EXHIBIT 4.1






                          KMC TELECOM HOLDINGS, INC.,
                                    as Issuer,



                           KMC TELECOM FINANCING, INC.
                                  as Guarantor,


                                      and


                           THE CHASE MANHATTAN BANK,
                                    as Trustee




                         First Supplemental Indenture

                           Dated as of May 24, 1999





                      12 1/2% Senior Discount Notes due 2008






<PAGE>


            THIS FIRST SUPPLEMENTAL  INDENTURE,  dated as of May 24, 1999, among
KMC TELECOM HOLDINGS,  INC., a Delaware corporation,  as issuer (the "COMPANY"),
KMC TELECOM FINANCING,  INC., a Delaware corporation and a Restricted Subsidiary
of the Company, as guarantor (the "GUARANTOR"), and THE CHASE MANHATTAN BANK, as
trustee (the "TRUSTEE").


                             RECITALS OF THE COMPANY

            WHEREAS,  the Company and the Trustee have entered into that certain
indenture dated as of January 29, 1998 (the "SENIOR DISCOUNT NOTES  INDENTURE"),
pursuant to which the Company issued in the original aggregate  principal amount
at maturity of  $460,800,000 12 1/2% Senior Discount Notes due 2008 (the "SENIOR
DISCOUNT NOTES");

            WHEREAS,  the Company covenanted and agreed pursuant to the terms of
the Senior Discount Notes Indenture not to permit any Restricted  Subsidiary (as
defined in the Senior  Discount Notes  Indenture),  directly or  indirectly,  to
guarantee any indebtedness of the Company which is equal or subordinate in right
of payment  with the Senior  Discount  Notes unless such  Restricted  Subsidiary
simultaneously  executes  and  delivers a  supplemental  indenture to the Senior
Discount Notes Indenture to provide for a Guarantee of the payment of the Senior
Discount Notes by such Restricted Subsidiary;

            WHEREAS, the Guarantor is a Restricted Subsidiary of the Company;

            WHEREAS,  the Company,  the  Guarantor  and the Trustee have entered
into that certain  indenture dated as of the date hereof (as amended,  restated,
supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant
to which the Company is issuing on the date  hereof  $275,000,000  in  aggregate
principal  amount of 13 1/2% Senior Notes due 2009 (the "NOTES") which are equal
in right of payment with the Senior Discount Notes; and

            WHEREAS,  the Notes are guaranteed by the Guarantor  pursuant to the
terms of the Indenture.

            NOW,  THEREFORE,  for and in  consideration  of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto agree,
for the equal and  proportionate  benefit of all Holders of the Senior  Discount
Notes, as follows:

<PAGE>
                                       2



                                    ARTICLE I

                            RATIFICATION; DEFINITIONS

            SECTION 1.01. FIRST SUPPLEMENTAL INDENTURE.  This First Supplemental
Indenture is  supplemental  to, and is entered into in  accordance  with Section
9.01 of the Senior Discount Notes Indenture, and except as modified, amended and
supplemented by this First Supplemental Indenture,  the provisions of the Senior
Discount  Notes  Indenture are in all respects  ratified and confirmed and shall
remain in full force and effect; and

            SECTION  1.02.  DEFINITIONS.  Unless  the  context  shall  otherwise
require,  all terms  which are  defined in Section  1.01 of the Senior  Discount
Notes  Indenture  shall  have the same  meanings,  respectively,  in this  First
Supplemental  Indenture  as such  terms  are given in said  Section  1.01 of the
Senior Discount Notes Indenture.


                                   ARTICLE II
                       GUARANTEE OF SENIOR DISCOUNT NOTES

            SECTION  2.01.  GUARANTEE.  (a)  Subject to the  provisions  of this
Supplemental  Indenture,   the  Guarantor  hereby  fully,   unconditionally  and
irrevocably guarantees  (hereinafter referred to as the "SUBSIDIARY  GUARANTEE")
to each holder of the Senior Discount Notes (each, a "HOLDER" and  collectively,
the "HOLDERS") and to the Trustee on behalf of itself and such Holders:

