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, 2008ORo

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
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE




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


Business


1ITEM 1A.


Risk Factors


25ITEM 1B.


Unresolved Staff Comments


32ITEM 2.


Properties


32ITEM 3.


Legal Proceedings


32ITEM 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


36ITEM 7.


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


37ITEM 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


53ITEM 8.


Financial Statements and Supplementary Data


53ITEM 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


87ITEM 9A.


Controls and Procedures


87ITEM 9B.


Other Information


89PART IIIITEM 10.


Directors, Executive Officers and Corporate
    Governance


89ITEM 11.


Executive Compensation


89ITEM 12.


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


89ITEM 13.


Certain Relationships and Related Transactions,
    and Director Independence


89ITEM 14.


Principal Accounting Fees and Services


89PART IVITEM 15.


Exhibits, Financial Statement Schedules


90




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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, and
    the necessity of obtaining future financing 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;
    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 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  Form 10-K, Form 10-Q, Form 8-K,
  Overview
  local exchange carrier
  Incumbent Local Exchange Carrier ILEC
  Local Multipoint Distribution
    System LMDS
  Segments
    XO
    Communications
   1




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##### 



Strategy
    Focus on Business and Carrier Customers.
  Focus on Data and IP Services. IP-based IP-related IP-based MPLS- IP-VPN). IP- VPN Ethernet VoIP
  Utilize Our Network Assets. collocations fiber optics on-network capacity
  Provide Quality Services to our Customers.
  Transformation.
  Service
    Offerings
   Data and IP Services. Dedicated IP-based IP-VPN bandwidth
 2




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##### 



IP-VPN
  private line back-up OC-192 ATM Frame Relay Synchronous Optical Network 24-hour-a-day-7-day-a-week
  Mbps T1 Gbps Local Area Networks IP-based switches
  Integrated/Voice Services.
  Managed Services. IP-enabled PBX Interactive Voice Response
    (IVR)
 3




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##### 



TDM
  Voice Services. interconnection
  Hosting and Hosted Applications. SaaS
  Business
    Units
    Business
    Services
  IP-based
        Small-to-Medium Business
    (SMB).
 4




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##### 



Mid-Market Business.
  Enterprise.
  Government.
    Carrier
    Services
 Competitive Local Exchange
    Carriers (CLECs), Internet Service Providers
    (ISPs), interexchange carriers routers
    DS3. Point-of-Presence (POP) backbone IP-originated Public Switched Telephone Network
    (PSTN)
 5




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##### 



Concentric
   Clustered Technology ® back-up.
    Nextlink
 wireless backhaul line-of-sight LOS
  Strategy
   Preserve the Spectrum.
  Focus on Growing Access Business in Key
    Markets.
  Building Backhaul Networks to Meet Customer
    Demand.
  Customers
  6




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##### 



Licenses
 (28-31 GHz
  LMDS License Renewal Filings.
  LMDS Substantial Service Filings. 1
      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

B    1
 7




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##### 



LicenseNumber

City

State

Population

BandWPLM411

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

BWPLM401

Los Angeles

CA

14,549,810

AWPLM428

Louisville

KY

1,352,955

AWPLM423

Mansfield

OH

221,514

BWPLM433

Medford-Grants Pass

OR

209,038

BWPLM419

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

BWPOH956

Providence-Pawtucket, New Bedford- Fall River

RI, MA

1,509,789

AWPLM437

Rochester

NY

1,118,963

BWPLM402

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

AWPOH954

Austin

TX

899,361

AWPOH962

Baltimore

MD

2,430,563

AWPOH955

Boston

MA

4,133,895

AWPOH950

Charlotte-Gastonia

NC

1,671,037

AWPOH948

Chicago

IL

8,182,076

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

A 8




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##### 



LicenseNumber

City

State

Population

BandWPOH979

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

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

AWPOH960

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

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

AWPOH968

West Palm Beach-Boca Raton

FL

893,145

AWPOH957

Worcester-Fitchburg-Leominster

MA

709,705

A     LicenseNumber

City

State

Population

BandWPOH944

Albany-Schenectady

NY

1,028,615

AWPOH963

Atlanta

GA

3,197,171

AWPOH977

Buffalo-Niagara Falls, NY

NY

1,231,795

AWPOH953

Dallas

TX

4,329,924

AWPLM429

Lexington

KY

816,101

AWPOH967

Miami-Ft. Lauderdale

FL

3,270,606

AWPOH970

Milwaukee

WI

1,751,525

AWPOH942

New York (unencumbered by PMSA)

NY

9,503,769

AWPLM432

Portland

OR

1,690,930

AWPOH972

Richmond-Petersburg

VA

1,090,869

AWPLM407

Sacramento

CA

1,656,581

AWPOH965

Tampa-St. Petersburg-Clearwater

FL

2,249,405

AWPOH961

Washington

DC

4,118,628

A     LicenseNumber

City

State

Population

Band

License RenewalWPOL286

New York (PMSA of 5 boroughs & 3 counties)

NY

8,546,846

A3

2/1/2016  9




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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 MHzA3

31,075 to 31,225 MHz = 150 MHzB

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







39 GHzNumber

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   Network
  wave division
    multiplexing advanced packet switching
    equipment
  Metropolitan Fiber Networks and Local
    Facilities. route miles
  central office
 10




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##### 



indefeasible rights to use IRU
    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
    Fullerton
    Garden Grove
    Huntington Beach
    Inglewood Irving

NJ

New Jersey

Bergen/Passaic Middlesex-Somerset-Hunterdon
    Newark
    Jersey City
    Monmouth-Ocean
    TrentonLong Beach

