<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                         COMMISSION FILE NUMBER 0-24059

                           MPOWER COMMUNICATIONS CORP.
             (Exact name of registrant as specified in its charter)

        NEVADA                                           88-0360042
(State of incorporation)                    (I.R.S. Employer Identification No.)

                          175 SULLY'S TRAIL, SUITE 300
                               PITTSFORD, NY 14534
                    (Address of principal executive offices)

                                 (716) 218-6550
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
                                YES [x] NO [ ]

         The number of shares outstanding of the issuer's common stock,
                             as of November 7, 2001:

     Common stock (par value $0.01 per share) .... 1,000 shares outstanding
<PAGE>
                           MPOWER COMMUNICATIONS CORP.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                  PAGE NO.
                                                                                                                  --------
<S>            <C>                                                                                                <C>
PART I-        FINANCIAL INFORMATION

Item 1.        Consolidated Financial Statements

               Consolidated Balance Sheets - September 30, 2001 (Unaudited) and December 31, 2000...............     3

               Consolidated Statements of Operations -- Three and Nine months ended September 30, 2001
               and 2000 (Unaudited).............................................................................     4

               Consolidated Statements of Redeemable Preferred Stock and Stockholders' Equity for
               the period from December 31, 1999 to September 30, 2001 (Unaudited)..............................     5

               Consolidated Statements of Cash Flows - Nine months ended September 30, 2001
               and 2000 (Unaudited).............................................................................     6

               Condensed Notes to Unaudited Interim Consolidated Financial Statements...........................     7

Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations............    12

Item 3.        Quantitative and Qualitative Disclosures about Market Risk.......................................    17

PART II-       OTHER INFORMATION

Item 1.        Legal Proceedings................................................................................    18

Item 6.        Exhibits and Reports on Form 8-K.................................................................    19

SIGNATURES     .................................................................................................    21
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

                           MPOWER COMMUNICATIONS CORP.
                           CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                                        SEPTEMBER 30,   DECEMBER 31
                                                                                                           2001            2000
                                                                                                           ----            ----
                                                                                                        (UNAUDITED)
<S>                                                                                                     <C>            <C>
                                                           ASSETS

Current assets:
   Cash and cash equivalents .....................................................................      $    52,088    $    10,437
   Investments available-for-sale ................................................................          213,493        492,804
   Restricted investments ........................................................................              586          1,065
   Accounts receivable, less allowance for doubtful accounts of $4,530 and $4,488 at
      September 30, 2001 and December 31, 2000, respectively .....................................           16,884         27,970
   Intercompany receivable from parent ...........................................................            1,500             --
Prepaid expenses .................................................................................            5,962          2,973
                                                                                                        -----------    -----------
         Total current assets ....................................................................          290,513        535,249
Property and equipment, net ......................................................................          394,395        482,265
Deferred financing costs, net of accumulated amortization of $384 and $895 at
   September 30, 2001 and December 31, 2000, respectively ........................................              822         10,794
Goodwill and other intangibles, net of accumulated amortization of $8,147 at December 31, 2000 ...               --        137,469
Other assets .....................................................................................            5,916          6,683
                                                                                                        -----------    -----------
      Total assets ...............................................................................      $   691,646    $ 1,172,460
                                                                                                        ===========    ===========

                        LIABILITIES, REDEEMABLE PREFERRED
                         STOCK AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of long-term debt and capital lease obligations ............................      $     7,635    $     8,422
   Accounts payable:
      Trade ......................................................................................           27,007         36,584
      Property and equipment .....................................................................            2,706         39,263
   Accrued interest ..............................................................................            3,311         15,613
   Accrued sales tax payable .....................................................................            7,753          9,091
   Accrued network optimization cost .............................................................           20,102          5,030
   Accrued other expenses ........................................................................           24,231         20,045
                                                                                                        -----------    -----------
      Total current liabilities ..................................................................           92,745        134,048
Senior Notes, net of unamortized discount of $555 and $13,564 at September 30, 2001 and
         December 31, 2000, respectively .........................................................           50,390        466,845
Other long-term debt and capital lease obligations ...............................................            3,836          9,814
                                                                                                        -----------    -----------
         Total liabilities .......................................................................          146,971        610,707
                                                                                                        -----------    -----------
Commitments and contingencies
Redeemable preferred stock:
   10% Series C convertible preferred stock, none and 1,250,000 shares authorized, issued and
      outstanding at September 30, 2001 and December 31, 2000, respectively ......................               --         42,760
   7.25% Series D convertible preferred stock, none and 4,140,000 shares authorized, issued
      and outstanding  at September 30, 2001 and December 31, 2000, respectively .................               --        202,126
Stockholders' equity:

   Preferred stock, none and 44,510,000 shares authorized but unissued at September 30, 2001 and
      December 31, 2000, respectively ............................................................               --             --
   Series E preferred stock, none and 100,000 shares authorized but unissued at September 30,
      2001 and December 31, 2000, respectively ...................................................               --             --
   Common stock, $0.01 and $0.001 par value, 1,000 and 300,000,000 shares authorized, 1,000 and
     56,875,870 shares issued at September 30, 2001 and December 31, 2000, respectively ..........               --             57
Additional paid-in capital .......................................................................        1,288,610        672,031
Accumulated deficit ..............................................................................         (754,331)      (358,875)
   Less: treasury stock, none and 13,710 shares at September 30, 2001 and December 31, 2000,
       respectively, at cost .....................................................................               --            (76)
Notes receivable from stockholders for issuance of common stock ..................................               --         (5,294)
Accumulated other comprehensive income ...........................................................           10,396          9,024
                                                                                                        -----------    -----------
         Total stockholders' equity ..............................................................          544,675        316,867
                                                                                                        -----------    -----------
         Total liabilities, redeemable preferred stock and stockholders' equity ..................      $   691,646    $ 1,172,460
                                                                                                        ===========    ===========
</TABLE>


See accompanying condensed notes to unaudited interim consolidated financial
statements.