            (i) the due and punctual  payment of the Accreted Value or principal
      amount at maturity  of,  premium,  if any, on and  interest on each Senior
      Discount  Note  outstanding  as of the date  hereof,  when and as the same
      shall become due and  payable,  whether at maturity,  by  acceleration  or
      otherwise,  the  due and  punctual  payment  of  interest  on the  overdue
      principal of and interest,  if any, on such Senior  Discount Notes, to the
      extent  lawful,  and  the  due  and  punctual  performance  of  all  other
      obligations  of  the  Company  to  the  Holders  or  the  Trustee,  all in
      accordance  with the terms of such  Senior  Discount  Note and the  Senior
      Discount Note Indenture; and

            (ii) in the case of any  extension  of time of payment or renewal of
      any such Senior Discount Note or any of such other  obligations,  that the
      same will be promptly  paid in full when due or  performed  in  accordance
      with the  terms of the  extension  or  renewal,  at  Stated  Maturity,  by
      acceleration or otherwise.

<PAGE>
                                       3


      (b) The Guarantor hereby waives diligence, presentment, demand of payment,
filing of  claims  with a court in the  event of  merger  or  bankruptcy  of the
Company,  any right to require a  proceeding  first  against  the  Company,  the
benefit  of  discussion,  protest  or notice  with  respect  to any such  Senior
Discount  Note or the debt  evidenced  thereby and all demands  whatsoever,  and
covenants that this  Subsidiary  Guarantee will not be discharged as to any such
Senior  Discount  Note  except  by  payment  in full of the  Accreted  Value  or
principal  amount  at  maturity  thereof  and  interest  thereon  in the  manner
contemplated  by the  terms of the  Senior  Discount  Notes  Indenture.  For the
purposes of this First Supplemental  Indenture,  the maturity of the obligations
guaranteed  hereby may be  accelerated  as set forth  under  Article  Six of the
Senior Discount Notes Indenture  (hereinafter  referred to as "ARTICLE SIX"). In
the event of any declaration of acceleration of such  obligations as provided in
such  Article  Six,  such  obligations  (whether or not due and  payable)  shall
forthwith  become due and payable by the Guarantor for the purpose of this First
Supplemental Indenture. In addition,  without limiting the foregoing provisions,
upon the  effectiveness  of an  acceleration  under Article Six, the Trustee may
make a demand for payment on the Senior  Discount  Notes  under this  Subsidiary
Guarantee.  Notwithstanding  the  foregoing,  this  Subsidiary  Guarantee by the
Guarantor shall  automatically  terminate upon the earlier of (i) the payment in
full of the Accreted Value or principal amount at maturity of, premium,  if any,
and interest on all  outstanding  Senior Discount Notes and (ii) the termination
of the guarantee of the Notes by the Guarantor in accordance  with Section 11.01
of the Indenture,  unless such termination  under Section 11.01 of the Indenture
results from a payment by the Guarantor under the Note Guarantee. If the Trustee
or the Holder is required by any court or  otherwise to return to the Company or
the Guarantor, or any custodian, receiver, liquidator,  trustee, sequestrator or
other similar  official acting in relation to the Company or the Guarantor,  any
amount paid to the Trustee or such Holder in respect of a Senior  Discount Note,
this  Subsidiary  Guarantee,  to the  extent  theretofore  discharged,  shall be
reinstated  in full force and  effect.  The  Guarantor  further  agrees,  to the
fullest extent that it may lawfully do so, that, as between it, on the one hand,
and the  Holders  and the  Trustee,  on the  other  hand,  the  maturity  of the
obligations  guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Subsidiary Guarantee,  notwithstanding any stay, injunction
or other prohibition extant under any applicable  bankruptcy law preventing such
acceleration in respect of the obligations guaranteed hereby.

