In
    thousands)
  Years Ended December 31,2007


2006


2005OPERATING ACTIVITIES:Net loss

$
(115,654
)

$
(130,344
)

$
(146,505
)Adjustments to reconcile net loss to net cash provided by
    operating activitiesDepreciation and amortization


206,953



201,222



233,084Accrual of interest


40,563



35,537



34,866Provision for doubtful accounts


18,166



32,607



33,501Stock-based compensation


1,933



2,169



147Gain on recovery of investment


(21,518
)


(5,156
)


(7,449
)Impairment charge from investment losses


655







5,500Changes in reserve and liability estimates


(26,299
)


(23,583
)


Loss on write-down of assets


7,936



3,538



1,678Changes in assets and liabilitiesAccounts receivable


(3,593
)


(26,211
)


(20,964
)Other assets


(3,330
)


(3,225
)


2,459Accounts payable


(3,395
)


(9,771
)


(4,043
)Accrued liabilities


37,719



23,579



(23,294
)Net cash provided by operating activities


140,136



100,362



108,980INVESTING ACTIVITIES:Capital expenditures


(215,182
)


(118,878
)


(86,727
)Cash paid for acquisitions










(1,071
)Proceeds from recovery of investment


21,518



12,718



6,145Release of escrow account










25,430Net cash used in investing activities


(193,664
)


(106,160
)


(56,223
)FINANCING ACTIVITIES:Payments on capital leases


(7,328
)


(2,818
)


(2,858
)Repayments of long-term debt










(107,050
)Proceeds from employee stock option exercises


368



341



Net cash used in financing activities


(6,960
)


(2,477
)


(109,908
)Net decrease in cash and cash equivalents


(60,488
)


(8,275
)


(57,151
)Cash and cash equivalents, beginning of period


168,563



176,838



233,989Cash and cash equivalents, end of period

$
108,075


$
168,563


$
176,838SUPPLEMENTAL DATA:Cash paid for interest

$
1,423


$
1,754


$
4,104Cash paid for income taxes

$
4


$



$
Accrued interest converted to long-term debt

$
40,563


$
35,450


$
39,730Accrued capital expenditures and capital leases

$
33,943


$
28,696


$
4,030    F-5




---



##### 



XO
    Holdings, Inc.
  Notes
    to Condensed Consolidated Financial Statements
  1.
    DESCRIPTION
    OF BUSINESS    2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  (a) Consolidation
    (b) Estimates
    (c) Change
    in Accounting Estimates
       F-6




---



##### 



(d) Cash
    and Cash Equivalents
    (e) Marketable
    Securities
    (f) Property
    and Equipment
      Telecommunications networks and acquired bandwidth

3-20 yearsFurniture, fixtures, equipment and other

5-7 yearsLeasehold improvements

shorter of estimated useful lives or terms of the leases    F-7




---



##### 



(g) Impairment
    of Goodwill and Indefinite Lived Intangible Assets
  Goodwill and Other
    Intangible Assets
  (h) Impairment
    of Long-lived Assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets
  (i) Fair
    Value
    (j) Asset
    Retirement Obligations
      (k) Class A
    Convertible Preferred Stock
   F-8




---



##### 



(l) Income
    Taxes
  Accounting for Income
    Taxes
    (m) Revenue
    Recognition
  Services
    Installation
    Revenue
    Network
    Capacity Leases
    Disputes
    Reciprocal
    Compensation
   F-9




---



##### 



(n) Cost
    of Service
    (o) Concentrations
    (p) Allowances
    for Doubtful Accounts
    (q) Share-Based
    Compensation
  Share-Based Payment
  (r) Advertising
    (s) Leases
  Accounting for Leases
 F-10




---



##### 



(t) Transaction
    Based Taxes and Other Surcharges
  No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent (EITF 99-19) No. 06-03, How Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement (That Is, Gross versus Net Presentation), (EITF 06-03). EITF 99-19
  (u) Effect
    of Misstatements on Financial Statements
  Considering the Effects of
    Prior Year Misstatements in Current Year Financial
    Statements
  Period in Which the Misstatement Originated


AdjustmentYear Ended December 31,


Recorded as of2004


2005


January 1, 2006Accumulated depreciation(1)