<PAGE>
                           MPOWER COMMUNICATIONS CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                               SEPTEMBER 30,                      SEPTEMBER 30,
                                                               -------------                      -------------
                                                          2001               2000           2001               2000
                                                          ----               ----           ----               ----
<S>                                                    <C>              <C>              <C>              <C>
Operating revenues:
   Telecommunication services ..................       $  49,810        $  45,905        $ 146,065        $ 102,281
Operating expenses:
   Cost of operating revenues ..................          38,282           37,622          121,045           77,727
   Selling .....................................          15,096           22,104           47,865           44,944
   General and administrative ..................          29,133           35,590          100,542           82,786
   Stock-based compensation expense ............              --              933            1,867            2,412
   Network optimization cost ...................              --           12,000          233,083           12,000
   Depreciation and amortization ...............          15,151           17,059           59,196           32,003
                                                       ---------        ---------        ---------        ---------
                                                          97,662          125,308          563,598          251,872
                                                       ---------        ---------        ---------        ---------
      Loss from operations .....................         (47,852)         (79,403)        (417,533)        (149,591)
Other income (expense):
   Gain on sale of assets, net .................           1,955               93            4,730               49
   Interest income .............................           4,433           10,730           17,805           32,912
   Interest expense (net of amount capitalized)           (3,121)         (14,957)         (32,780)         (32,928)
                                                       ---------        ---------        ---------        ---------
      Net loss before extraordinary item .......         (44,585)         (83,537)        (427,778)        (149,558)
Extraordinary item:
    Gain (loss) on early retirement of debt ....              --               --           32,322          (19,547)
                                                       ---------        ---------        ---------        ---------
      Net loss .................................       $ (44,585)       $ (83,537)       $(395,456)       $(169,105)
                                                       =========        =========        =========        =========
</TABLE>


See accompanying condensed notes to unaudited interim consolidated financial
statements.
<PAGE>
                           MPOWER COMMUNICATIONS CORP.
 CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                                       REDEEMABLE
                                                           COMPREHENSIVE             PREFERRED STOCK                  COMMON STOCK
                                                                LOSS            SHARES            AMOUNT        SHARES       AMOUNT
                                                                ----            ------            ------        ------       ------
<S>                                                        <C>               <C>              <C>             <C>            <C>
BALANCE AT DECEMBER 31, 1999 .........................                         6,527,779     $    84,973      34,866,492     $ 35
Unrealized gain on investments available-for-sale ....      $    10,110               --              --              --       --
Common stock issued for cash .........................               --               --              --       9,245,564        9
Warrants and options exercised for common stock ......               --               --              --       1,298,728        1
Payment on stockholders' notes .......................               --               --           4,900              --       --
10% Series B convertible preferred stock converted
  to common stock ....................................               --       (5,277,779)        (55,153)      7,916,668        8
7.25% Series D convertible preferred stock issued
  for cash ...........................................               --        4,140,000         200,575              --       --
Stock-based compensation .............................               --               --              --              --       --
Accrued preferred stock dividend .....................               --               --          16,889              --       --
Preferred dividends paid in common stock .............               --               --         (14,063)      1,448,661        2
Accretion of preferred stock to redemption value .....               --               --           6,765              --       --
Shares issued for acquisition of Primary Network .....               --               --              --       2,024,757        2
Options and warrants issued for acquisition of Primary
  Network ............................................               --               --              --              --       --
Shares issued in exchange of Primary Network Senior
  Notes ..............................................               --               --              --          75,000       --
Net loss .............................................         (244,714)              --              --              --       --
                                                            -----------      -----------     -----------     -----------     ----
COMPREHENSIVE LOSS ...................................      $  (234,604)
                                                            ===========
BALANCE AT DECEMBER 31, 2000 .........................                         5,390,000         244,886      56,875,870       57
Unrealized gain on investments available-for-sale ....      $     1,372               --              --              --       --
Warrants and options exercised for common stock ......               --               --              --         114,100        1
Stock-based compensation .............................               --               --              --              --       --
Accrued preferred stock dividend .....................               --               --           7,795              --       --
Preferred dividends paid in common stock .............               --               --          (2,995)        427,070       --
7.25% Series D convertible preferred stock
  converted to common stock ..........................               --       (1,125,612)        (54,170)      2,198,684        2
Conversion of common stock to Mpower Holding
  Corporation common stock ...........................               --               --              --     (59,614,724)     (60)
Cancellation of preferred stock by Mpower Holding
  Corporation ........................................               --       (4,264,388)       (195,516)             --       --
Transfer of obligations of Senior Notes ..............               --               --              --              --       --
Net loss .............................................         (395,456)              --              --              --       --
                                                            -----------      -----------     -----------     -----------     ----
COMPREHENSIVE LOSS ...................................      $  (394,084)
                                                            ===========
BALANCE AT SEPTEMBER 30, 2001 (UNAUDITED) ............                                --     $        --           1,000     $ --
                                                                              ===========     ===========     ===========     ====
</TABLE>