      (c) Until such time as the Senior  Discount  Notes  outstanding  as of the
date  hereof  are fully and  finally  paid,  including  all  interest,  premium,
principal and  liquidated  damages with respect  thereto,  the Guarantor  hereby
irrevocably  waives  any  claim or other  rights  which it may now or  hereafter
acquire against the Company that arise from the existence,  payment, performance
or  enforcement  of its  obligations  under this  Subsidiary  Guarantee and this
Supplemental Indenture, including, without limitation, any right of subrogation,

<PAGE>
                                       4


reimbursement,   exoneration,   contribution,   indemnification,  any  right  to
participate  in any claim or remedy of the  Holders  against  the Company or any
collateral  which any such  Holder  or the  Trustee  on  behalf  of such  Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract,  statute or common law, including,  without  limitation,  the
right to take or receive from the Company,  directly or  indirectly,  in cash or
other  property  or by set-off or in any other  manner,  payment or  security on
account  of such  claim  or other  rights.  If any  amount  shall be paid to the
Guarantor  in  violation of the  preceding  sentence  and the Accreted  Value or
principal  amount at maturity of, premium,  if any, and accrued  interest on the
Senior  Discount  Notes or any other  amounts  payable by the Company  under the
Senior  Discount Notes  Indenture  shall not have been paid in full, such amount
shall be deemed to have been paid to the  Guarantor for the benefit of, and held
in trust for the benefit of, the Holders and the Trustee, and shall forthwith be
paid to the Trustee for the benefit of itself and the Holders to be credited and
applied upon the  principal  of,  premium,  if any, and accrued  interest on the
Senior Discount Notes.

      (d) This Subsidiary  Guarantee shall not be valid or become obligatory for
any purpose  with respect to a Senior  Discount  Note until the  certificate  of
authentication on the Note shall have been signed by or on behalf of the Trustee
pursuant to the terms of the Indenture.

            SECTION  2.02.  OBLIGATIONS  UNCONDITIONAL.  (a)  Subject to Section
2.05,  nothing contained in this First  Supplemental  Indenture or in the Senior
Discount  Notes is  intended to or shall  impair,  as among the  Guarantor,  the
Trustee and the Holders, the obligation of the Guarantor,  which is absolute and
unconditional,  upon failure by the Company,  to pay to the Holders the Accreted
Value or principal  amount at maturity of, premium,  if any, and interest on the
Senior  Discount  Notes  outstanding  as of the date hereof as and when the same
shall become due and payable in accordance with their terms or any other amounts
payable by the Company under the Senior Discount Notes Indenture, or is intended
to or shall affect the relative rights of the Holders, the Trustee and creditors
of the Guarantor,  nor shall anything  herein or therein  prevent the Holders of
such Senior  Discount  Notes or the Trustee on their behalf from  exercising all
remedies  otherwise   permitted  by  applicable  law  upon  default  under  this
Indenture.

      (b)  Without  limiting  the  foregoing,  nothing  contained  in this First
Supplemental  Indenture will restrict the right of the Trustee or the Holders to
take any action to declare this Subsidiary Guarantee to be due and payable prior
to the Stated  Maturity of the Senior  Discount Notes or to pursue any rights or
remedies hereunder.

<PAGE>
                                       5


            SECTION 2.03.  NOTICE TO TRUSTEE.  The  Guarantor  shall give prompt
written  notice to the  Trustee of any fact known to the  Guarantor  which would
prohibit  the  making of any  payment  to or by the  Trustee  in respect of this
Subsidiary  Guarantee  pursuant  to the  provisions  of this First  Supplemental
Indenture.

            SECTION  2.04.  THIS ARTICLE NOT TO PREVENT  EVENTS OF DEFAULT.  The
failure to make a payment on account of the Accreted  Value or principal  amount
at maturity of,  premium,  if any, or interest on the Senior  Discount  Notes by
reason  of any  provision  of this  First  Supplemental  Indenture  will  not be
construed as preventing the occurrence of an Event of Default.

            SECTION  2.05.  NET  WORTH  LIMITATION.  Notwithstanding  any  other
provision  of the Senior  Discount  Notes  Indenture,  this  First  Supplemental
Indenture or the Senior Discount Notes and this Subsidiary Guarantee, this First
Supplemental  Indenture  shall not be  enforceable  against the  Guarantor in an
amount  in  excess  of  the  net  worth  of  the  Guarantor  at  the  time  that
determination  of such net worth  is,  under  applicable  law,  relevant  to the
enforceability of the Note Guarantee  pursuant to the terms of the Indenture and
the Collateral Pledge and Security  Agreement.  Such net worth shall include any
claim or future claim of the Guarantor against the Company for reimbursement and
any claim against any grantor of a Guarantee for contribution.