$
4,301


$
6,179


$
10,480Impact on net income(2)

$
4,301


$
6,179Retained earnings(3)









$
10,480     (1)
    
    The Company applied incorrect
    useful life estimates to certain leasehold improvement and
    transport assets acquired from Allegiance Telecom in June 2004.
    As a result of this error, depreciation expense for 2004 and
    2005 was understated by $4.3 million and $6.2 million,
    respectively. This misstatement was not considered material to
    the Companys financial statements for either of the
    affected years.(2)
    
    Represents the understatement of
    net loss for the indicated periods resulting from these
    misstatements.(3)
    
    Represents the net reduction to
    retained earnings recorded as of January 1, 2006 to record
    the initial application of SAB 108.  (v) New
    Accounting Pronouncements
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of Accounting Research
    Bulletin No. 51
  Fair Value Measurements
 F-11




---



##### 



FAS 157-2
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  (w) Reclassifications
        3.
    MARKETABLE
    SECURITIES    Estimated

Gains in Accumulated OtherEquity Securities

Fair Value

Comprehensive Income2007

$
885


$
2006

$
2,420


$
880   No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments (EITF 03-1). EITF 03-1,
 F-12




---



##### 



4.
    PROPERTY
    AND EQUIPMENT    2007


2006Telecommunications networks and acquired bandwidth

$
1,056,102


$
856,093Furniture, fixtures, equipment and other


340,004



299,8511,396,106



1,155,944Less: accumulated depreciation


(757,677
)


(564,833
)638,429



591,111Construction-in-progress,
    parts and equipment


81,967



87,122Property and equipment, net

$
720,396


$
678,233   construction-in-progress
  5.
    GOODWILL
    AND INTANGIBLE ASSETS    2007


2006Customer relationships

$
112,366


$
112,366Internally developed technology


9,521



9,521Acquired trade names


5,673



5,673127,560



127,560Less: accumulated amortization


(127,560
)


(117,568
)



9,992Broadband wireless licenses  indefinite life asset


35,782



35,782XO Trade name  indefinite life asset


16,662



16,662Goodwill indefinite life asset


1,071



1,071$
53,515


$
63,507      F-13




---



##### 



6.
    OTHER
    ASSETS    2007


2006ATLT bankruptcy claim

$
20,553


$
20,553Other long-term assets


24,069



20,808$
44,622


$
41,361   debtors-in-possession
      7.
    OTHER
    CURRENT LIABILITIES    2007


2006Accrued compensation

$
56,996


$
48,184Deferred revenue


43,596



42,556Accrued operating taxes


47,703



45,590Accrued operating expenses


74,114



56,081Accrued telecommunications costs


14,368



29,537Other accrued liabilities


15,440



13,943$
252,217


$
235,891   8.
    LONG-TERM
    DEBT TO RELATED PARTIES     F-14




---



##### 



F-15




---



##### 



9.
    ASSET
    RETIREMENT OBLIGATIONS    Balance as of January 1, 2006

$
4,996Estimate revisions


(261
)Accretion


394Usage


Balance as of December 31, 2006

$
5,129Additions


69Estimate revisions


Accretion


409Usage


Balance as of December 31, 2007

$
5,607     10.
    UNDERUTILIZED
    OPERATING LEASES      Balance as of January 1, 2006

$
37,339Usage, net


(12,678
)Accretion


4,074Estimate revisions


2,295Balance as of December 31, 2006

$
31,030Usage, net


(10,146
)Accretion


4,196Estimate revisions


(4,658
)Balance as of December 31, 2007

$
20,422   11.
    REDEEMABLE
    PREFERRED STOCK   F-16




---



##### 



12.
    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 approximately
    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 approximately
    7.1 million shares of the Companys common stock at an
    exercise price of $10.00 per share.   F-17




---



##### 



Earnings
    (Loss) Per Share
    Universal
    Shelf Registration Statement
  Form S-3 No. 333-147643)
  13.
    SHARE-BASED
    COMPENSATION  Stock
    Incentive Plans
       F-18




---



##### 



Stock
    Options
    Weighted AverageNumber of

Weighted Average

Remaining

AggregateShares

Exercise Price

Contractual Term

Intrinsic ValueOutstanding at December 31, 2006


9,788,204


$
5.06Granted


409,500


$
5.00Forfeited


(122,032
)

$
5.01Expired


(368,177
)

$
5.06Exercised


(73,750
)

$
5.00Outstanding at December 31, 2007


9,633,745


$
5.07



6.2 years


$
Exercisable at December 31, 2007


7,540,993


$
5.05



5.6 years


$
Expected to vest at December 31, 2007


1,843,714


$
5.07



8.1 years


$
       Fair
    Value Determination
    2007

2006

2005Weighted average grant date price per share of Company stock

$
4.55


$
4.56


$
2.74Weighted average exercise price

$
5.00


$
5.10


$
5.00Range of expected volatility


60.00 - 63.09
%


63.89 - 65.26
%


61.00
%Range of risk free interest rate


4.42 - 5.06
%


4.48 - 5.04
%


3.80
%Dividend yield










Expected term (in years)


6.25



6.25



4.00  F-19




---



##### 



Prior
    Period Pro Forma Disclosures
  Accounting
    for Stock Issued to Employees Accounting
    for Stock-Based Compensation
  2005Net loss allocable to common shareholders, as reported

$
(159,208
)Add: Stock-based employee compensation expense included in net
    loss allocable to common shareholders, as reported


147Deduct: Total stock-based employee compensation expense
    determined under fair value based methods for all stock awards


(5,973
)Pro forma net loss allocable to common shareholders

$
(165,034
)Net loss allocable to common shareholders per common share,
    basic and diluted:Net loss allocable to common shareholders per common share,
    basic and diluted  as reported

$
(0.88
)Net loss allocable to common shareholders per common share,
    basic and diluted  pro forma

$
(0.91
)   Unrecognized
    Compensation
    14.
    EMPLOYEE
    SAVINGS AND RETIREMENT PLAN    15.
    INVESTMENT
    AND OTHER INCOME  2007


2006


2005Investment income, net

$
20,863


$
5,193


$
1,950Other income


2,205







3,380Total

$
23,068


$
5,193


$
5,330    F-20




---



##### 



16.
    INCOME
    TAXES    December 31,2007


2006Deferred tax assets:Provisions not currently deductible

$
75,199


$
103,938Property, equipment and other long-term assets (net)


467,400



498,253Net operating loss and capital loss carry forwards


590,527



518,376Total deferred tax assets


1,133,126



1,120,567Valuation allowance


(1,133,126
)


(1,120,567
)Net deferred tax assets






Deferred tax liabilities:Other identifiable intangibles


(6,498
)


(6,831
)Total deferred tax liabilities


(6,498
)


(6,831
)Net deferred tax liability

$
(6,498
)

$
(6,831
)      F-21




---



##### 



Year Ended December 31,2007


2006


2005Current income tax expense:State

$
1,116







Foreign


4







Total current income tax expense


1,120







Deferred income tax benefitState


(333
)






Total deferred income tax benefit


(333
)






Total income tax expense (benefit)

$
787







     2007


2006


2005Statutory U.S. federal rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal benefit


4.0



5.0



6.0Reduction of state deferred tax assets


(32.0
)






Other


0.5







Subtotal


7.5



40.0



41.0Valuation allowance for deferred tax assets


(8.2
)


(40.0
)


(41.0
)Effective income tax rate


(0.7
)%


0.0
%


0.0
%   Accounting for Uncertainty in Income Taxes, an interpretation
    of SFAS No. 109
    Reconciliation
    of Unrecognized Tax Benefits (in thousands)
  Gross unrecognized tax benefits at January 1, 2007

$
509,264Gross amount of increases and decreases from tax
    positions  prior period


(39,390
)Gross amount of increases and decreases from tax
    positions  current period


Decreases resulting from settlements with taxing authorities


Decreases resulting from expiration of statutes of limitation


Gross unrecognized tax benefits at December 31, 2007

$
469,874    F-22




---



##### 



Interest
    and Penalties
    Accrued interest as of January 1, 2007

$
1,103Interest recognized


327Accrued interest as of December 31, 2007

$
1,430     Possible
    Changes in Unrecognized Tax Benefits
    Open
    Tax Years
    17.
    RELATED
    PARTY TRANSACTIONS    Outstanding