<TABLE>
<CAPTION>
                                                              ADDITIONAL
                                                               PAID-IN          ACCUMULATED         TREASURY STOCK
                                                               CAPITAL           DEFICIT          SHARES       AMOUNT
                                                               -------           -------          ------       ------
<S>                                                         <C>               <C>                <C>          <C>
BALANCE AT DECEMBER 31, 1999 .........................      $   225,288       $  (114,161)       13,710       $ (76)
Unrealized gain on investments available-for-sale ....               --                --            --          --
Common stock issued for cash .........................          316,724                --            --          --
Warrants and options exercised for common stock ......            2,944                --            --          --
Payment on stockholders' notes .......................               --                --            --          --
10% Series B convertible preferred stock converted
  to common stock ....................................           55,145                --            --          --
7.25% Series D convertible preferred stock issued
  for cash ...........................................               --                --            --          --
Stock-based compensation .............................            3,345                --            --          --
Accrued preferred stock dividend .....................          (16,889)               --            --          --
Preferred dividends paid in common stock .............           14,061                --            --          --
Accretion of preferred stock to redemption value .....           (6,765)               --            --          --
Shares issued for acquisition of Primary Network .....           70,382                --            --          --
Options and warrants issued for acquisition of Primary
  Network ............................................            5,171                --            --          --
Shares issued in exchange of Primary Network Senior
  Notes ..............................................            2,625                --            --          --
Net loss .............................................               --          (244,714)           --          --
                                                               --------          --------      --------       -----
COMPREHENSIVE LOSS ...................................
BALANCE AT DECEMBER 31, 2000 .........................          672,031          (358,875)       13,710         (76)
Unrealized gain on investments available-for-sale ....               --                --            --          --
Warrants and options exercised for common stock ......               74                --            --          --
Stock-based compensation .............................            1,867                --            --          --
Accrued preferred stock dividend .....................           (7,795)               --            --          --
Preferred dividends paid in common stock .............            2,995                --            --          --
7.25% Series D convertible preferred stock
  converted to common stock ..........................           54,168                --            --          --
Conversion of common stock to Mpower Holding
  Corporation common stock ...........................           (5,894)               --       (13,710)         76
Cancellation of preferred stock by Mpower Holding
  Corporation ........................................          195,516                --            --          --
Transfer of obligations of Senior Notes ..............          375,648                --            --          --
Net loss .............................................               --          (395,456)           --          --
                                                               --------          --------      --------       -----
COMPREHENSIVE LOSS ...................................
BALANCE AT SEPTEMBER 30, 2001 (UNAUDITED) ............      $ 1,288,610       $  (754,331)           --       $  --
                                                            ===========       ===========     =========       ======
</TABLE>



<TABLE>
<CAPTION>
                                                                 NOTES            ACCUMULATED
                                                            RECEIVABLE FROM          OTHER
                                                           STOCKHOLDERS FOR      COMPREHENSIVE            TOTAL
                                                              ISSUANCE OF           INCOME            STOCKHOLDERS'
                                                             COMMON STOCK           (LOSS)               EQUITY
                                                             ------------           ------               ------
<S>                                                       <C>                     <C>                 <C>
BALANCE AT DECEMBER 31, 1999 .........................       $  (6,219)           $  (1,086)           $ 103,781
Unrealized gain on investments available-for-sale ....              --               10,110               10,110
Common stock issued for cash .........................              --                   --              316,733
Warrants and options exercised for common stock ......              --                   --                2,945
Payment on stockholders' notes .......................             925                   --                  925
10% Series B convertible preferred stock converted
  to common stock ....................................              --                   --               55,153
7.25% Series D convertible preferred stock issued
  for cash ...........................................              --                   --                   --
Stock-based compensation .............................              --                   --                3,345
Accrued preferred stock dividend .....................              --                   --              (16,889)
Preferred dividends paid in common stock .............              --                   --               14,063
Accretion of preferred stock to redemption value .....              --                   --               (6,765)
Shares issued for acquisition of Primary Network .....              --                   --               70,384
Options and warrants issued for acquisition of Primary
  Network ............................................              --                   --                5,171
Shares issued in exchange of Primary Network Senior
  Notes ..............................................              --                   --                2,625
Net loss .............................................              --                   --             (244,714)
                                                             ---------            ---------            ---------
COMPREHENSIVE LOSS
BALANCE AT DECEMBER 31, 2000 .........................          (5,294)               9,024              316,867
Unrealized gain on investments available-for-sale ....              --                1,372                1,372
Warrants and options exercised for common stock ......              --                   --                   75
Stock-based compensation .............................              --                   --                1,867
Accrued preferred stock dividend .....................              --                   --               (7,795)
Preferred dividends paid in common stock .............              --                   --                2,995
7.25% Series D convertible preferred stock
  converted to common stock ..........................              --                   --               54,170
Conversion of common stock to Mpower Holding
  Corporation common stock ...........................           5,294                                      (584)
Cancellation of preferred stock by Mpower Holding
  Corporation ........................................              --                                   195,516
Transfer of obligations of Senior Notes ..............              --                   --              375,648
Net loss .............................................              --                   --             (395,456)
                                                             ---------            ---------            ---------
Comprehensive Loss ...................................
BALANCE AT SEPTEMBER 30, 2001 (UNAUDITED) ............       $      --            $  10,396            $ 544,675
                                                            =========            =========            =========
</TABLE>