NV

Las Vegas

Las VegasOrange
    Santa Ana

NY

New York

Manhattan 
    Nassau-SuffolkCA

Sacramento

Sacramento

OH

Cleveland / Akron

Cleveland-Lorain-ElyriaCA

San Diego

San Diego





AkronCA

San Francisco

San Francisco
    Oakland

OH

Columbus

Canton-Massillon ColumbusFremont

OR

Portland

Portland-Vancouver, OR-WAMilpitas
    Mountain View
    Palo Alto
    Santa Clara
    Sunnyvale

PA / DE

Central PA

Allentown-Bethlehem-Easton Harrisburg-Lebanon-Carlisle Lancaster
    Reading Scranton-Wilkes-Barre-HazletonCA

San Jose

San Jose





YorkCO

Denver

Denver
    Boulder-Longmont

PA

Philadelphia

Wilmington-Newark, DE-MD
    Dover
    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-MS 11




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##### 



Metro Fiber





Metro FiberNetwork





NetworkState

Location

Service Market

State

Location

Service MarketFL

Miami

Miami

TN

Nashville

NashvilleWest Palm Beach-Boca Raton

TX

Austin

Austin-San MarcoFL

Orlando

Orlando Tampa-St.

TX

Dallas / Ft Worth

Dallas
    Fort Worth-ArlingtonFL

Tampa

Petersburg-Clearwater

TX

Houston

HoustonGA

Atlanta

Atlanta

TX

San Antonio

San AntonioMarietta

UT

Salt Lake City

Salt Lake City-OgdenIL

Chicago

Chicago





Orem/ProvoMA

Boston

Boston, MA-NH

WA

Seattle

Seattle-Bellevue-EverettBrockton
    Lawrence, MA-NH
    Lowell, MA-NH
    Worcester, MA-CT

WA

Spokane

Spokane
    Lewiston
    Clarkston
    Coeur dAleneMD

Baltimore

Baltimore   wavelengths
  Inter-city Network.
  dark fiber
  Tbps
  IP Network. nodes peering
 12




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##### 



Provider Edge GE
  Wireless Network.
  backhaul
 13




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- Licenses
  Competition
   14




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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. 15




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
    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 3 to 13 miles. In addition, new protocols are under
    development, such as WiMax, that 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 IP-enabled
    Regulatory
  Overview.
      Federal Regulation.
  conduits unbundled network elements UNE
 16




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##### 



Unbundling of Incumbent Network Elements.
  FCC Regulation of Wireless Services.
  and/or Licenses
  Additional
    Federal Regulations
    Verizon and Qwest Petitions for Forbearance from Unbundling
    Requirements.
  VoIP. IP-enabled
 17




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##### 



Universal
    Service Fund IP-enabled
  AT&T Declaratory Ruling
    Re:  VoIP. access
    charges
  ILEC Petitions for Forbearance from
    Regulation.
  Intercarrier Compensation Reform and Treatment of VoIP
    Services.
 18




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##### 



VoIP 911 Regulation.
  CALEA Regulation. dial-up
  State and
    Local Regulation
     Wireless Services Affected by State
    Regulations.
 19




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##### 



Additional
    State and Local Regulation
 XO Complaints Against Verizon.
  Qwest Complaints Against XO.
 20




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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.
  Digital.
 21




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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.
 22




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##### 



Local Loop.
  Local Multipoint Distribution System, or
    LMDS.
  Mbps (megabits per second).
  MPLS, or Multi-Protocol Label Switching.
  Node.
  OC-n.
  Peering.
  Point-of-Presence, or POP.
  PBX, or Private Bank eXchange.
  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.
  T1.
 23




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##### 



Tbps terabits per
    second 12
  Time Division Multiplexing, or TDM.
  Unbundled Network Elements, or UNE.
  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.
  Wireless Backhaul.
 24




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##### 



Employees
    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.
      and/or
  Unfavorable
    general economic conditions in the United States could
    negatively impact our operating results and financial
    condition.
   25




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##### 



Risks
    Related to our Wireline 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.
          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
 26




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##### 



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.
    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.
   27




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##### 



Our
    spectrum licenses may not be renewed upon expiration, which
    could harm our business.
      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.
    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.
     28




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##### 



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
  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.
    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.
   29




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##### 



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.
    04-290
  Risks
    Related to our Common Stock
  An entity
    owned and controlled by our Chairman is our majority
    stockholder.
   30




---



##### 



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
 31




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##### 



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES      ITEM 3.
    LEGAL
    PROCEEDINGS    Allegiance
    Telecom Liquidating Trust Litigation
      Houlihan
    Lokey Howard and Zukin Capital LLC
   32




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##### 



Nashville
    Electric Service
    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
  mark-up,
  2008


2007Quarter

High


Low


High


LowFirst

$
2.45


$
1.06


$
5.24


$
4.07Second

$
1.30


$
0.41


$
5.20


$
4.33Third

$
0.75


$
0.32


$
4.89


$
3.10Fourth

$
0.40


$
0.12


$
3.45


$
1.92   Holders
    Dividends
    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


9,022,674


$
5.05



6,594,778Equity compensation plans not approved by stockholders










Total


9,022,674


$
5.05



6,594,778     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.  2002 Stock Incentive Plan Programs.
  2003 Employee Retention and Incentive Plan.
 34




---



##### 



2003 Annual Bonus Plan.
 35




---



##### 



ITEM 6.
    SELECTED
    FINANCIAL DATA        Years Ended December 31,2008


2007


2006


2005


2004aStatement of Operations Data:Revenue

$
1,477,610


$
1,428,665


$
1,416,843


$
1,437,897


$
1,300,420Loss from
    operationsb


(84,813
)


(110,137
)


(113,697
)


(128,962
)


(373,475
)Net lossc


(75,281
)


(117,355
)


(131,890
)


(149,073
)


(408,726
)Net loss allocable to common
    shareholdersc


(117,075
)


(131,624
)


(145,376
)


(161,776
)


(413,636
)Net loss allocable to common shareholders per common share,
    basic and
    dilutedd


(0.64
)


(0.72
)


(0.80
)


(0.89
)


(2.59
)Balance Sheet Data:Cash, cash equivalents and marketable
    securitiese,f


373,895



108,960



170,983



183,988



251,289Total assets


1,375,984



1,090,126



1,131,221



1,202,725



1,459,385Long-term
    obligationsf






377,213



336,650



301,113



366,247Class A convertible preferred
    stockf


259,948



244,811



230,542



217,056



204,353Class B convertible preferred
    stockf


573,795















Class C perpetual preferred
    stockf


200,877















Total stockholders (deficit) equity


(58,469
)


33,813



164,015



306,821



482,833Statement of Cash Flow Data:Net cash provided by operating activities


71,614



139,534



97,657



108,980



150Net cash used in investing
    activitiese


(293,596
)


(193,062
)


(103,455
)


(56,223
)


(444,837
)Net cash provided by (used in) financing
    activitiesf


370,654



(6,960
)


(2,477
)


(109,908
)


200,116     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 included a $212.5 million
    non-cash impairment charge for goodwill.c
    
    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. 2004 included a $212.5 million
    non-cash impairment charge for goodwill.d
    
    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. 2004
    included a $1.31 per share non-cash impairment charge for
    goodwill. 36




---



##### 



e
    
    2008 included $137.2 million
    of payments for 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.f
    
    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 long-term obligations
    and net cash provided by financing activities of
    $307.0 million. In 2004, 4.0 million shares of
    Class A preferred stock were issued in a private placement,
    yielding net proceeds of $199.4 million. 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
        IP-VPN off-net
 37




---



##### 



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
     40




---



##### 



Results
    of Operations
    % of





% ofConsolidated





Consolidated


ChangeYears Ended December 31,

2008


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 write-down 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
)%Other income


257



NM



2,205



0.2



(1,948
)


(88.3
)%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
)%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
)%   % of





% 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*


815,012



57.0



825,178



58.2



(10,166
)


(1.2
)%Selling, general and administrative


508,901



35.6



500,602



35.4



8,299



1.7
%Depreciation and amortization


206,953



14.5



201,222



14.2



5,731



2.8
%Loss on write-down of assets


7,936



0.6



3,538



0.2



4,398



124.3
%Total cost and expenses


1,538,802



107.7



1,530,540



108.0



8,262



0.5
%Loss from operations


(110,137
)


(7.7
)


(113,697
)


(8.0
)


(3,560
)


(3.1
)%Interest income


8,182



0.6



8,691



0.6



(509
)


(5.9
)%Other income


2,205



0.2











2,205



NMInvestment gain, net


20,863



1.4



5,193



0.4



15,670



301.8
%Interest expense, net


(37,681
)


(2.6
)


(32,077
)


(2.3
)


5,604



17.5
%Net loss before income taxes


(116,568
)


(8.1
)


(131,890
)


(9.3
)


(15,322
)


(11.6
)%Income tax expense


(787
)


(0.1
)










787



NMNet loss


(117,355
)


(8.2
)


(131,890
)


(9.3
)


(14,535
)


(11.0
)%Preferred stock accretion


(14,269
)


(1.0
)


(13,486
)


(1.0
)


783



5.8
%Net loss allocable to common shareholders

$
(131,624
)


(9.2
)%

$
(145,376
)


(10.3
)%

$
(13,752
)


(9.5
)%     *
    
    Exclusive of depreciation and
    amortization expense  NM
    
    = not meaningful 41




---



##### 



Revenue 
    2008 Compared to 2007
  IP-based IP-based
    % of





% of


Change2008


Revenue


20071


Revenue


Dollars


PercentCore ServicesData and IP

$
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
%     1
    
    2007 revenue categories have been
    reclassified for comparability with 2008 presentation.  Core Services.
    IP-enabled
 42




---



##### 



Legacy/TDM Services.
    Revenue 
    2007 Compared to 2006
    % of





% of


Change20071


Revenue


20061


Revenue


Dollars


PercentCore ServicesData and IP

$
530,257



37.1
%

$
422,746



29.8
%

$
107,511



25.4
%Integrated/Voice


337,324



23.6



367,577



26.0



(30,253
)


(8.2
)%Total Core Services


867,581



60.7



790,323



55.8



77,258



9.8
%Legacy/TDM services


561,084



39.3



626,520



44.2



(65,436
)


(10.4
)%Total revenue

$
1,428,665



100.0
%

$
1,416,843



100.0
%

$
11,822



0.8
%     1
    
    2007 and 2006 revenue categories
    have been reclassified for comparability with 2008 presentation.  Core Services.
  IP-enabled
  Legacy/TDM Services.
  COS 
    2008 Compared to 2007
   43




---



##### 



% of





% of


Change2008


Revenue


2007


Revenue


Dollars


PercentTelecommunications services


622,646



42.1
%

$
584,690



40.9
%

$
37,956



6.5
%Network
    operations1


192,379



13.0



180,836



12.7



11,543



6.4
%Pass-through taxes


56,420



3.8



49,486



3.4



6,934



14.0
%Total cost of service


871,445



58.9
%

$
815,012



57.0
%

$
56,433



6.9
%     1
    
    2007 cost of service, as presented,
    includes $4.4 million associated with a reclassification of
    expenses from SG&A for comparability with 2008 presentation.       44




---



##### 



COS 
    2007 Compared to 2006
    % of





% of


Change2007


Revenue


2006


Revenue


Dollars


PercentTelecommunications services

$
584,690



40.9
%

$
597,027



42.1
%

$
(12,337
)


(2.1
)%Network
    operations1


180,836



12.7



179,270



12.7



1,566



0.9
%Pass-through taxes


49,486



3.4



48,881



3.4



605



1.2
%Total cost of service

$
815,012



57.0
%

$
825,178



58.2
%

$
(10,166
)


(1.2
)%     1
    
    Cost of service, as presented,
    included $4.4 million for 2007 and $3.1 million for
    2006 associated with a reclassification of expenses from
    SG&A for comparability with 2008 presentation.    Selling, General and Administrative  2008
    Compared to 2007
      Selling,
    General and Administrative  2007 Compared to
    2006
    Depreciation
    and Amortization
   45




---



##### 



Investment
    Gain, Net
      Interest
    Expense, Net
  Debt Retirement
    through Issuance of Preferred Stock
    Capital
    Expenditures
  Capital Expenditures(dollars in thousands)

Dollars


% of Revenue2008

$
216,958



14.7
%2007

$
215,182



15.1
%2006

$
118,878



8.4
%   IP-based
 46




---



##### 



Comparison
    of Segment Financial Results
    XO Communications.
  % of





% ofXOC





XOC


Change2008


Revenue


20071


Revenue


Dollars


PercentRevenue from external customers

$
1,476,061



99.9
%

$
1,428,050



99.9
%

$
48,011



3.4
%Inter-segment revenue


550



0.1



274



0.1



276



100.7
%Total revenue


1,476,611



100.0



1,428,324



100.0



48,287



3.4
%Cost and expensesCost of service*


867,297



58.7



811,942



56.8



55,355



6.8
%Selling, general and administrative


488,234



33.1



499,618



35.0



(11,384
)


(2.3
)%Depreciation and amortization


188,086



12.7



206,452



14.5



(18,366
)


(8.9
)%Loss on write-down of assets


2,432



0.2



7,257



0.5



(4,825
)


(66.5
)%Total cost and expenses


1,546,049



104.7



1,525,269



106.8



20,780



1.4
%Segment loss

$
(69,438
)


(4.7
)%

$
(96,945
)


(6.8
)%

$
(27,507
)


(28.4
)%Capital Expenditures

$
207,922



14.1
%

$
210,156



14.7
%   % of





% ofXOC





XOC


Change20071


Revenue


20062


Revenue


Dollars


PercentRevenue from external customers

$
1,428,050



99.9
%

$
1,415,971



99.9
%

$
12,079



0.9
%Inter-segment revenue


274



0.1



130



0.1



144



110.8
%Total revenue


1,428,324



100.0



1,416,101



100.0



12,223



0.9
%Cost and expensesCost of service*


811,942



56.8



824,390



58.2



(12,448
)


(1.5
)%Selling, general and administrative


499,618



35.0



488,610



34.5



11,008



2.3
%Depreciation and amortization


206,452



14.5



196,201



13.9



10,251



5.2
%Loss on write-down of assets


7,257



0.5



3,531



0.2



3,726



105.5
%Total cost and expenses


1,525,269



106.8



1,512,732



106.8



12,537



0.8
%Segment loss

$
(96,945
)


(6.8
)%

$
(96,631
)


(6.8
)%

$
(314
)


(0.3
)%Capital Expenditures

$
210,156



14.7
%

$
114,634



8.1
%     *
    
    Exclusive of depreciation and
    amortization  1
    
    $4.4 million of expenses were
    reclassified from SG&A to Cost of service for comparability
    with 2008 presentation.2
    
    $3.1 million of expenses were
    reclassified from SG&A to Cost of service for comparability
    with 2008 presentation.   47




---



##### 



Nextlink.
  % of





% ofNextlink





Nextlink


Change2008


Revenue


2007


Revenue


Dollars


PercentRevenue from external customers

$
1,549



46.2
%

$
615



40.5
%

$
934



151.9
%Inter-segment revenue


1,807



53.8



905



59.5



902



99.7
%Total revenue


3,356



100.0



1,520



100.0



1,836



120.8
%Cost and expensesCost of service*


6,487



193.3



4,247



279.4



2,240



52.7
%Selling, general and administrative


9,400



280.1



9,285



610.8



115



1.2
%Depreciation and amortization


1,142



34.0



501



33.0



641



127.9
%Loss on write-down of assets


1,702



50.7



679



44.7



1,023



150.7
%Total cost and expenses


18,731



558.1



14,712



967.9



4,019



27.3
%Segment loss

$
(15,375
)


(458.1
)%

$
(13,192
)


(867.9
)%

$
2,183



16.5
%Capital Expenditures

$
9,036



269.2
%

$
5,026



330.7
%

$
4,009



79.8
%     *
    
    Exclusive of depreciation and
    amortization  Revenue.
    Cost of Service. start-up
  Depreciation and Amortization.
  Loss on write-down of assets.
  Capital expenditures.
 48




---



##### 



% of





% ofNextlink





Nextlink


Change2007


Revenue


2006


Revenue


Dollars


PercentRevenue from external customers

$
615



40.5
%

$
872



69.2
%

$
(257
)


(29.5
)%Inter-segment revenue


905



59.5



389



30.8



516



132.6
%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
%Selling, general and administrative


9,285



610.8



11,993



951.0



(2,708
)


(22.6
)%Depreciation and amortization


501



33.0



5,021



398.2



(4,520
)


(90.0
)%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.
  Selling, general and administrative.
  Depreciation and amortization.
  Loss on write-down of assets.
  Capital expenditures.
  Liquidity
    and Capital Resources
   49




---



##### 



Redemption
    of Class A Convertible Preferred Stock
    Debt
    Retirement through Issuance of Preferred Stock
       50




---



##### 



Cash
    Flow
  IP-based
    2008


2007


2006Cash provided by operating activities

$
71,614


$
139,534


$
97,657Cash used in investing activities

$
(293,596
)

$
(193,062
)

$
(103,455
)Cash provided by (used in) financing activities

$
370,654


$
(6,960
)