Series A, B and CCommon Stock


Warrants


Credit Facility


Preferred StockAt December 31, 2006(2)


Greater than 50
%


Greater than 40
%


Greater than 90
%


Greater than 50
%At December 31, 2007(1)


Greater than 50
%


Greater than 40
%


Greater than 90
%


Greater than 50
%     (1)
    
    As reported in the October 2,
    2007 Form 4 for the Chairman, and the July 2, 2007
    Amendment No. 9 to Schedule 13D filed by Cardiff
    Holding, LLC (Cardiff) and other parties to such
    joint filings.(2)
    
    According to Amendment No. 8
    to the Schedule 13D of Cardiff Holding LLC
    (Cardiff), filed with the Securities and Exchange
    Commission on May 1, 2006, on April 28, 2006, Cardiff,
    an entity affiliated with the Companys Chairman, sold in a
    private sale to qualified institutional buyers an aggregate of
    1,725,000 shares of the Companys 6% Class A
    Convertible Preferred Stock (the Preferred Stock).       F-23




---



##### 



18.
    SEGMENT
    INFORMATION    XO
    Communications
    Nextlink
     F-24




---



##### 



2007IntercompanyXOC


Nextlink


Elimination


ConsolidatedRevenue from external customers

$
1,428,193


$
472


$



$
1,428,665Inter-segment revenue

$
131


$
1,048


$
(1,179
)

$
Depreciation and amortization

$
206,452


$
501


$



$
206,953Loss from operations

$
(95,244
)

$
(13,192
)

$



$
(108,436
)Interest income














8,182Investment and other income














23,068Interest expense, net














(37,681
)Income tax expense














(787
)Net loss













$
(115,654
)   2006IntercompanyXOC


Nextlink


Elimination


ConsolidatedRevenue from external customers

$
1,415,971


$
872


$



$
1,416,843Inter-segment revenue

$
130


$
389


$
(519
)

$
Depreciation and amortization

$
196,201


$
5,021


$



$
201,222Loss from operations

$
(95,085
)

$
(17,066
)

$



$
(112,151
)Interest income














8,691Investment and other income














5,193Interest expense, net














(32,077
)Income tax expense














Net loss













$
(130,344
)   2005IntercompanyXOC


Nextlink


Elimination


ConsolidatedRevenue to external customers

$
1,437,691


$
206


$



$
1,437,897Depreciation and amortization

$
226,757


$
6,327


$



$
233,084Loss from operations

$
(117,012
)

$
(9,382
)

$



$
(126,394
)Interest income














8,850Investment and other income














5,330Interest expense, net














(34,291
)Income tax expense














Net loss













$
(146,505
)     XOC

Nextlink

Consolidated2007

$
210,156


$
5,026


$
215,1822006

$
114,634


$
4,244


$
118,8782005

$
86,254


$
473


$
86,727  F-25




---



##### 



XOC

Nextlink

ConsolidatedDecember 31, 2007

$
1,042,060


$
48,066


$
1,090,126December 31, 2006

$
1,088,399


$
42,822


$
1,131,221   Major
    Customers
    19.
    COMMITMENTS
    AND CONTINGENCIES  Leases
      2008

$
63,3362009


55,8602010


49,1952011


41,0962012


36,630Thereafter


87,586Total minimum lease payments

$
333,703       2007


2006Network assets

$
14,513


$
8,259Accumulated depreciation


(4,252
)


(3,192
)Net capitalized lease assets

$
10,261


$
5,067  F-26




---



##### 



2008

$
6,2002009


1,8532010


1,5022011


1,5022012


1,502Thereafter


10,816Total minimum capital lease payments


23,375Less: imputed interest


(2,256
)Less: current portion of capital lease payments


(4,860
)Long-term portion of capital lease payments

$
16,259   Other
    Commitments
    2008

$
125,6762009


78,3172010


54,2852011


44,8382012


39,837Thereafter


74,273Total minimum lease payments

$
417,226       Indemnification
    Legal
    Proceedings
  Loss
    Contingencies
 F-27




---



##### 



Allegiance
    Telecom Liquidating Trust Litigation
        true-up True-Up)
      True-Up,
          Litigation
    Relating to the Wireline Sale
  No. 1862-N).
 F-28