See accompanying condensed notes to unaudited interim consolidated financial
statements.
<PAGE>
                           MPOWER COMMUNICATIONS CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                NINE MONTHS ENDED
                                                                                                   SEPTEMBER 30,
                                                                                            2001                  2000
                                                                                            ----                  ----
<S>                                                                                   <C>                   <C>
Cash flows from operating activities:
    Net loss....................................................................      $    (395,456)        $    (169,105)
    Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization ............................................             59,196                32,003
      (Gain) loss on early retirement of debt ..................................            (32,322)               19,547
      Network optimization cost ................................................            233,083                12,000
      Gain on sale of assets ...................................................             (4,730)                  (49)
      Amortization of debt discount ............................................                822                   757
      Amortization of deferred debt financing costs ............................                773                   904
      Stock-based compensation .................................................              1,867                 2,412
      Changes in assets and liabilities:
          Decrease (increase) in accounts receivable, net ......................             10,746               (14,411)
          Increase in intercompany receivable from parent.......................             (1,500)                   --
          Increase in prepaid expenses .........................................             (3,136)                 (470)
          Decrease (increase) in other assets ..................................                786                (6,092)
          (Decrease) increase in accounts payable - trade ......................             (9,577)               11,891
          (Decrease) increase in accrued sales tax payable .....................             (1,338)                1,153
          Decrease in accrued network optimization cost ........................             (9,033)                   --
          Increase in accrued interest and other expenses ......................              2,580                26,353
                                                                                      -------------         -------------
            Net cash used in operating activities ..............................           (147,239)              (83,107)
                                                                                      --------------        -------------
Cash flows from investing activities:
    Purchase of property and equipment, net of payables.........................            (78,953)             (228,177)
    Net cash paid for acquisition of business...................................                 --               (13,088)
    Proceeds from sale of customer base ........................................              1,601                    --
    Sale (purchase) of investments available-for-sale, net .....................            286,607              (432,902)
    Sale of restricted investments .............................................                460                 9,566
                                                                                      -------------         -------------
            Net cash provided by (used in) investing activities ................            209,715              (664,601)
                                                                                      -------------         -------------
Cash flows from financing activities:
    Proceeds from issuance of Senior Notes .....................................                 --               243,220
    Costs associated with issuance of Senior Notes .............................                 --                (6,524)
    Proceeds from issuance of Convertible Preferred
      Stock, net of issuance costs .............................................                 --               200,575
    Repurchase of Senior Notes .................................................            (14,134)                   --
    Payments on other long-term debt ...........................................             (6,765)               (1,896)
    Collection on Notes Receivable for stock....................................                 --                 5,725
      Proceeds from issuance of common stock ...................................                 74               319,584
                                                                                      -------------         -------------
            Net cash (used in) provided by financing activities ................            (20,825)              760,684
                                                                                      --------------        -------------
            Net increase in cash ...............................................             41,651                12,976
Cash and cash equivalents at beginning of period ...............................             10,437                42,979
                                                                                      -------------         -------------
Cash and cash equivalents at the end of period..................................      $      52,088         $      55,955
                                                                                      =============         =============
Supplemental schedule of non-cash investing and financing activities:
    Stock issued for acquisition of subsidiary .................................      $          --         $      70,384
                                                                                      =============         =============
    Preferred stock converted to common stock ..................................      $      54,170         $      55,153
                                                                                      =============         =============
    Preferred dividends paid in common stock ...................................      $       2,995         $      10,311
                                                                                      =============         =============
    Accretion of preferred stock to redemption value ...........................      $          --         $       5,637
                                                                                      =============         ==============
    Options and warrants issued for acquisition of subsidiary ..................      $          --         $       5,171
                                                                                      =============         =============
    Shares issued in exchange of Primary Network Senior Notes ..................      $          --         $       2,625
                                                                                      =============         =============
    Preferred stock dividends accrued ..........................................      $       7,795         $      12,275
                                                                                      =============         =============
Other disclosures:
    Cash paid for interest, net of amounts capitalized .........................      $      28,025         $       5,816
                                                                                      =============         =============
</TABLE>

See accompanying condensed notes to unaudited interim consolidated financial
statements.
<PAGE>
                           MPOWER COMMUNICATIONS CORP.
     CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

         The accompanying unaudited interim consolidated financial statements of
Mpower Communications Corp. (the "Company"), a Nevada corporation, include the
accounts of the Company and its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated.

         On June 28, 2001, the Company became the wholly-owned subsidiary of
Mpower Holding Corporation ("Holding") pursuant to a merger agreement approved
by the Company's stockholders. All of the outstanding shares of the Company's
common stock, 10% Series C Convertible Preferred Stock and 7.25% Series D
Convertible Preferred Stock were automatically converted into shares of
Holding's common stock, 10% Series C Convertible Preferred Stock and 7.25%
Series D Convertible Preferred Stock, respectively. The common stock and 7.25%
Series D Convertible Preferred Stock of Holding are listed on the Nasdaq
national market system under the same symbols as the common stock and 7.25%
Series D Convertible Preferred Stock of the Company prior to the merger.

         These consolidated financial statements reflect all normal recurring
adjustments, which management believes are necessary to present fairly the
financial position, results of operations, and cash flows for the Company for
the respective periods presented. Certain information and footnote disclosures
normally included in the annual consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission for Form 10-Q. These unaudited interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K filed with the Securities and Exchange Commission.

         The consolidated balance sheet at December 31, 2000 was derived from
the audited consolidated financial statements, but does not include all
disclosures required under generally accepted accounting principles.

         Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

         Certain reclassifications, which have no effect on net loss, have been
made in the prior period financial statements to conform to the current
presentation.
<PAGE>
(2) PROPERTY AND EQUIPMENT

         Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                   SEPTEMBER 30,         DECEMBER 31,
                                                                                       2001                  2000
                                                                                       ----                  ----
                                                                                    (UNAUDITED)
<S>                                                                               <C>                 <C>
Building and property .........................................................   $         5,658     $          5,640
Switching equipment ...........................................................           316,502              323,355
Leasehold improvements ........................................................            40,183               61,147
Computer hardware and software ................................................            25,502               17,800
Office equipment and vehicles .................................................            26,232               25,603
                                                                                  ---------------     ----------------
                                                                                          414,077              433,545
Less accumulated depreciation .................................................          (106,907)             (70,342)
                                                                                  ----------------    -----------------
                                                                                          307,170              363,203
Assets held for future use ....................................................            58,470                   --
Construction in progress.......................................................            28,755              119,062
                                                                                  ---------------     ----------------
Net property and equipment.....................................................   $       394,395     $        482,265
                                                                                  ===============     ================
</TABLE>
     As further discussed in Note 8 "Network Optimization Cost", the assets held
for future use are directly related to the recovery of switch and collocation
equipment from markets cancelled or exited during 2001 which will be redeployed
throughout the Company's remaining operating markets.

(3) DIVESTITURE

    Beginning in February 2001, the Company entered into a series of agreements
to sell its dial-up ISP customer base. The Company acquired this customer base
through its acquisition of Primary Network in June of 2000. The Company received
proceeds from these sales of approximately $1.6 million during the nine months
ended September 30, 2001.

(4) EMPLOYMENT AGREEMENT

     In August 2001, the Company and its Chief Executive Officer (the "CEO")
amended his Employment/Stock Repurchase Agreement dated October 13, 1999 (the
"Employment Agreement"). The terms of the Employment Agreement provided a $1.0
million signing bonus to the CEO, which was subject to repayment if the CEO's
employment was terminated before three years of employment under certain
circumstances. Pursuant to the terms of the amended Employment Agreement, the
Company agreed that the signing bonus shall become immediately fully vested such
that the CEO would not be required to repay the bonus or any portion thereof.
Upon acceptance of the amended Employment Agreement, the Company recognized the
remaining unamortized portion of the signing bonus as a component of general and
administrative expenses within the Consolidated Statement of Operations.

(5) SENIOR NOTES

    In June 2001, the Company repurchased $48.9 million in face value of its
2010 senior notes for $15.5 million in cash, which was inclusive of $1.4 million
of interest payments, in a series of transactions in the open market. The
Company recognized an extraordinary gain of $32.3 million on these transactions.

     In July 2001, pursuant to the terms of the 13% Senior Notes due 2010, as a
result of Holding becoming the publicly held parent holding company of the
Company and after satisfying other preconditions set forth in the indenture
governing the notes, the Company was released from its obligations on its 13%
Senior Notes due 2010. As a result, Holding is now the sole obligor on the 13%
Senior Notes due 2010. In addition, pursuant to a supplemental indenture,
Holding became a co-obligor, along with the Company, on the Company's 13% Senior
Notes due 2004.
<PAGE>
(6) REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

    Beginning in January 2001, the Company entered into privately negotiated
conversions of its 7.25% Series D Convertible Redeemable Preferred Stock
("Series D Preferred Stock") into shares of the Company's common stock. As of
September 30, 2001, the Company had converted 1,125,612 preferred shares into
2,198,684 common shares, primarily resulting from these agreements.

    The Company recognized an additional $6.6 million charge to stockholders'
equity associated with the inducement feature included in the conversion of
preferred shares into common stock, calculated as the excess of the fair value
of the common stock issued in the exchange over the fair value of the common
stock issuable under the current conversion terms for the Series D Preferred
Stock. This amount has been recognized in the Consolidated Balance Sheet as an
increase in additional paid-in capital, with an offsetting decrease in
additional paid-in capital, and has been included as a part of preferred stock
dividends within the Consolidated Statement of Operations.

    On January 24, 2001, the Company's Board of Directors declared a quarterly
dividend of $0.91 per share on the Company's Series D Preferred Stock payable in
shares of the Company's common stock on February 15, 2001 to Series D Preferred
stockholders of record on January 31, 2001. The number of shares of common stock
issued on February 15, 2001 was 427,070.

     In April 2001, the Company announced deferrals of the quarterly dividend on
the Company's Series D Preferred Stock. Dividends will continue to accrue on the
liquidation amount of $50.00 per share at the rate of 7.25% per year and will be
payable, at the option of the Company, in cash or in shares of the Company's
common stock.

     As discussed in Note 1 "Principles of Consolidation and Basis of
Presentation," in June 2001, all of the outstanding shares of the Company's
common stock, 10% Series C Convertible Preferred Stock and 7.25% Series D
Convertible Preferred Stock were automatically converted into shares of
Holding's common stock, 10% Series C Convertible Preferred Stock and 7.25%
Series D Convertible Preferred Stock, respectively.

(7) COMMITMENTS AND CONTINGENT LIABILITIES

     In the ordinary course of business, the Company enters into purchase
agreements with its equipment vendors and collocation site providers. As of
September 30, 2001 and December 31, 2000, the Company had total unfulfilled
commitments with equipment vendors of approximately $9.4 million and $23.1
million, respectively, and with collocation site providers of approximately $7.0
million and $12.4 million, respectively, for the build-out of collocation sites.
The Company also has various agreements with certain carriers for transport,
long distance and other network services. At September 30, 2001, the Company's
minimum commitment under these agreements is $53.6 million, which expire through
July 2005.

     The Company is party to various legal proceedings, most of which relate to
routine matters incidental to its business. However, on September 20, 2000, a
class action lawsuit was commenced against the Company and its CEO in federal
court for the Western District of New York. On March 6, 2001, an amended
consolidated class action complaint was served in that action, seeking to
recover damages for alleged violations by the Company of the Securities Exchange
Act of 1934 and rule 10(b)-5 thereunder (the "Exchange Act") and section 11 of
the Securities Act of 1933. The amended consolidated complaint also seeks to
recover damages against several of the Company's officers and members of its
board of directors in addition to the CEO. The amended consolidated complaint
also names various underwriters as defendants in the action.

     The Company and the individual defendant officers and board members have
denied any wrongdoing and will vigorously contest the class action suit. Any
judgment that is significantly greater than the Company's available insurance
coverage could have a material adverse effect on the Company's results of
operations and/or financial condition.

    The Company and the CEO have brought a motion to dismiss the amended
consolidated class action complaint. That motion is scheduled to be argued
before the Court in December 2001. All discovery and other activity has been
stayed pending the resolution of the motion by defendants.
<PAGE>
     On August 2, 2001 Fir Tree Partners, the owner of approximately $70 million
of the Company's 13% Senior Notes due 2010, commenced an action in New York
State Supreme Court, New York County, seeking declaratory relief, but no
compensatory damages of any nature. Fir Tree requested that the Court declare
(i) that Mpower is insolvent or in the vicinity of insolvency; and (ii) that
Mpower and its directors owe a fiduciary duty to Mpower creditors which stands
in preference to any duties owed to Mpower shareholders.

     The Company and the individual directors named in the lawsuit believed the
lawsuit was groundless, denied any wrongdoing and contested the declaratory
judgment action commenced by Fir Tree. The Company and individual directors
brought a motion to dismiss the complaint, which was argued on November 1, 2001.
On November 8, 2001, the Court granted the Company's motion and dismissed the
lawsuit.

     Except as set forth above, management does not believe that the outcome of
any legal proceedings will have a material adverse effect on the Company's
financial position or results of operations.

     In September 2001, the Company committed to pay up to $4.5 million during
the period through December 31, 2002 for employee retention and incentive
compensation bonuses, subject to the terms of the agreements. In addition, the
Company committed to pay up to $7.5 million in severance payments to certain
employees in the event they are terminated involuntarily, without cause or
voluntarily, with good cause. As of November 2001, the Company has established a
trust, which is funded at a level sufficient to cover the maximum commitment for
retention, incentive compensation and severance payments.

(8) NETWORK OPTIMIZATION COST

     In September 2000, the Company announced the cancellation of 339
collocations and the delay of entrance into twelve markets in the Northeast and
Northwest. The Company recognized a $12.0 million network optimization charge in
the third quarter of 2000 associated with commitments made for collocation
sites. As of September 30, 2001, the Company has incurred $9.2 million of these
charges and has $2.8 million of remaining reserves classified as Accrued Network
Optimization Cost in the Consolidated Balance Sheet.

     In February 2001, the Company announced the cancellation of its plans to
enter twelve markets in the Northeast and Northwest, representing more than 350
collocations. The Company recognized a network optimization charge of $24.0
million in the first quarter of 2001 associated with the commitments made for
switch sites and collocations for these markets. As of September 30, 2001, the
Company has incurred $23.9 million of these charges and has $0.1 million of
remaining reserves classified as Accrued Network Optimization Cost in the
Consolidated Balance Sheet.

     In May 2001, the Company announced plans to close down operations in twelve
of its recently opened markets, representing more than 180 collocations and
recognized a network optimization charge of $209.1 million in the second quarter
of 2001. The Company exited these markets in the third quarter of 2001. Included
in the charge was $126.8 million for the goodwill and customer base associated
with the Primary Network business, which was eliminated as a result of the
market closings, $65.1 million for property and equipment including collocations
and switch sites and $17.2 million for other costs associated with exiting these
markets. As of September 30, 2001, the Company has incurred $54.5 million and
$4.5 million of charges related to property and equipment and other costs,
respectively, and has $23.3 million of remaining reserves, of which $17.2
million is classified as Accrued Network Optimization Cost and $6.1 is
classified within assets held for future use in Property and Equipment.

     These charges represent amounts paid or estimated to be paid. Actual
payments will be based on ultimate settlements with various carriers, net of any
costs that may be recoverable through sales of the related assets, and the
Company's ability to enter into sublease agreements for its switch site and
sales office leases.

    The Company has switch site and sales office lease commitments related to
these markets which expire from 2002 through 2010. In connection with these
leases, the network optimization charges reflect up to the first twenty-four
months' lease
<PAGE>
payment commitments as the Company estimates that it will be
successful in entering into sublease agreements or terminating the remaining
lease commitments within the period estimated.

(9) RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141). The standard is effective for acquisitions initiated after June 30, 2001.
This standard eliminates the pooling-of-interests method of accounting for
business combinations and requires the purchase method of accounting for
business combinations. The adoption of SFAS No. 141 has not had a material
effect on the financial results of the Company.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). The Company will adopt this standard on January 1, 2002.
Upon adoption of SFAS No. 142, goodwill and other acquired intangible assets
with indefinite lives will no longer be amortized, but will be subject to at
least an annual assessment for impairment through the application of a
fair-value-based test. Management does not expect the adoption of SFAS No. 142
to have a material effect on the financial results of the Company.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). The Company will adopt this standard on January 1,
2003. Upon adoption of SFAS No. 143, the fair value of a liability for an asset
retirement obligation will be recognized in the period in which it is incurred.
The associated retirement costs will be capitalized as part of the carrying
amount of the long-lived asset and subsequently allocated to expense over the
asset's useful life. Management does not expect the adoption of SFAS No. 143 to
have a material effect on the financial results of the Company.

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). The Company will
adopt this standard on January 1, 2002. This standard addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
Management does not expect the adoption of SFAS No. 144 to have a material
effect on the financial results of the Company.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

OVERVIEW

         Mpower Communications Corp. is a facilities-based broadband
communications company offering a full range of data, telephony, Internet access
and web hosting services primarily to small and medium size business customers.
We currently have 603 incumbent carrier central office collocation sites and
currently deliver our services in 28 metropolitan areas in 9 states. As of
September 30, 2001, we had 380,318 customer lines sold, of which 359,236 lines
were in service.

         On June 28, 2001, we became the wholly-owned subsidiary of Mpower
Holding Corporation ("Holding") pursuant to a merger agreement approved by our
stockholders. All of our outstanding shares of common stock, 10% Series C
Convertible Preferred Stock and 7.25% Series D Convertible Preferred Stock were
automatically converted into shares of Holding's common stock, 10% Series C
Convertible Preferred Stock and 7.25% Series D Convertible Preferred Stock,
respectively. The common stock and 7.25% Series D Convertible Preferred Stock of
Holding are listed on the Nasdaq national market system under the same symbols
as our common stock and 7.25% Series D Convertible Preferred Stock prior to the
merger.

         Our revenues are generated from sales of communications services
consisting primarily of local phone services, long distance services, switched
access billings and non-recurring charges, principally installation charges.
Local, long distance and data services are generally provided and billed as a
bundled offering under which customers pay a fixed amount for a package of
combined local, long distance and data services. As a result, the portion of our
revenues attributable to each kind of service is not identifiable and,
therefore, we do not record or report these amounts separately.

         Our principal recurring operating expenses consist of cost of operating
revenues, selling expenses, general and administrative expenses, and
depreciation and amortization expense. Cost of operating revenues consists
primarily of access charges, line installation expenses, transport expenses,
long distance expenses and lease expenses for our switch sites and our
collocation sites. Selling expenses consist primarily of salaries and related
personnel costs and facilities costs. General and administrative expenses
consist primarily of salaries and related personnel costs, provision for bad
debts, professional fees and facilities expenses. Depreciation and amortization
expense includes depreciation of switching and collocation equipment as well as
general property and equipment and the amortization of goodwill and other
intangibles.

         Building and expanding our network and business in our existing markets
has required and will continue to require us to incur significant capital
expenditures. As part of our network growth strategy, we purchased and installed
host switches in each of our markets while leasing the means of transporting
voice and data traffic from these switches to our customers' telephones or other
equipment. We believe this strategy, referred to as a "smart build" strategy,
while initially increasing our level of capital expenditures and operating
losses, will enhance our long-term financial performance in comparison to a
resale strategy.

         We have experienced operating losses and generated negative cash flow
from operations since inception and expect to continue to generate negative cash
flow from operations for the foreseeable future while we continue to expand our
existing network and develop our product offerings and customer base. During
this period, we expect to incur significant operating losses as many of the
fixed costs of providing service in a market are incurred before significant
revenue can be generated from that market. In addition, we expect to incur
significant selling costs to build our base of customers in our markets. We
cannot assure investors that our revenue or customer base will continue to grow
or that we will be able to achieve or sustain positive cash flow from
operations.
<PAGE>
RESULTS OF OPERATIONS

         Quarterly Comparison - September 30, 2001 vs. September 30, 2000

         Total operating revenues increased to $49.8 million for the quarter
ended September 30, 2001 as compared to $45.9 million for the quarter ended
September 30, 2000. The 8.5% increase was primarily the result of the increase
in the number of lines in service. Total lines in service increased 110,332 (or
44.3%) from 248,905 at September 30, 2000 to 359,236 at September 30, 2001. Our
switched access revenues decreased $4.7 million or 24.4% from the quarter ended
September 30, 2000, as well as decreased as a percentage of our total operating
revenues from 42% to 29% over the same period.

         Cost of operating revenues for the quarter ended September 30, 2001 was
$38.3 million as compared to $37.6 million for the quarter ended September 30,
2000. The 1.9% increase is due to the increased number of lines in service and
installation and operational expenses associated with the expansion of our
network. Gross margin (operating revenues less cost of operating revenues) as a
percentage of operating revenues has increased from 18% to 23% for the quarters
ending September 30, 2000 and 2001, respectively, primarily due to the closing
of higher cost markets, achieving network efficiencies, and spreading certain
fixed network costs over an increased number of lines in service.

         For the quarter ended September 30, 2001, selling expenses totaled
$15.1 million, a 31.7% decrease over the $22.1 million for the quarter ended
September 30, 2000. This decrease reflects the closing of certain operating
markets and cost saving initiatives being implemented. Costs eliminated relate
primarily to sales support and administrative functions. Selling expense
declined despite an increase in quota carrying account managers from 263 at
September 30, 2000 to 432 at September 30, 2001.

         For the quarter ended September 30, 2001, general and administrative
expenses totaled $29.1 million, an 18.3% decrease over the $35.6 million for the
quarter ended September 30, 2000. This decrease reflects the closing of certain
operating markets and cost saving initiatives being implemented.

         For the quarter ended September 30, 2000, we recorded $0.9 million in
stock-based compensation. This expense relates to in-the-money stock options
granted in 1999 and 2000. Pursuant to our merger agreement with Holding, all of
our outstanding stock options were automatically converted into stock options to
purchase shares of Holding's common stock. As a result of the merger, beginning
June 28, 2001 we were no longer required to recognize stock-based compensation.

         In September 2000, we announced a plan to eliminate 339 collocations
and delay our expansion into 12 Northeast and Northwest markets. We recorded a
network optimization charge of $12.0 million that represented estimated amounts
paid, or to be paid, to incumbent local exchange carriers for collocation sites
we decided to not enter. The total actual charges incurred will be based on
ultimate settlements with these carriers.

         For the quarter ended September 30, 2001, depreciation and amortization
was $15.2 million as compared to $17.1 million for the quarter ended September
30, 2000. This 11.1% decrease is a result of the network optimization charge
described above and the write-off of significant goodwill and property in the
first two quarters of 2001.

         Gross interest expense for the quarter ended September 30, 2001 totaled
$3.9 million compared to $18.9 million for the quarter ended September 30, 2000.
Interest capitalized for the quarter ended September 30, 2001 decreased to $0.8
million as compared to $3.9 million for the quarter ended September 30, 2000. In
July 2001, pursuant to the terms of the 13% Senior Notes due 2010, as a result
of Holding becoming our publicly held parent holding company and after
satisfying other preconditions set forth in the indenture governing the notes,
we were released from our obligations on our 13% Senior Notes due 2010. As a
result, Holding is now the sole obligor on the 13% Senior Notes due 2010.
Interest expense recognized for the quarter ended September 30, 2001 relates
only to the 13% Senior Notes due 2004.

         Interest income was $4.4 million during the quarter ended September 30,
2001 compared to $10.7 million for the quarter ended September 30, 2000. This
58.9% decrease results from the usage of cash and investments during 2000 and
2001 to make capital expenditures, pay interest on the senior notes, repurchase
certain senior notes due 2010 and fund operating losses.
<PAGE>
         For the three months ended September 30, 2001 and 2000, we incurred net
losses of $44.6 million and $83.5 million, respectively.

         Effective June 30, 2000, we acquired Primary Network, a provider of
data-centric communications services to business and residential customers in
the Midwest. From July 1, 2000, the results of Primary's operations are included
in our consolidated financial statements. However, as of September 30, 2001, we
had effectively eliminated all operations related to the Primary Network
acquisition.

         Nine Month Period Ended - September 30, 2001 vs. September 30, 2000

         Total operating revenues increased to $146.1 million for the nine
months ended September 30, 2001 as compared to $102.3 million for the nine
months ended September 30, 2000. This 42.8% increase was primarily the result of
the increase in the number of lines in service.

         Cost of operating revenues for the nine months ended September 30, 2001
was $121.0 million as compared to $77.7 million for the nine months ended
September 30, 2000. The 55.7% increase is due to the increased number of lines
in service and installation and operational expenses associated with the
expansion and continued development of our network, offset in part by recent
market reductions and cost saving initiatives.

         For the nine months ended September 30, 2001, selling expenses totaled
$47.9 million, a 6.7% increase over the $44.9 million for the comparable 2000
period. The increase is primarily a result of increased costs attributable to
our expanded geographic footprint and increased sales force and related sales
support personnel, offset in part by recent market reductions and cost saving
initiatives.

         For the nine months ended September 30, 2001, general and
administrative expenses totaled $100.5 million, a 21.4% increase over the $82.8
million for the comparable 2000 period. The increase is primarily a result of
costs attributable to administrative personnel and facilities expenses necessary
to support our expanded network operations and customer base, offset in part by
recent market reductions and cost saving initiatives.

         For the nine months ended September 30, 2001 we recorded $1.9 million
in stock-based compensation compared to $2.4 million for the comparable 2000
period. This expense relates to in-the-money stock options granted in 1999 and
2000. Pursuant to our merger agreement with Holding, all of our outstanding
stock options were automatically converted into stock options to purchase shares
of Holding's common stock. As a result of the merger, beginning June 28, 2001 we
were no longer required to recognize stock-based compensation.