$
(2,477
)   Operating Activities.
    Investing Activities.
  IP-based
 51




---



##### 



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








More thanTotal


than 1 year


1-3 Years


3-5 Years


5 yearsCapital lease obligations

$
31.1


$
7.8


$
11.0


$
3.0


$
9.3Operating lease obligations


322.7



62.6



108.1



84.8



67.2Purchase
    obligations1


333.9



95.5



114.4



69.7



54.3Redemption of Class A convertible preferred stock


276.7







276.7







Total contractual obligations

$
964.4


$
165.9


$
510.2


$
157.5


$
130.8     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
  FAS 142-3, Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible
    Assets Business Combinations FSP 142-3 FSP 142-3 FSP 142-3 FSP 142-3
 52




---



##### 



FSP 142-3
  EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is
    Indexed to an Entitys Own Stock EITF 07-5 EITF 07-5 EITF 07-5
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Report of Independent Registered Public
    Accounting Firm


54Consolidated Balance Sheets


55Consolidated Statements of Operations


56Consolidated Statements of Stockholders
    (Deficit) Equity


57Consolidated Statements of Cash Flows


58Notes to Consolidated Financial Statements


59Financial Statement ScheduleSchedule II  Valuation and
    Qualifying Accounts


94  53




---



##### 



Report
    of Independent Registered Public Accounting Firm           Considering the
    Effects of Prior Year Misstatements in Current Year Financial
    Statements.
  Internal Control  Integrated Framework
      54




---



##### 



XO
    Holdings, Inc.



Consolidated
    Balance Sheets

(in
    thousands, except for share and per share data)  December 31,


December 31,2008


2007ASSETSCurrent AssetsCash and cash equivalents

$
256,747


$
108,075Marketable securities


117,148



885Accounts receivable, net of allowance for doubtful accounts of
    $9,727 and $10,116, respectively


152,622



131,705Prepaid expenses and other current assets


41,200



30,928Total current assets


567,717



271,593Property and equipment, net


724,404



720,396Intangible assets, net


53,515



53,515Other assets


30,348



44,622Total Assets

$
1,375,984


$
1,090,126LIABILITIES, REDEEMABLE PREFERRED STOCK AND
    STOCKHOLDERS (DEFICIT) EQUITYCurrent LiabilitiesAccounts payable

$
93,547


$
106,488Accrued liabilities


221,356



253,003Total current liabilities


314,903



359,491Long-term debt and accrued interest payable to related parties






377,213Deferred revenue, less current portion


29,715



17,168Other liabilities


55,215



57,630Total Liabilities


399,833



811,502Class A convertible preferred stock


259,948



244,811Class B convertible preferred stock


573,795



Class C perpetual preferred stock


200,877



Commitments and contingenciesStockholders (Deficit) 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;
    555,000 shares of Class B convertible preferred stock
    issued and outstanding on December 31, 2008 and none issued
    as of December 31, 2007; 225,000 shares of
    Class C perpetual preferred stock issued and outstanding on
    December 31, 2008 and none issued as of December 31,
    2007






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


941,270



953,427Accumulated other comprehensive loss


(4,844
)


Accumulated deficit


(994,895
)


(919,614
)Total Stockholders (Deficit) Equity


(58,469
)


33,813Total Liabilities, Redeemable Preferred Stock and
    Stockholders (Deficit) Equity

$
1,375,984


$
1,090,126    55




---



##### 



XO
    Holdings, Inc.



Consolidated
    Statements of Operations

(in
    thousands, except for share and per share data)  Years Ended December 31,2008


2007


2006Revenue

$
1,477,610


$
1,428,665


$
1,416,843Cost and expensesCost of service (exclusive of depreciation and amortization)


871,445



815,012



825,178Selling, general and administrative


497,616



508,901



500,602Depreciation and amortization


189,228



206,953



201,222Loss on write-down of assets


4,134



7,936



3,538Total costs and expenses


1,562,423



1,538,802



1,530,540Loss from operations


(84,813
)


(110,137
)


(113,697
)Interest income


7,398



8,182



8,691Other income


257



2,205



Investment gain, net


19,187



20,863



5,193Interest expense, net


(21,322
)


(37,681
)


(32,077
)Net loss before income taxes


(79,293
)


(116,568
)


(131,890
)Income tax benefit (expense)


4,012



(787
)


Net loss


(75,281
)


(117,355
)


(131,890
)Preferred stock accretion


(41,794
)


(14,269
)


(13,486
)Net loss allocable to common shareholders

$
(117,075
)

$
(131,624
)

$
(145,376
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.64
)

$
(0.72
)

$
(0.80
)Weighted average shares, basic and diluted


182,075,035



182,048,182



181,970,946    56




---



##### 



XO
    Holdings, Inc.



Consolidated
    Statements of Stockholders Equity

(In
    thousands, except for share data)  Common Stock and








Accumulated OtherAdditional Paid-In-Capital


Deferred


Accumulated


ComprehensiveShares


Amount


Compensation


Deficit


Income (Loss)


TotalBalance at January 1, 2006


181,933,035


$
976,447


$
(77
)

$
(659,889
)

$
820


$
317,301Cumulative 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
)


(670,369
)


820



306,821Stock-based compensation and issuance 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














(131,890
)






(131,890
)Net unrealized holding gains on
    available-for-sale
    securities


















60



60Total comprehensive loss














(131,890
)


60



(131,830
)Balance at December 31, 2006


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
)    57




---



##### 



XO
    Holdings, Inc.



Consolidated
    Statements of Cash Flows

(in
    thousands)  Years Ended December 31,2008


2007


2006OPERATING ACTIVITIES:Net loss

$
(75,281
)

$
(117,355
)

$
(131,890
)Adjustments to reconcile net loss to net cash provided by
    operating activitiesDepreciation and amortization


189,228



206,953



201,222Accrued interest converted to long term debt


18,627



40,563



35,537Provision for doubtful accounts


13,271



18,166



32,607Stock-based compensation


1,445



1,933



2,169Gain from investments


(35,928
)


(21,518
)


(5,156
)Impairment loss on marketable securities


16,519



655



Changes in reserve and liability estimates






(26,299
)


(23,583
)Loss on write-down of assets


4,134



7,936



3,538Changes in assets and liabilitiesAccounts receivable


(34,188
)


(3,593
)


(26,211
)Other assets


(23,914
)


(3,330
)


(3,225
)Accounts payable


3,676



(3,997
)


(12,476
)Accrued liabilities


(5,975
)


39,420



25,125Net cash provided by operating activities


71,614



139,534



97,657INVESTING ACTIVITIES:Capital expenditures


(216,958
)


(215,182
)


(118,878
)Proceeds from fixed asset sales


2,969



602



2,705Purchases of
    available-for-sale
    investments


(137,178
)






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


132







Proceeds from recovery of investment


57,439



21,518



12,718Net cash used in investing activities


(293,596
)


(193,062
)


(103,455
)FINANCING ACTIVITIES:Proceeds from preferred stock issuance


329,242







Proceeds from related party note


75,000







Payments of long-term debt


(22,285
)






Financing costs


(4,741
)






Payments on capital leases


(6,562
)


(7,328
)


(2,818
)Proceeds from employee stock option exercises






368



341Net cash provided by (used in) financing activities


370,654



(6,960
)


(2,477
)Net increase (decrease) in cash and cash equivalents


148,672



(60,488
)


(8,275
)Cash and cash equivalents, beginning of period


108,075



168,563



176,838Cash and cash equivalents, end of period

$
256,747


$
108,075


$
168,563SUPPLEMENTAL DATA:Cash paid for interest

$
1,466


$
1,290


$
1,572Cash paid for income taxes

$
951


$
4


$
Accrued capital expenditures and capital leases

$
27,773


$
44,391


$
12,514Non-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


$



$
    58




---



##### 



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
 59




---



##### 



e. Property
    and Equipment, Net
     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
 Goodwill and Other Intangible
    Assets
  g. Long-lived
    Assets
 Accounting for the Impairment or
    Disposal of Long-Lived Assets
  h. Fair
    Value
 Disclosure About Fair Value of Financial
    Interests, Fair Value Measurements
 60




---



##### 



157-2, Effective Date of FASB Statement No. 157
  i. Asset
    Retirement Obligations
 Accounting for Asset Retirement
    Obligations
  j. Redeemable
    Preferred Stock
   k. Income
    Taxes
 Accounting for Income Taxes
    l. Revenue
    Recognition
 Services
   Installation
    Revenue
 Revenue Recognition
 61




---



##### 



Network
    Capacity Leases
   Disputes
   Reciprocal
    Compensation
   m. Cost
    of Service
 rights-of-way
  n. Concentrations
   o. Allowances
    for Doubtful Accounts
   p. Stock-Based
    Compensation
 Share-Based
    Payment,
 62




---



##### 



q. Advertising
   r. Leases
 Accounting for Leases
  s. Transaction
    Based Taxes and Other Surcharges
 99-19, Reporting Revenue Gross as a Principal Versus Net as an
    Agent, EITF 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 99-19
  t. 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
    depreciation1

$
4,301


$
6,179


$
10,480Impact on net
    income2

$
4,301


$
6,179Retained
    earnings3









$
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. 63




---



##### 



u. New
    Accounting Pronouncements
 No. 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 Business
    Combinations FSP 142-3 FSP 142-3 FSP 142-3 FSP 142-3 FSP 142-3
  EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is
    Indexed to an Entitys Own Stock EITF 07-5 EITF 07-5 EITF 07-5
  v. Reclassifications
   3.
    PRIOR
    PERIOD ADJUSTMENTS     64




---



##### 



2007


2006Prior


Adjusted


Prior


AdjustedUnderutilized operating lease liability

$
20,422


$
28,953


$
31,030


$
37,861SG&A

$
507,200


$
508,901


$
499,056


$
500,602Net loss

$
(115,654
)

$
(117,355
)

$
(130,344
)

$
(131,890
)Accumulated deficit-beginning

$
(795,426
)

$
(802,259
)

$
(654,602
)

$
(659,889
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.71
)

$
(0.72
)

$
(0.79
)

$
(0.80
)   4.
    MARKETABLE
    SECURITIES    other-than-temporary
  Held Less Than 12 MonthsFair

UnrealizedValue

Loss$65,786

$6,679
   other-than-temporarily other-than-temporarily
  other-than-temporary
  available-for-sale other-than-temporary other-than-temporary
 65




---



##### 



Quoted Prices inActive Markets(Level 1)Available-for-sale
    securitiesEquity securities

$
10,632Corporate debt securities


106,516Total marketable securities

$
117,148   5.
    PROPERTY
    AND EQUIPMENT    2008


2007Telecommunications networks and acquired bandwidth

$
1,211,894


$
1,056,102Furniture, fixtures, equipment and other


371,561



340,0041,583,455



1,396,106Less: accumulated depreciation


(931,607
)


(757,677
)651,848



638,429Construction-in-progress,
    parts and equipment


72,556



81,967Property and equipment, net

$
724,404


$
720,396   construction-in-progress
   66




---



##### 



6.
    INTANGIBLE
    ASSETS    2008


2007Customer relationships

$
112,366


$
112,366Internally developed technology


9,521



9,521Acquired trade names


5,673



5,673127,560



127,560Less: accumulated amortization


(127,560
)


(127,560
)



Broadband wireless licenses  indefinite life asset


35,782



35,782XO Trade name  indefinite life asset


16,662



16,662Goodwill


1,071



1,071$
53,515


$
53,515       7.
    ACCRUED
    LIABILITIES    2008


2007Accrued compensation

$
60,082


$
56,996Deferred revenue


44,744



43,596Accrued operating taxes


43,469



47,703Accrued operating expenses


52,784



74,114Accrued telecommunications costs


4,890



14,368Underutilized operating lease accruals


8,751



9,721Asset retirement obligations


463



949Other accrued liabilities


6,173



5,556$
221,356


$
253,003   8.
    UNDERUTILIZED
    OPERATING LEASES   67




---



##### 



Balance as of January 1, 2006

$
42,626Usage, net


(10,827
)Accretion


4,308Estimate revisions


1,754Balance as of December 31, 2006


37,861Usage, net


(8,990
)Accretion


2,728Estimate revisions


(2,646
)Balance as of December 31, 2007


28,953Usage, net


(7,275
)Accretion


2,499Estimate revisions


(566
)Balance as of December 31, 2008

$
23,611   9.
    ASSET
    RETIREMENT OBLIGATIONS    Balance as of January 1, 2007

$
5,129Additions


69Accretion


409Balance as of December 31, 2007


5,607Additions


1,231Estimate revisions


851Accretion


503Balance as of December 31, 2008

$
8,192   10.
    LONG-TERM
    DEBT TO RELATED PARTIES     68




---



##### 



11.
    REDEEMABLE
    PREFERRED STOCK  Issuance
    of Class A Convertible Preferred Stock
        69




---



##### 



Extension
    of Date for Redemption of Certain Shares of Class A
    Preferred Stock
   Issuance
    of Class B Convertible Preferred Stock and Class C
    Perpetual Preferred Stock
       Terms of
    Class B Convertible Preferred Stock
    70




---



##### 



Terms of
    Class C Perpetual Preferred Stock
    71




---



##### 



Initial
    Recognition
 Presentation in Financial Statements
    of Redeemable Preferred Stocks Classification and Measurement of Redeemable Securities
    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 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. 72




---



##### 



Universal
    Shelf Registration Statement
 Form S-3 No. 333-147643)
  Earnings
    (Loss) Per Share
     2008


2007


2006Stock options


9.0



9.6



9.8Warrants


23.7



23.7



23.7Class A preferred stock


56.3



53.0



50.0Class B convertible preferred stock


381.5







   13.
    SHARE-BASED
    COMPENSATION  Stock
    Incentive Plans
    73




---



##### 



Stock
    Options
   Weighted AverageNumber of


Weighted Average


RemainingShares


Exercise Price


Contractual TermOutstanding at December 31, 2007


9,633,745


$
5.07



6.2 yearsGranted


455,500


$
5.00Forfeited


(159,530
)

$
5.08Expired


(907,041
)

$
5.18Outstanding at December 31, 2008


9,022,674


$
5.05



5.4 yearsExercisable at December 31, 2008


7,603,674


$
5.05



4.9 yearsExpected to vest at December 31, 2008


1,250,139


$
5.04



8.1 yearsAvailable for future issuance at December 31, 2008


6,594,778      74




---



##### 



Fair
    Value Determination
   2008


2007


2006Weighted average grant date price per share of Company stock

$
1.32


$
4.55


$
4.56Weighted average exercise price

$
5.00


$
5.00


$
5.10Range of expected volatility


61.98-69.74
%


60.00-63.09
%


63.89-65.26
%Range of risk free interest rate


2.57-3.30
%


4.42-5.06
%


4.48-5.04
%Dividend yield










Expected term (in years)


6.25



6.25



6.25     Unrecognized
    Compensation
   14.
    EMPLOYEE
    SAVINGS AND RETIREMENT PLAN   75




---



##### 



15.
    INCOME
    TAXES    December 31,2008


2007Deferred tax assets:Provisions not currently deductible

$
69,266


$
78,526Property, equipment and other long-term assets (net)


404,853



467,400Net operating loss and capital loss carry forwards


675,836



590,527Total deferred tax assets


1,149,955



1,136,453Valuation allowance


(1,149,955
)


(1,136,453
)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
)      76




---



##### 



Year Ended December 31,2008


2007


2006Current income tax (benefit) expense:State

$
(4,013
)

$
1,116


$
Foreign


1



4



Total current income tax (benefit) expense


(4,012
)


1,120



Deferred income tax benefit State






(333
)


Total deferred income tax benefit






(333
)


Total income tax (benefit) expense

$
(4,012
)

$
787


$
     2008


2007


2006Statutory U.S. federal rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal benefit


4.0



4.0



5.0Reduction of state deferred tax assets






(31.7
)


Other


(0.6
)


0.5



Subtotal


38.4



7.8



40.0Valuation allowance for deferred tax assets


(33.3
)


(8.5
)


(40.0
)Effective income tax rate


5.1
%


(0.7
)%


0.0
%     Reconciliation
    of Unrecognized Tax
    Benefits (in thousands)
  Gross unrecognized tax benefits at January 1, 2008

$
469,874Gross amount of increases and decreases from tax
    positions  prior period


(42,713
)Decreases resulting from expiration of statutes of limitation


(3,863
)Gross unrecognized tax benefits at December 31, 2008

$
423,298     Interest
    and Penalties
   Accrued interest as of January 1, 2008

$
1,430Reversal of accrued interest


(1,115
)Accrued interest as of December 31, 2008

$
315    77




---



##### 



Possible
    Changes in Unrecognized Tax Benefits
   Open Tax
    Years
   Tax
    Allocation Agreement
   Reconsolidation
   16.
    RELATED
    PARTY TRANSACTIONS   78




---



##### 



At December 31,
    20081

At December 31,
    20072Outstanding Common Stock

Greater than 50%

Greater than 50%Series A, B and C Warrants

Greater than 40%

Greater than 40%Credit Facility

N/A

Greater than 90%Class A Preferred Stock

Greater than 70%

Greater than 50%Class B Convertible Preferred Stock

100%

N/AClass C Perpetual Preferred Stock

100%

N/A     1
    
    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 Cardiff
    Holding, LLC and other parties to such joint filing.2
    