                                   ARTICLE III

                                  MISCELLANEOUS

            SECTION  3.01.  NOTICES.   Any  notice  or  communication  shall  be
sufficiently  given if in  writing  and  delivered  in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:

            IF TO THE COMPANY OR THE GUARANTOR:

                  KMC Telecom Holdings, Inc.
                  1545 Route 206, Suite 300
                  Bedminster, New Jersey  07921
                  Telecopier Number:  (908) 719-8775
                  Attention: Chief Financial Officer

                        With a copy to:

                  Kelley Drye & Warren LLP
                  101 Park Avenue
                  New York, NY  10178
                  Attention: Alan M. Epstein, Esq.

<PAGE>
                                       6

                        and a copy to:

                  Simpson Thacher & Bartlett
                  425 Lexington Avenue
                  New York, NY 10017 - 3954
                  Attention: Arthur D. Robinson, Esq.

            IF TO THE TRUSTEE:

                  The Chase Manhattan Bank
                  450 West 33rd Street, 15th Floor
                  New York, New York  10001-2697
                  Telecopier Number:  (212) 946-8159/8160
                  Attention: Capital Markets Fiduciary Services

                        With a copy to:

                  Pryor Cashman Sherman & Flynn, LLP
                  410 Park Avenue
                  New York, NY  10022
                  Attention: Eric Hellige, Esq.

            The  Company,  the  Guarantor or the Trustee by notice to the others
may  designate  additional  or different  addresses  for  subsequent  notices or
communications.

            SECTION 3.02.  SUCCESSORS AND ASSIGNS.  All covenants and agreements
of the  Company,  the  Guarantor  and the  Trustee  in this  First  Supplemental
Indenture shall bind their respective successors.

            SECTION 3.03. COUNTERPARTS. This First Supplemental Indenture may be
executed in any number of  counterparts  and by the  parties  hereto in separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of  which  taken  together  shall  constitute  one and  the  same  First
Supplemental Indenture.

            SECTION 3.04. GOVERNING LAW. This First Supplemental Indenture shall
be governed by and construed in  accordance  with the internal laws of the State
of New York.

<PAGE>
                                       7


            SECTION  3.05.  SEPARABILITY.  In case any  provision  in this First
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining  provisions shall not in any way be
affected or impaired thereby.

            SECTION 3.06.  EFFECTIVE  DATE.  This First  Supplemental  Indenture
shall become effective as of the date hereof.

            SECTION 3.07.  INCORPORATION INTO INDENTURE.  All provisions of this
First  Supplemental  Indenture shall be deemed to be  incorporated  in, and made
part of, the Senior  Discount  Notes  Indenture;  and the Senior  Discount Notes
Indenture,  as amended and  supplemented by this First  Supplemental  Indenture,
shall be read, taken and construed as one and the same instrument.

            SECTION 3.08. THE TRUSTEE.  The Trustee shall not be responsible for
or in  respect  of the  validity  or  sufficiency  of  this  First  Supplemental
Indenture or for or in respect of the recitals  contained  herein,  all of which
are made solely by the Company.



<PAGE>



                                  SIGNATURES

            IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this First
Supplemental  Indenture to be duly  executed,  all as of the date first  written
above.


                                            KMC TELECOM HOLDINGS, INC.



                                            By:   /s/ James D. Grenfell
                                                  ------------------------
                                            Name:  JAMES D. GRENFELL
                                            Title: EXECUTIVE VICE PRESIDENT,
                                                   CHIEF FINANCIAL OFFICER



                                            KMC TELECOM FINANCING, INC.
                                                as Guarantor



                                            By:   /s/ James D. Grenfell
                                                  ------------------------
                                            Name:  JAMES D. GRENFELL
                                            Title: EXECUTIVE VICE PRESIDENT,
                                                   CHIEF FINANCIAL OFFICER


                                            THE CHASE MANHATTAN BANK,
                                               as Trustee



                                            By:   /s/ P. Kelly
                                                  ------------------------
                                            Name:
                                            Title: