UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 or
 o
    
    TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 0-30900
 XO HOLDINGS, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    54-1983517
(I.R.S. Employer Identification No.)
 
 
 þ o
  Large accelerated filer o
Accelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




---



##### 



XO Holdings, Inc.
Index to Form 10-Q
 PagePart I. Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 and June 30, 2007 (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and June 30, 2007 (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 4.
    
    Controls and Procedures
    
    
    37Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    38Item 1A.
    
    Risk Factors
    
    
    40Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3.
    
    Defaults Upon Senior Securities
    
    
    43Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43Item 5.
    
    Other Information
    
    
    43Item 6.
    
    Exhibits
    
    
    43Signatures
    
    
    43




---



##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements.
 XO Holdings, Inc.
Condensed Consolidated Balance Sheets
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    65,584
    
    
    $
    108,075Marketable securities
    
    
    7,394
    
    
    
    885Accounts receivable, net of allowance
for doubtful accounts of $7,459 at June
30, 2008 and $10,116 at December 31,
2007
    
    
    134,589
    
    
    
    131,705Prepaid expenses and other current assets
    
    
    44,077
    
    
    
    30,928Total current assets
    
    
    251,644
    
    
    
    271,593Property and equipment, net
    
    
    737,603
    
    
    
    720,396Goodwill and intangible assets, net
    
    
    53,515
    
    
    
    53,515Other assets
    
    
    44,380
    
    
    
    44,622Total Assets
    
    $
    1,087,142
    
    
    $
    1,090,126LIABILITIES, CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS (DEFICIT) EQUITYCurrent LiabilitiesAccounts payable
    
    $
    115,644
    
    
    $
    106,488Other current liabilities
    
    
    225,900
    
    
    
    252,217Total current liabilities
    
    
    341,544
    
    
    
    358,705Long-term debt and accrued interest payable
to related parties refinanced July 25, 2008
    
    
    470,503
    
    
    
    377,213Other long-term liabilities
    
    
    61,912
    
    
    
    67,050Total Liabilities
    
    
    873,959
    
    
    
    802,968Class A convertible preferred stock
    
    
    252,268
    
    
    
    244,811Commitments and contingenciesStockholders Equity (Deficit)Preferred 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 June 30, 2008 and 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 on June 30, 2008 and
December 31, 2007
    
    
    946,866
    
    
    
    953,427Accumulated other comprehensive loss
    
    
    (2,255
    )
    
    
    Accumulated deficit
    
    
    (983,696
    )
    
    
    (911,080
    )Total Stockholders (Deficit) Equity
    
    
    (39,085
    )
    
    
    42,347Total Liabilities, Convertible
Preferred Stock and Stockholders
(Deficit) Equity
    
    $
    1,087,142
    
    
    $
    1,090,126
  1




---



##### 



XO Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007Revenue
    
    $
    367,370
    
    
    $
    354,352
    
    
    $
    728,519
    
    
    $
    704,287Cost and expenses:Cost of service (exclusive of
depreciation and amortization)
    
    
    213,272
    
    
    
    207,086
    
    
    
    441,615
    
    
    
    398,485Selling, general, and administrative
    
    
    128,446
    
    
    
    125,967
    
    
    
    254,771
    
    
    
    247,764Depreciation and amortization
    
    
    47,139
    
    
    
    51,141
    
    
    
    92,668
    
    
    
    102,054(Gain) loss on disposition of assets
    
    
    (878
    )
    
    
    1,382
    
    
    
    (832
    )
    
    
    1,105Total costs and expenses
    
    
    387,979
    
    
    
    385,576
    
    
    
    788,222
    
    
    
    749,408Loss from operations
    
    
    (20,609
    )
    
    
    (31,224
    )
    
    
    (59,703
    )
    
    
    (45,121
    )Interest and other income
    
    
    787
    
    
    
    4,245
    
    
    
    6,035
    
    
    
    6,443Interest expense, net
    
    
    (9,513
    )
    
    
    (9,191
    )
    
    
    (18,264
    )
    
    
    (17,826
    )Net loss before income taxes
    
    
    (29,335
    )
    
    
    (36,170
    )
    
    
    (71,932
    )
    
    
    (56,504
    )Income tax expense
    
    
    (342
    )
    
    
    (200
    )
    
    
    (684
    )
    
    
    (500
    )Net loss
    
    
    (29,677
    )
    
    
    (36,370
    )
    
    
    (72,616
    )
    
    
    (57,004
    )Preferred stock accretion
    
    
    (3,756
    )
    
    
    (3,540
    )
    
    
    (7,457
    )
    
    
    (7,029
    )Net loss allocable to common shareholders
    
    $
    (33,433
    )
    
    $
    (39,910
    )
    
    $
    (80,073
    )
    
    $
    (64,033
    )Net loss allocable to common shareholders
per common share, basic and diluted
    
    $
    (0.18
    )
    
    $
    (0.22
    )
    
    $
    (0.44
    )
    
    $
    (0.35
    )Weighted average shares, basic and diluted
    
    
    182,075,035
    
    
    
    182,040,420
    
    
    
    182,075,035
    
    
    
    182,021,292
  2




---



##### 



XO Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2007OPERATING ACTIVITIES:Net loss
    
    $
    (72,616
    )
    
    $
    (57,004
    )Adjustments to reconcile net loss to net cash provided by operating activitiesDepreciation and amortization
    
    
    92,668
    
    
    
    102,054Accrual of interest expense
    
    
    18,289
    
    
    