---



##### 



No. 1877-N)) No. 1880-N))
      Houlihan
    Lokey Howard and Zukin Capital LLC
   F-29




---



##### 



Level 3
  10-K
  Metro
    Nashville
    Choice
    Tel
   F-30




---



##### 



20.
    SELECTED
    QUARTERLY DATA (Unaudited  see accompanying
    accountants report)    Quarters Ended 2007March 31


June 30


September 30


December 31Revenue

$
348,513


$
352,893


$
359,354


$
367,905Cost of Service*  originally reported

$
136,242


$
150,192


$
140,911



N/AOperating expense reclassification(1)


52,890



54,492



55,967



N/ACost of service*  revised*

$
189,132


$
204,684


$
196,878


$
219,896Loss from operations

$
(13,896
)

$
(31,224
)

$
(17,329
)

$
(45,987
)Net loss

$
(20,633
)

$
(36,370
)

$
(4,462
)

$
(54,189
)Net loss allocable to common shareholders

$
(24,122
)

$
(39,910
)

$
(8,055
)

$
(57,836
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.13
)

$
(0.22
)

$
(0.04
)

$
(0.32
)   Quarters Ended 2006March 31


June 30


September 30


December 31Revenue  originally reported

$
349,690


$
354,282


$
352,334


$
355,310Pass through tax reclassification(2)


1,334



1,339



1,244



1,310Revenue  revised

$
351,024


$
355,621


$
353,578


$
356,620Cost of service*  originally reported

$
154,380


$
153,089


$
141,840


$
147,718Operating expense reclassification(1)


57,214



56,153



55,435



50,986Pass through tax reclassification(2)


1,334



1,339



1,244



1,310Cost of service*  revised

$
212,928


$
210,581


$
198,519


$
200,014Loss from operations

$
(37,989
)

$
(30,458
)

$
(16,570
)

$
(27,134
)Net loss

$
(43,658
)

$
(36,081
)

$
(22,972
)

$
(27,633
)Net loss allocable to common shareholders

$
(46,945
)

$
(39,455
)

$
(26,359
)

$
(31,071
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.26
)

$
(0.22
)

$
(0.14
)

$
(0.17
)     *
    
    exclusive of depreciation and
    amortization(1)
    
    Represents the quarterly impact
    associated with the reclassification of certain network
    operation costs from selling, operating and general expenses to
    a component of cost of service. The Company believes that
    reclassifying these expense categories into cost of service
    better matches the relationship of the costs with the
    corresponding revenue. See Note 2w.(2)
    
    Represents the quarterly impact
    associated with the reclassification of certain pass-through
    transaction based taxes previously reported on a net basis,
    which should have been reported on a gross basis as a separate
    component of revenue and cost of service. See Note 2w.       F-31




---



##### 



21.
    SUBSEQUENT
    EVENTS  Conversion
    of McLeodUSA Stock
    Engagement
    of Financial Advisor
    Short-Term
    Borrowing from Related Party
       F-32




---



##### 



pari passu
    Form 8-K
 F-33




---



##### 



XO
    Holdings, Inc.Schedule IIValuation and Qualifying Accounts
    For The Years Ended December 31, 2007, 2006 and
    2005
  AdditionsCharged to

Charged toBeginning

Costs and

Other



Ending(In thousands)

Balance

Expenses

Accounts

Deductions

BalanceAllowance for doubtful accounts2005

$
38,981


$
33,502


$



$
(36,422
)

$
36,0612006

$
36,061


$
32,607


$



$
(51,914
)

$
16,7542007

$
16,754


$
18,166


$



$
(24,804
)

$
10,116Accrued underutilized lease obligations2005

$
43,656


$
6,861


$



$
(13,178
)

$
37,3392006

$
37,339


$
6,369


$



$
(12,678
)

$
31,0302007

$
31,030


$
(462
)

$



$
(10,146
)

$
20,422Deferred tax asset valuation allowance2005

$
1,257,821


$
46,267


$



$
(197,402
)

$
1,106,6862006

$
1,106,686


$
52,690


$



$
(38,809
)

$
1,120,5672007

$
1,120,567


$
55,216


$



$
(42,657
)

$
1,133,126  S-1