    As reported in the January 2,
    2008 Form 4 for the Chairman, and the July 2, 2007
    Amendment No. 9 to Schedule 13D filed by Cardiff and
    other parties to such joint filing.        17.
    SEGMENT
    INFORMATION    XO
    Communications
  79




---



##### 



IP-based
    Nextlink
 28-31 GHz
  Major Customers.
    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
)   80




---



##### 



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 benefit














(787
)Net loss













$
(117,355
)   2006IntercompanyXOC


Nextlink


Elimination


ConsolidatedRevenue from external customers

$
1,415,971


$
872


$



$
1,416,843Inter-segment revenue


130



389



(519
)


Total revenue

$
1,416,101


$
1,261


$
(519
)

$
1,416,843Depreciation and amortization

$
196,201


$
5,021


$



$
201,222Loss from operations

$
(96,631
)

$
(17,066
)

$



$
(113,697
)Interest income














8,691Other income














Investment gain, net














5,193Interest expense, net














(32,077
)Income tax benefit














Net loss













$
(131,890
)     XOC


Nextlink


Consolidated2008

$
207,922


$
9,036


$
216,9582007

$
210,156


$
5,026


$
215,1822006

$
114,634


$
4,244


$
118,878     XOC


Nextlink


ConsolidatedDecember 31, 2008

$
1,322,891


$
53,093


$
1,375,984December 31, 2007

$
1,042,060


$
48,066


$
1,090,126   18.
    COMMITMENTS
    AND CONTINGENCIES  Leases
  81




---



##### 



2009

$
62,5722010


58,3192011


49,8162012


45,9402013


38,882Thereafter


67,142Total minimum contractual payments

$
322,671       2008


2007Network assets

$
16,552


$
14,513Accumulated depreciation


(6,580
)


(4,252
)Net capitalized lease assets

$
9,972


$
10,261     2009

$
7,7592010


7,9692011


3,0772012


1,5022013


1,502Thereafter


9,315Total minimum capital lease payments


31,124Less: imputed interest


(8,688
)Less: current portion of capital lease payments


(5,025
)Long-term portion of capital lease payments

$
17,411  82




---



##### 



Other
    Commitments
   2009

$
95,4912010


68,1992011


46,1872012


40,9952013


28,761Thereafter


54,294Total minimum lease payments

$
333,927     Indemnification
   Legal
    Proceedings
 Accounting for
    Contingencies
  Allegiance
    Telecom Liquidating Trust Litigation
     Houlihan
    Lokey Howard and Zukin Capital LLC
  83




---



##### 



Metro
    Nashville
   Nashville
    Electric Service
  84




---



##### 



Choice
    Tel
   City of
    Memphis Franchise Fees
 BellSouth vs. City of Memphis
 85




---



##### 



19.
    UNAUDITED
    SELECTED QUARTERLY DATA    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   Quarters Ended 2007March 31


June 30


September 30a


December 31bRevenue

$
349,936


$
354,352


$
360,682


$
363,695Cost of service*

$
191,399


$
207,083


$
199,399


$
217,131Loss from operations

$
(13,936
)

$
(31,710
)

$
(17,623
)

$
(46,868
)Net loss

$
(20,672
)

$
(36,856
)

$
(4,756
)

$
(55,071
)Net loss allocable to common shareholders

$
(24,160
)

$
(40,396
)

$
(8,349
)

$
(58,719
)Net loss allocable to common shareholders per common share,
    basic and diluted

$
(0.13
)

$
(0.22
)

$
(0.05
)

$
(0.32
)     *
    
    Cost of service is presented
    exclusive of depreciation and amortization in all periods.a
    
    September 2007 quarterly Loss from
    operations, Net loss, and Net loss allocable to common
    shareholders decreased $21.5 million, or $0.12 per share,
    due to the beneficial settlement of a legal matter regarding the
    Companys holding of Global Crossing debt securities.

b
    
    December 2007 quarterly Loss from
    operations, Net loss, and Net loss allocable to common
    shareholders increased $13.3 million, or $0.07 per share,
    for additional depreciation expense from revisions to the
    depreciable lives of certain fixed asset categories.

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. 86




---



##### 



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
       87




---



##### 



Report
    of Independent Registered Public Accounting Firm
    Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
      
 88




---



##### 



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   89




---



##### 



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

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).3
.3

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
    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). 90




---



##### 



4
.5

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).10
.1

XO Communications, Inc. 2002 Stock Incentive Plan (incorporated
    by reference to exhibit 10.1.1 filed with the Annual Report
    on
    Form 10-K
    of XO Communications, Inc. for the year ended December 31,
    2002).(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). 91




---



##### 



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).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).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 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. 92




---



##### 



SIGNATURES
      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 Directors/s/  Keith
    MeisterKeith
    Meister

Director/s/  Adam
    DellAdam
    Dell

Director/s/  Fredrik
    GradinFredrik
    Gradin

Director/s/  Vincent
    J. IntrieriVincent
    J. Intrieri

Director/s/  Robert
    L. KnaussRobert
    L. Knauss

Director/s/  David
    SchechterDavid
    Schechter

Director  93




---



##### 



XO
    Holdings, Inc.Schedule IIValuation and Qualifying Accounts
    For The Years Ended December 31, 2008, 2007 and
    2006
  AdditionsCharged to


Charged toBeginning


Costs and


Other





Ending(In thousands)

Balance


Expenses


Accounts


Deductions


BalanceAllowance for doubtful accounts2006

$
36,061


$
32,607


$



$
(51,914
)

$
16,7542007

$
16,754


$
18,166


$



$
(24,804
)

$
10,1162008

$
10,116


$
13,271


$



$
(13,660
)

$
9,727    94