    19,506Provision for doubtful accounts
    
    
    6,282
    
    
    
    11,819Stock-based compensation
    
    
    897
    
    
    
    971Non cash gain from investments
    
    
    (4,106
    )
    
    
    (Gain) loss on disposal of assets
    
    
    (832
    )
    
    
    1,105Changes in assets and liabilitiesAccounts receivable
    
    
    (9,166
    )
    
    
    14,571Other assets
    
    
    (16,690
    )
    
    
    (7,343
    )Accounts payable
    
    
    18,037
    
    
    
    (4,443
    )Accrued liabilities
    
    
    (29,351
    )
    
    
    (25,518
    )Net cash provided by operating activities
    
    
    3,412
    
    
    
    55,718INVESTING ACTIVITIES:Capital expenditures
    
    
    (118,524
    )
    
    
    (109,429
    )Proceeds from sale of fixed assets
    
    
    600
    
    
    
    Proceeds from sales of marketable securities
    
    
    132
    
    
    
    Net cash used in investing activities
    
    
    (117,792
    )
    
    
    (109,429
    )FINANCING ACTIVITIES:Payments on capital leases
    
    
    (2,104
    )
    
    
    (3,320
    )Financing costs
    
    
    (1,007
    )
    
    
    Proceeds from note to related party
    
    
    75,000
    
    
    
    Proceeds from employee stock option exercises
    
    
    
    
    
    
    368Net cash provided by (used in) financing activities
    
    
    71,889
    
    
    
    (2,952
    )Net decrease in cash and cash equivalents
    
    
    (42,491
    )
    
    
    (56,663
    )Cash and cash equivalents, beginning of period
    
    
    108,075
    
    
    
    168,563Cash and cash equivalents, end of period
    
    $
    65,584
    
    
    $
    111,900SUPPLEMENTAL DATA:Cash paid for interest
    
    $
    524
    
    
    $
    561Cash paid for income taxes
    
    $
    854
    
    
    $
    Accrued interest converted to long-term debt
    
    $
    18,289
    
    
    $
    19,506
  3




---



##### 



XO Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Basis of Presentation
    4




---



##### 



Transaction Based Taxes and Other Surcharges
  Error Correction
  Reclassification
    New Accounting Pronouncements
 Fair Value Measurements
 5




---



##### 



The Fair Value Option for Financial Assets and
Financial Liabilities
 Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB SFAS No. 133
 Determination of the Useful
Life of Intangible Assets, Goodwill and Other Intangible
Assets Business Combinations
 The Hierarchy of Generally Accepted Accounting
Principles
 6




---



##### 



The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles
 2. COMPREHENSIVE LOSS
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (29,677
    )
    
    $
    (36,370
    )
    
    $
    (72,616
    )
    
    $
    (57,004
    )Other comprehensive income:Net unrealized (loss) gain on investments
    
    
    (319
    )
    
    
    (880
    )
    
    
    (2,255
    )
    
    
    (840
    )Comprehensive loss
    
    $
    (29,996
    )
    
    $
    (37,250
    )
    
    $
    (74,871
    )
    
    $
    (57,844
    )
 3. FAIR VALUE MEASUREMENTS
   Quoted Prices in ActiveMarkets (Level 1)Available-for-sale securities
    
    $
    7,394Total assets measured at fair value
    
    $
    7,394
   7




---



##### 



4. LONG-LIVED ASSETS
  Property and Equipment
  June 30, 2008
    
    
    December 31, 2007Telecommunications networks and acquired bandwidth
    
    $
    1,163,802
    
    
    $
    1,056,102Furniture, fixtures, equipment and other
    
    
    344,886
    
    
    
    340,0041,508,688
    
    
    
    1,396,106Less: accumulated depreciation
    
    
    (849,942
    )
    
    
    (757,677
    )658,746
    
    
    
    638,429Construction-in-progress, parts and equipment
    
    
    78,857
    
    
    
    81,967Property and equipment, net
    
    $
    737,603
    
    
    $
    720,396
  Broadband Wireless Licenses and Other Intangibles
  June 30, 2008
    
    
    December 31, 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  indefinite life asset
    
    
    1,071
    
    
    
    1,071$
    53,515
    
    
    $
    53,515
  8




---



##### 



5. LONG-TERM DEBT TO RELATED PARTIES
  (in thousands)
    
    June 30, 2008
    
    
    December 31, 2007Credit facility
    
    $
    392,848
    
    
    $
    377,213Promissory note
    
    
    77,655
    
    
    
    Total
    
    
    470,503
    
    
    
    377,213
 Credit Facility
  Promissory Note
  Subsequent Retirement of Debt to Related Parties
  6. UNDERUTILIZED OPERATING LEASES
   Balance as of January 1, 2008
    
    $
    20,422Usage, net
    
    
    (5,114
    )Accretion
    
    
    2,039Estimate revisions
    
    
    (1,022
    )Balance as of June 30, 2008
    
    $
    16,325
 9




---



##### 



7. INCOME TAXES
   Open Tax Years
  8. EARNINGS (LOSS) PER SHARE
  9. RELATED PARTY TRANSACTIONS
  At June 30, 2008(1)
    
    At December 31, 2007(2)Outstanding Common Stock
    
    Greater than 50%
    
    Greater than 50%Series A, B and C Warrants
    
    Greater than 40%
    
    Greater than 40%Credit Facility
    
    Greater than 90%
    
    Greater than 90%Promissory Note
    
    Greater than 90%
    
    N/APreferred Stock
    
    Greater than 50%
    
    Greater than 50%
 
 (1)
    
    As reported in the April 2, 2008 Form 4 for the Chairman, and the March 17, 2008 Amendment
No. 10 to Schedule 13D filed by Cardiff Holding, LLC and other parties to such joint filing.(2)
    
    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 and other parties to such joint filing.  10




---



##### 



10. SEGMENT INFORMATION
  XO Communications
   11




---



##### 



Nextlink
    Three Months Ended June 30, 2008
    
    
    Three Months Ended June 30, 2007Intercompany
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    IntercompanyXOC
    
    
    Nextlink
    
    
    Elimination
    
    
    Consolidated
    
    
    XOC
    
    
    Nextlink
    
    
    Elimination
    
    
    ConsolidatedRevenue from
external customers
    
    $
    366,827
    
    
    $
    543
    
    
    $
    
    
    
    $
    367,370
    
    
    $
    354,236
    
    
    $
    116
    
    
    $
    
    
    
    $
    354,352Inter-segment
revenue
    
    
    112
    
    
    
    431
    
    
    
    (543
    )
    
    
    
    
    
    
    53
    
    
    
    187
    
    
    
    (240
    )
    
    
    Total revenue
    
    $
    366,939
    
    
    $
    974
    
    
    $
    (543
    )
    
    $
    367,370
    
    
    $
    354,289
    
    
    $
    303
    
    
    $
    (240
    )
    
    
    354,352Depreciation and
amortization
    
    $
    46,954
    
    
    $
    185
    
    
    $
    
    
    
    $
    47,139
    
    
    $
    51,046
    
    
    $
    95
    
    
    $
    
    
    
    $
    51,141(Gain) loss on
disposition of
assets
    
    $
    (878
    )
    
    $
    
    
    
    $
    
    
    
    $
    (878
    )
    
    $
    1,382
    
    
    $
    
    
    
    $
    
    
    
    $
    1,382Loss from operations
    
    $
    (17,381
    )
    
    $
    (3,228
    )
    
    $
    
    
    
    $
    (20,609
    )
    
    $
    (28,729
    )
    
    $
    (2,495
    )
    
    $
    
    
    
    $
    (31,224
    )Interest and other
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,245Interest expense,
net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,513
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,191
    )Net loss before
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,335
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,170
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (342
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (29,677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (36,370
    )Capital expenditures
    
    $
    51,520
    
    
    $
    1,699
    
    
    $
    
    
    
    $
    53,219
    
    
    $
    65,802
    
    
    $
    2,509
    
    
    $
    
    
    
    $
    68,311
 12




---



##### 



Six Months Ended June 30, 2008
    
    
    Six Months Ended June 30, 2007Intercompany
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    IntercompanyXOC
    
    
    Nextlink
    
    
    Elimination
    
    
    Consolidated
    
    
    XOC
    
    
    Nextlink
    
    
    Elimination
    
    
    ConsolidatedRevenue from
external customers
    
    $
    727,387
    
    
    $
    1,132
    
    
    $
    
    
    
    $
    728,519
    
    
    $
    704,119
    
    
    $
    168
    
    
    $
    
    
    
    $
    704,287Inter-segment
revenue
    
    
    195
    
    
    
    714
    
    
    
    (909
    )
    
    
    
    
    
    
    126
    
    
    
    358
    
    
    
    (484
    )
    
    
    Total revenue
    
    $
    727,582
    
    
    $
    1,846
    
    
    $
    (909
    )
    
    $
    728,519
    
    
    $
    704,245
    
    
    $
    526
    
    
    $
    (484
    )
    
    
    704,287Depreciation and
amortization
    
    $
    92,280
    
    
    $
    388
    
    
    $
    
    
    
    $
    92,668
    
    
    $
    101,878
    
    
    $
    176
    
    
    $
    
    
    
    $
    102,054(Gain) loss on
disposition of
assets
    
    $
    (832
    )
    
    $
    
    
    
    $
    
    
    
    $
    (832
    )
    
    $
    1,105
    
    
    $
    
    
    
    $
    
    
    
    $
    1,105Loss from operations
    
    $
    (53,218
    )
    
    $
    (6,485
    )
    
    $
    
    
    
    $
    (59,703
    )
    
    $
    (40,064
    )
    
    $
    (5,057
    )
    
    $
    
    
    
    $
    (45,121
    )Interest and other
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,443Interest expense,
net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,264
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,826
    )Net loss before
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71,932
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56,504
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (684
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (72,616
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (57,004
    )Capital expenditures
    
    $
    114,886
    
    
    $
    3,638
    
    
    $
    
    
    
    $
    118,524
    
    
    $
    106,599
    
    
    $
    2,830
    
    
    $
    
    
    
    $
    109,429
 Total Assets
    
    XOC
    
    Nextlink
    
    ConsolidatedJune 30, 2008
    
    $
    1,037,387
    
    
    $
    49,755
    
    
    $
    1,087,142December 31, 2007
    
    $
    1,042,060
    
    
    $
    48,066
    
    
    $
    1,090,126
 11. COMMITMENTS AND CONTINGENCIES
 Loss Contingencies
 Allegiance Telecom Liquidating Trust Litigation
  13




---



##### 



(a)
    
    with respect to the ATLTs reimbursement claim of approximately $20 million, XOH must
pay to the ATLT damages in the minimum amount of approximately $8.0 million, subject to an
upward adjustment of up to an additional amount of approximately $2 million pending
resolution of the dispute regarding the true-up of certain disputed liabilities by the
referee, together with interest accruing at the New York statutory rate of 9% per annum;(b)
    
    the Company must pay to the ATLT the amount of approximately $0.5 million, together
with interest accruing at the New York statutory rate, which amount represents cash
received by the Company after the closing of the Allegiance acquisition, provided there is
a corresponding reduction in accounts receivable included in the Acquired Assets;(c)
    
    the Company must immediately pay or deliver to the ATLT certain checks in the
approximate aggregate amount of $0.6 million issued by the U.S. Internal Revenue Service on
account of tax refunds owed to Allegiance, together with interest accruing at the New York
statutory rate;(d)
    
    with respect to the true-up of certain disputed liabilities, the ATLT shall pay to XOH
the approximate amount of $2.8 million, together with interest accruing at the New York
statutory rate, which amount may be increased by the referee;(e)
    
    XOH is fully subrogated to the obligations of approximately $1.7 million of Allegiance
liabilities that the Company caused to be honored after the closing; and(f)
    
    to the extent not satisfied, the ATLT must pay to XOH its tax reimbursement
obligations, together with interest accruing at the New York statutory rate.
   14




---



##### 



Litigation Relating to the Wireline Sale
     Houlihan Lokey Howard and Zukin Capital LLC
  15




---



##### 



nd nd
 Metro Nashville
  Nashville Electric Service
  16




---



##### 



Choice Tel
  12. SUBSEQUENT EVENTS
  Stock Purchase Agreement
  17




---



##### 



Terms of Convertible Preferred Stock
   18




---



##### 



Terms of Perpetual Preferred Stock
   19




---



##### 



Tax Sharing Agreement
  20




---



##### 



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Regarding Forward-Looking Statements
 This Quarterly Report on Form 10-Q 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, intend, can, may,
could 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 and expansion 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. These risks include any
failure by us to:
 
    
    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.
  21




---



##### 



Overview of the Business
  Critical Accounting Policies and Estimates
   Liquidity and Capital Resources
  Debt Retirement Through Issuance of Preferred Stock
   22




---



##### 



Debt and Borrowing Capacity
  June 30, 2008
    
    
    December 31, 2007Credit facility
    
    $
    392,848
    
    
    $
    377,213Promissory note
    
    
    77,655
    
    
    
    Total
    
    
    470,503
    
    
    
    377,213
 23




---



##### 



Credit Facility
  Promissory Note
  Cash Flow
   2008
    
    2007Cash provided by operating activities
    
    $
    3,412
    
    
    $
    55,718Cash used in investing activities
    
    $
    (117,792
    )
    
    $
    (109,429
    )Cash provided by (used in) financing activities
    
    $
    71,889
    
    
    $
    (2,952
    )
   24




---



##### 



Results of Operations
  % of
    
    
    
    
    
    
    % ofConsolidated
    
    
    
    
    
    
    ConsolidatedThree Months Ended June 30,
    
    2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Change
    
    
    % ChangeRevenue
    
    $
    367,370
    
    
    
    100.0
    %
    
    $
    354,352
    
    
    
    100.0
    %
    
    $
    13,018
    
    
    
    3.7
    %Cost and expensesCost of service*
    
    
    213,272
    
    
    
    58.0
    
    
    
    207,086
    
    
    
    58.5
    
    
    $
    6,186
    
    
    
    3.0
    %Selling, general and administrative
    
    
    128,446
    
    
    
    35.0
    
    
    
    125,967
    
    
    
    35.5
    
    
    $
    2,479
    
    
    
    2.0
    %Depreciation and amortization
    
    
    47,139
    
    
    
    12.8
    
    
    
    51,141
    
    
    
    14.4
    
    
    $
    (4,002
    )
    
    
    (7.8
    )%(Gain) loss on disposition of assets
    
    
    (878
    )
    
    
    (0.2
    )
    
    
    1,382
    
    
    
    0.4
    
    
    $
    2,260
    
    
    
    163.5
    %Total cost and expenses
    
    
    387,979
    
    
    
    105.6
    
    
    
    385,576
    
    
    
    108.8
    
    
    $
    2,403
    
    
    
    0.6
    %Loss from operations
    
    
    (20,609
    )
    
    
    (5.6
    )
    
    
    (31,224
    )
    
    
    (8.8
    )
    
    $
    (10,615
    )
    
    
    (34.0
    )%Interest and other income
    
    
    787
    
    
    
    0.2
    
    
    
    4,245
    
    
    
    1.2
    
    
    $
    (3,458
    )
    
    
    (81.5
    )%Interest expense, net
    
    
    (9,513
    )
    
    
    (2.6
    )
    
    
    (9,191
    )
    
    
    (2.6
    )
    
    $
    322
    
    
    
    3.5
    %Net loss before income taxes
    
    
    (29,335
    )
    
    
    (8.0
    )
    
    
    (36,170
    )
    
    
    (10.2
    )
    
    $
    (6,835
    )
    
    
    (18.9
    )%Income tax expense
    
    
    (342
    )
    
    
    (0.1
    )
    
    
    (200
    )
    
    
    (0.1
    )
    
    $
    142
    
    
    
    71.0
    %Net loss
    
    
    (29,677
    )
    
    
    (8.1
    )
    
    
    (36,370
    )
    
    
    (10.3
    )
    
    $
    (6,693
    )
    
    
    (18.4
    )%Preferred stock accretion
    
    
    (3,756
    )
    
    
    (1.0
    )
    
    
    (3,540
    )
    
    
    (1.0
    )
    
    $
    216
    
    
    
    6.1
    %Net loss allocable to common
shareholders
    
    $
    (33,433
    )
    
    
    (9.1
    )%
    
    $
    (39,910
    )
    
    
    (11.3
    )%
    
    $
    (6,477
    )
    
    
    (16.2
    )%Net loss allocable to common
shareholders, basic and diluted
    
    $
    (0.18
    )
    
    
    
    
    
    $
    (0.22
    )Weighted average shares, basic and
diluted
    
    
    182,075,035
    
    
    
    
    
    
    
    182,040,420
 
 *
    
    exclusive of depreciation and amortization 25




---



##### 



% of
    
    
    
    
    
    
    % ofConsolidated
    
    
    
    
    
    
    ConsolidatedSix Months Ended June 30,
    
    2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Change
    
    
    % ChangeRevenue
    
    $
    728,519
    
    
    
    100.0
    %
    
    $
    704,287
    
    
    
    100.0
    %
    
    $
    24,232
    
    
    
    3.4
    %Cost and expensesCost of service*
    
    
    441,615
    
    
    
    60.6
    
    
    
    398,485
    
    
    
    56.5
    
    
    $
    43,130
    
    
    
    10.8
    %Selling, general and administrative
    
    
    254,771
    
    
    
    35.0
    
    
    
    247,764
    
    
    
    35.2
    
    
    $
    7,007
    
    
    
    2.8
    %Depreciation and amortization
    
    
    92,668
    
    
    
    12.7
    
    
    
    102,054
    
    
    
    14.5
    
    
    $
    (9,386
    )
    
    
    (9.2
    )%(Gain) loss on disposition of assets
    
    
    (832
    )
    
    
    (0.1
    )
    
    
    1,105
    
    
    
    0.2
    
    
    $
    1,937
    
    
    
    175.3
    %Total cost and expenses
    
    
    788,222
    
    
    
    108.2
    
    
    
    749,408
    
    
    
    106.4
    
    
    $
    38,814
    
    
    
    5.2
    %Loss from operations
    
    
    (59,703
    )
    
    
    (8.2
    )
    
    
    (45,121
    )
    
    
    (6.4
    )
    
    $
    14,582
    
    
    
    32.3
    %Interest and other income
    
    
    6,035
    
    
    
    0.8
    
    
    
    6,443
    
    
    
    0.9
    
    
    $
    (408
    )
    
    
    (6.3
    )%Interest expense, net
    
    
    (18,264
    )
    
    
    (2.5
    )
    
    
    (17,826
    )
    
    
    (2.5
    )
    
    $
    438
    
    
    
    2.5
    %Net loss before income taxes
    
    
    (71,932
    )
    
    
    (9.9
    )
    
    
    (56,504
    )
    
    
    (8.0
    )
    
    $
    15,428
    
    
    
    27.3
    %Income tax expense
    
    
    (684
    )
    
    
    (0.1
    )
    
    
    (500
    )
    
    
    (0.1
    )
    
    $
    184
    
    
    
    36.8
    %Net loss
    
    
    (72,616
    )
    
    
    (10.0
    )
    
    
    (57,004
    )
    
    
    (8.1
    )
    
    $
    15,612
    
    
    
    27.4
    %Preferred stock accretion
    
    
    (7,457
    )
    
    
    (1.0
    )
    
    
    (7,029
    )
    
    
    (1.0
    )
    
    $
    428
    
    
    
    6.1
    %Net loss allocable to common
shareholders
    
    $
    (80,073
    )
    
    
    (11.0
    )%
    
    $
    (64,033
    )
    
    
    (9.1
    )%
    
    $
    16,040
    
    
    
    25.0
    %Net loss allocable to common
shareholders, basic and diluted
    
    $
    (0.44
    )
    
    
    
    
    
    $
    (0.35
    )Weighted average shares, basic and
diluted
    
    
    182,075,035
    
    
    
    
    
    
    
    182,021,292
 
 *
    
    exclusive of depreciation and amortization Revenue
   Three Months Ended June 30% of
    
    
    
    
    
    
    % of
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentCore servicesData and IP
    
    $
    163,760
    
    
    
    44.6
    %
    
    $
    123,881
    
    
    
    35.0
    %
    
    $
    39,879
    
    
    
    32.2
    %Integrated/Voice
    
    
    82,008
    
    
    
    22.3
    
    
    
    81,168
    
    
    
    22.9
    
    
    $
    840
    
    
    
    1.0
    %Total core services
    
    
    245,768
    
    
    
    66.9
    
    
    
    205,049
    
    
    
    57.9
    
    
    $
    40,719
    
    
    
    19.9
    %Legacy/TDM services
    
    
    121,602
    
    
    
    33.1
    
    
    
    149,303
    
    
    
    42.1
    
    
    $
    (27,701
    )
    
    
    (18.6
    )%Total revenue
    
    $
    367,370
    
    
    
    100.0
    %
    
    $
    354,352
    
    
    
    100.0
    %
    
    $
    13,018
    
    
    
    3.7
    %
 26




---



##### 



Six Months Ended June 30% of
    
    
    
    
    
    
    % of
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentCore servicesData and IP
    
    $
    316,493
    
    
    
    43.4
    %
    
    $
    241,716
    
    
    
    34.3
    %
    
    $
    74,777
    
    
    
    30.9
    %Integrated/Voice
    
    
    167,399
    
    
    
    23.0
    
    
    
    164,080
    
    
    
    23.3
    
    
    $
    3,319
    
    
    
    2.0
    %Total core services
    
    
    483,892
    
    
    
    66.4
    
    
    
    405,796
    
    
    
    57.6
    
    
    $
    78,096
    
    
    
    19.2
    %Legacy/TDM services
    
    
    244,627
    
    
    
    33.6
    
    
    
    298,491
    
    
    
    42.4
    
    
    $
    (53,864
    )
    
    
    (18.0
    )%Total revenue
    
    $
    728,519
    
    
    
    100.0
    %
    
    $
    704,287
    
    
    
    100.0
    %
    
    $
    24,232
    
    
    
    3.4
    %
 Core Services.
   Legacy/TDM Services.
 Cost of Service
  27




---



##### 



Three Months Ended June 30,% of
    
    
    
    
    
    
    % of
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentTelecommunications services
    
    $
    153,762
    
    
    
    41.8
    %
    
    $
    150,192
    
    
    
    42.5
    %
    
    $
    3,570
    
    
    
    2.4
    %Network operations
    
    
    47,438
    
    
    
    12.9
    
    
    
    43,713
    
    
    
    12.3
    
    
    $
    3,725
    
    
    
    8.5
    %Pass-through taxes
    
    
    12,072
    
    
    
    3.3
    
    
    
    13,181
    
    
    
    3.7
    
    
    $
    (1,109
    )
    
    
    (8.4
    )%Total cost of service
    
    $
    213,272
    
    
    
    58.0
    %
    
    $
    207,086
    
    
    
    58.5
    %
    
    $
    6,186
    
    
    
    3.0
    %
 Six Months Ended June 30,% of
    
    
    
    
    
    
    % of
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentTelecommunications services
    
    $
    318,453
    
    
    
    43.7
    %
    
    $
    286,436
    
    
    
    40.6
    %
    
    $
    32,017
    
    
    
    11.2
    %Network operations
    
    
    95,428
    
    
    
    13.1
    
    
    
    86,786
    
    
    
    12.3
    
    
    $
    8,642
    
    
    
    10.0
    %Pass-through taxes
    
    
    27,734
    
    
    
    3.8
    
    
    
    25,263
    
    
    
    3.6
    
    
    $
    2,471
    
    
    
    9.8
    %Total cost of service
    
    $
    441,615
    
    
    
    60.6
    %
    
    $
    398,485
    
    
    
    56.5
    %
    
    $
    43,130
    
    
    
    10.8
    %
    28




---



##### 



Selling, General and Administrative
   29




---



##### 



Depreciation and Amortization
  Interest and Other Income
   Comparison of Segment Financial Results
 Overview
  XO Communications
   30




---



##### 



Three Months Ended June 30,% of
    
    
    
    
    
    
    % ofXOC
    
    
    
    
    
    
    XOC
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue from external customers
    
    $
    366,827
    
    
    
    99.9
    %
    
    $
    354,236
    
    
    
    99.9
    %
    
    $
    12,591
    
    
    
    3.6
    %Inter-segment revenue
    
    
    112
    
    
    
    0.1
    
    
    
    53
    
    
    
    0.1
    
    
    $
    59
    
    
    
    111.3
    %Total revenue
    
    
    366,939
    
    
    
    100.0
    %
    
    $
    354,289
    
    
    
    100.0
    %
    
    $
    12,650
    
    
    
    3.6
    %Cost and expensesCost of service*
    
    
    212,105
    
    
    
    57.8
    
    
    
    206,564
    
    
    
    58.3
    
    
    $
    5,541
    
    
    
    2.7
    %Selling, general and administrative
    
    
    126,139
    
    
    
    34.4
    
    
    
    124,026
    
    
    
    35.0
    
    
    $
    2,113
    
    
    
    1.7
    %Depreciation and amortization
    
    
    46,954
    
    
    
    12.8
    
    
    
    51,046
    
    
    
    14.4
    
    
    $
    (4,092
    )
    
    
    (8.0
    )%(Gain) loss on disposition of assets
    
    
    (878
    )
    
    
    (0.2
    )
    
    
    1,382
    
    
    
    0.4
    
    
    $
    2,260
    
    
    
    163.5
    %Total cost and expenses
    
    
    384,320
    
    
    
    104.7
    
    
    
    383,018
    
    
    
    108.1
    
    
    $
    1,302
    
    
    
    0.3
    %Segment loss
    
    $
    (17,381
    )
    
    
    (4.7
    )%
    
    $
    (28,729
    )
    
    
    (8.1
    )%
    
    $
    (11,348
    )
    
    
    39.5
    %Capital expenditures
    
    $
    51,520
    
    
    
    14.0
    %
    
    $
    65,802
    
    
    
    18.6
    %
    
    $
    (14,282
    )
    
    
    (21.7
    )%
 Six Months Ended June 30,% of
    
    
    
    
    
    
    % ofXOC
    
    
    
    
    
    
    XOC
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue from external customers
    
    $
    727,387
    
    
    
    99.9
    %
    
    $
    704,119
    
    
    
    99.9
    %
    
    $
    23,268
    
    
    
    3.3
    %Inter-segment revenue
    
    
    195
    
    
    
    0.1
    
    
    
    126
    
    
    
    0.1
    
    
    $
    69
    
    
    
    54.8
    %Total revenue
    
    
    727,582
    
    
    
    100.0
    %
    
    $
    704,245
    
    
    
    100.0
    %
    
    $
    23,337
    
    
    
    3.3
    %Cost and expensesCost of service*
    
    
    439,142
    
    
    
    60.4
    
    
    
    397,690
    
    
    
    56.5
    
    
    $
    41,452
    
    
    
    10.4
    %Selling, general and administrative
    
    
    250,210
    
    
    
    34.4
    
    
    
    243,636
    
    
    
    34.6
    
    
    $
    6,574
    
    
    
    2.7
    %Depreciation and amortization
    
    
    92,280
    
    
    
    12.7
    
    
    
    101,878
    
    
    
    14.5
    
    
    $
    (9,598
    )
    
    
    (9.4
    )%(Gain) loss on disposition of assets
    
    
    (832
    )
    
    
    (0.1
    )
    
    
    1,105
    
    
    
    0.2
    
    
    $
    1,937
    
    
    
    175.3
    %Total cost and expenses
    
    
    780,800
    
    
    
    107.3
    
    
    
    744,309
    
    
    
    105.7
    
    
    $
    36,491
    
    
    
    4.9
    %Segment loss
    
    $
    (53,218
    )
    
    
    (7.3
    )%
    
    $
    (40,064
    )
    
    
    (5.7
    )%
    
    $
    13,154
    
    
    
    (32.8
    )%Capital expenditures
    
    $
    114,886
    
    
    
    15.8
    %
    
    $
    106,599
    
    
    
    15.2
    %
    
    $
    8,287
    
    
    
    7.8
    %
 
 *
    
    exclusive of depreciation and amortization  Capital Expenditures
  Nextlink
  31




---



##### 



LMDS License Renewals
 Demonstrations of Substantial Service.
 32




---



##### 



Three Months Ended June 30% of
    
    
    
    
    
    
    % ofNextlink
    
    
    
    
    
    
    Nextlink
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue from external customers
    
    $
    543
    
    
    
    55.7
    %
    
    $
    116
    
    
    
    38.3
    %
    
    $
    427
    
    
    
    368.1
    %Inter-segment revenue
    
    
    431
    
    
    
    44.3
    
    
    
    187
    
    
    
    61.7
    
    
    $
    244
    
    
    
    130.5
    %Total revenue
    
    
    974
    
    
    
    100.0
    
    
    
    303
    
    
    
    100.0
    
    
    $
    671
    
    
    
    221.5
    %Cost and expensesCost of service*
    
    
    1,710
    
    
    
    175.5
    
    
    
    763
    
    
    
    251.8
    
    
    $
    947
    
    
    
    124.1
    %Selling, general and administrative
    
    
    2,307
    
    
    
    236.9
    
    
    
    1,940
    
    
    
    640.2
    
    
    $
    367
    
    
    
    18.9
    %Depreciation and amortization
    
    
    185
    
    
    
    19.0
    
    
    
    95
    
    
    
    31.4
    
    
    $
    90
    
    
    
    94.7
    %Total cost and expenses
    
    
    4,202
    
    
    
    431.4
    
    
    
    2,798
    
    
    
    923.4
    
    
    $
    1,404
    
    
    
    50.2
    %Segment loss
    
    $
    (3,228
    )
    
    
    (331.4
    )%
    
    $
    (2,495
    )
    
    
    (823.4
    )%
    
    $
    733
    
    
    
    (29.4
    )%Capital expenditures
    
    $
    1,699
    
    
    
    174.4
    %
    
    $
    2,509
    
    
    
    828.1
    %
    
    $
    (810
    )
    
    
    (32.3
    )%
 Six Months Ended June 30% of
    
    
    
    
    
    
    % ofNextlink
    
    
    
    
    
    
    Nextlink
    
    
    Change2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue from external customers
    
    $
    1,132
    
    
    
    61.3
    %
    
    $
    168
    
    
    
    31.9
    %
    
    $
    964
    
    
    
    573.8
    %Inter-segment revenue
    
    
    714
    
    
    
    38.7
    
    
    
    358
    
    
    
    68.1
    
    
    $
    356
    
    
    
    99.4
    %Total revenue
    
    
    1,846
    
    
    
    100.0
    
    
    
    526
    
    
    
    100.0
    
    
    $
    1,320
    
    
    
    251.0
    %Cost and expensesCost of service*
    
    
    3,382
    
    
    
    183.2
    
    
    
    1,279
    
    
    
    243.2
    
    
    $
    2,103
    
    
    
    164.4
    %Selling, general and administrative
    
    
    4,561
    
    
    
    247.1
    
    
    
    4,128
    
    
    
    784.8
    
    
    $
    433
    
    
    
    10.5
    %Depreciation and amortization
    
    
    388
    
    
    
    21.0
    
    
    
    176
    
    
    
    33.5
    
    
    $
    212
    
    
    
    120.5
    %Total cost and expenses
    
    
    8,331
    
    
    
    451.3
    
    
    
    5,583
    
    
    
    1,061.4
    
    
    $
    2,748
    
    
    
    49.2
    %Segment loss
    
    $
    (6,485
    )
    
    
    (351.3
    )%
    
    $
    (5,057
    )
    
    
    (961.4
    )%
    
    $
    1,428
    
    
    
    28.2
    %Capital expenditures
    
    $
    3,638
    
    
    
    197.1
    %
    
    $
    2,830
    
    
    
    538.0
    %
    
    $
    808
    
    
    
    28.6
    %
 
 *
    
    exclusive of depreciation and amortization Revenue
   Cost of Service (exclusive of depreciation and amortization)
  33




---



##### 



Depreciation and Amortization
  Capital Expenditures
  Recently Issued Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB SFAS No. 133
 34




---



##### 



Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
 Regulatory
  FCC Regulation of Wireless Services
 Additional Federal Regulations
 VoIP 911 Regulation.
 Qwest Petition for Forbearance from Unbundling Requirements.
 35




---



##### 



Intercarrier Compensation Reform and Treatment of VoIP Services In re: Core
Communications Inc.
   Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an
Order of the Minnesota Public Utilities Commission
  Additional State and Local Regulation
 State Commission Financing Filings.
 XO Complaints Against Verizon.
 36




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
   Changes in Internal Controls
  37




---



##### 



PART II. OTHER INFORMATION
 ITEM 1. Legal Proceedings
  Allegiance Telecom Liquidating Trust Litigation
    (a)
    
    with respect to the ATLTs reimbursement claim of approximately $20 million, XOH must
pay to the ATLT damages in the minimum amount of approximately $8.0 million, subject to an
upward adjustment of up to an additional amount of approximately $2 million pending
resolution of the dispute regarding the true-up of certain disputed liabilities by the
referee, together with interest accruing at the New York statutory rate of 9% per annum;(b)
    
    the Company must pay to the ATLT the amount of approximately $0.5 million, together
with interest accruing at the New York statutory rate, which amount represents cash
received by the Company after the closing of the Allegiance acquisition, provided there is
a corresponding reduction in accounts receivable included in the Acquired Assets;
 38




---



##### 



(c)
    
    the Company must immediately pay or deliver to the ATLT certain checks in the
approximate aggregate amount of $0.6 million issued by the U.S. Internal Revenue Service on
account of tax refunds owed to Allegiance, together with interest accruing at the New York
statutory rate;(d)
    
    with respect to the true-up of certain disputed liabilities, the ATLT shall pay to XOH
the approximate amount of $2.8 million, together with interest accruing at the New York
statutory rate, which amount may be increased by the referee;(e)
    
    XOH is fully subrogated to the obligations of approximately $1.7 million of Allegiance
liabilities that the Company caused to be honored after the closing; and(f)
    
    to the extent not satisfied, the ATLT must pay to XOH its tax reimbursement
obligations, together with interest accruing at the New York statutory rate.
   Houlihan Lokey Howard and Zukin Capital LLC
 nd nd
 Nashville Electric Service
  39




---



##### 



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.
   40




---



##### 



Risks Related To Long Term Debt Covenant
 The financial covenants in our
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.
  Risks Related to our Wireless Operations
 Our spectrum licenses may not be renewed upon expiration, which could harm our business.
   41




---



##### 



1
 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.
    
 1
    
    An LMDS coalition filed for an extension of named
member companies substantial service requirements on June 14, 2007. In order
to utilize its resources in the most efficient manner possible, Nextlink joined
this coalition and, on October 10, 2007, petitioned the FCC for extension of
its B Band LMDS licenses. Subsequently, Nextlink petitioned the FCC for
extension of its substantial service requirements for 18 of its A Band
licenses. 42




---



##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  Item 3. Defaults Upon Senior Securities.
  Item 4. Submission of Matters to a Vote of Security Holders.
  Votes For
    
    Votes WithheldCarl C. Icahn
    
    
    155,591,700
    
    
    
    25,023,324Carl J. Grivner
    
    
    158,128,112
    
    
    
    22,486,912Peter Shea
    
    
    158,145,179
    
    
    
    22,469,845Adam Dell
    
    
    162,760,351
    
    
    
    17,854,673Vincent J. Intrieri
    
    
    162,758,903
    
    
    
    17,855,121Keith Meister
    
    
    158,138,746
    
    
    
    22,476,278Robert Knauss
    
    
    160,440,979
    
    
    
    20,174,045Fredrik Gradin
    
    
    158,116,204
    
    
    
    22,498,820
 Item 5. Other Information.
  Item 6. Exhibits.
  43




---



##### 



SIGNATURES
  Date: August 11, 2008
    XO HOLDINGS, INC.By:
    /s/  Gregory W. FreibergGregory W. FreibergSenior Vice President and Chief Financial Officer 44




---



##### 



EXHIBIT INDEX
 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 herein 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, 2006 (incorporated
herein 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 herein 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
    
    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 **4.2
    
    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 **10.1
    
    Promissory note, dated as of March 13, 2008, executed by XO Communications, LLC in
favor of Arnos Corp. *10.2
    
    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 *10.3
    
    Amendment No. 2 and Waiver to Amended and Restated Credit and Guaranty Agreement
dated May 9, 2008 between XO Communications, LLC, its subsidiaries and Arnos
Corp., as Requisite Lenders*10.4
    
    Stock Purchase Agreement**10.5
    
    Registration Rights Agreement**10.6
    
    Tax Allocation Agreement**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
    
    Certificate 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 Sarbanes-Oxley Act of 2002
(filed herewith)
 
 *
    
    Incorporated herein by reference to Form 10-Q for the quarter ended March 31, 2008.**
    
    Incorporated herein by reference to the Current Report on Form 8-K filed on July
28, 2008. 45