         In May 2001, we announced plans to close down operations in twelve of
our recently opened markets, representing more than 180 collocations. We exited
most of these markets in the third quarter ending September 30, 2001 and
recognized a network optimization charge of $209.1 million in the second quarter
of 2001. Included in the charge was $126.8 million for the goodwill and customer
base associated with the Primary Network business, which was eliminated as a
result of the market closings, $65.1 million for property including collocations
and switch sites, and $17.2 million for other costs associated with exiting
these markets. The total actual charges incurred will be based on ultimate
settlements with various carriers, recovery of costs from any subsequent
subleases, our ability to sell or redeploy network equipment for growth in our
existing network and other factors.

         In February 2001, we announced the cancellation of our plans to enter
12 Northeast and Northwest markets and the related elimination of more than 350
collocations. We recognized a $24.0 million network optimization charge in the
first quarter of 2001 associated with the commitments we made for switch sites
and collocations in these markets. The total actual charges will be based on
ultimate settlements with the incumbent local exchange carriers, recovery of
costs from any subsequent subleases, our ability to sell or redeploy network
equipment for growth in our existing network and other factors.

         In September 2000, we announced a plan to eliminate 339 collocations
and delay our expansion into 12 Northeast and Northwest markets. We recorded a
network optimization charge of $12.0 million that represented estimated amounts
paid, or to
<PAGE>
be paid, to incumbent local exchange carriers for collocation sites
we decided to not enter. The total actual charges incurred will be based on
ultimate settlements with these carriers.

         For the nine months ended September 30, 2001, depreciation and
amortization was $59.2 million as compared to $32.0 million for the nine months
ended September 30, 2000. This 85.0% increase is largely a result of placing
additional assets in service in accordance with the planned build-out of our
network and investment in information technology infrastructure and equipment.

         Gross interest expense for the nine months ended September 30, 2001
totaled $37.4 million compared to $39.7 million for the nine months ended
September 30, 2000. Interest capitalized for the nine months ended September 30,
2001 decreased to $4.6 million as compared to $6.7 million for the nine months
ended September 30, 2000. In July 2001, pursuant to the terms of the 13% Senior
Notes due 2010, as a result of Holding becoming our publicly held parent holding
company and after satisfying other preconditions set forth in the indenture
governing the notes, we were released from our obligations on the 13% Senior
Notes due 2010. As a result, Holding is now the sole obligor on the 13% Senior
Notes due 2010. The decrease in gross interest expense associated with Holding
becoming the sole obligor on the 13% Senior Notes due 2010 is offset in part by
the 13% Senior Notes due 2010 issued in March 2000 and the assumption of $55.6
million in Senior Notes, in addition to capital lease obligations, in connection
with acquisition of Primary Network in June 2000.

         Interest income was $17.8 million during the nine months ended
September 30, 2001 compared to $32.9 million for the nine months ended September
30, 2000. This 45.9% decrease results from the usage of cash and investments
during 2000 and 2001 to make capital expenditures, pay interest on the Senior
Notes, repurchase of certain senior notes due 2010 and fund operating losses.

         During the nine months ended September 30, 2001, we recognized an
extraordinary gain on the early retirement of debt of $32.3 million. During the
nine months ended September 30, 2000, we recognized an extraordinary loss on the
early retirement of debt of $19.5 million. For the nine months ended September
30, 2001 and 2000, we incurred net losses after extraordinary items of $395.5
million and $169.1 million, respectively.

         Effective June 30, 2000, we acquired Primary Network, a provider of
data-centric communications services to business and residential customers in
the Midwest. From July 1, 2000, the results of Primary's operations are included
in our consolidated financial statements. However, as of September 30, 2001, we
had effectively eliminated all operations related to the Primary Network
acquisition.

LIQUIDITY AND CAPITAL RESOURCES

         Our operations require substantial capital investment for the purchase
of communications equipment and the development, installation and support of our
network and the acquisition of additional customers. Capital expenditures were
$12.6 million for the quarter and $48.7 million for the nine months ended
September 30, 2001. We expect we will continue to require substantial amounts of
capital to fund our operating losses, the continued augmentation of our network
in our existing markets and the development of new products and services.

         The substantial capital investment required to initiate services and
fund our operations has exceeded our operating cash flow. This negative cash
flow from operations results from the need to establish and support our network
in anticipation of connecting and servicing revenue-generating customers. We
expect to continue recording negative cash flow from operations for a period of
time. We cannot assure you we will attain break-even cash flow from operations
in subsequent periods.

         We expect that our available cash will be adequate to fund our
operating losses and planned capital expenditures, as currently projected, into
the first quarter of 2003. Management intends to explore a number of
alternatives to improve our funding position, including one or a combination of
the following: bank financing, vendor financing, private equity investments and
cost management initiatives. However, we cannot assure investors that we will be
successful in obtaining additional debt or equity financing or in obtaining a
bank facility on terms acceptable to us, or at all, or that our estimate of
additional funds required is accurate. In addition, the indenture governing
Holding's 13% Senior Notes due 2010 and the terms of Holding's preferred stock
impose restrictions upon our ability to incur additional debt or issue preferred
stock.
<PAGE>
         We continually evaluate our capital requirements plan in light of
developments in the telecommunications industry and market acceptance of our
service offerings. The actual amount and timing of future capital requirements
may differ materially from our estimates as a result of, among other things:

-  the cost of the development and support of our networks in each of our
   markets
-  the extent of price and service competition for telecommunication services in
   our markets
-  the demand for our services
-  regulatory and technological developments
-  our ability to develop, acquire and integrate necessary operating support
   systems

         As such, actual costs and revenues may vary from expected amounts,
possibly to a material degree, and such variations are likely to affect our
future capital requirements.

         Beginning in January 2001, we entered into privately negotiated
conversions of our Series D Preferred Stock into shares of our common stock. As
of September 30, 2001, we had converted 1,125,612 Series D preferred shares into
2,198,684 common shares, primarily resulting from these agreements.

         During June 2001, we repurchased $48.9 million in face value of our
2010 senior unsecured notes for $15.5 million, which was inclusive of $1.4
million of interest payments, in the open market. We recognized a gain of $32.3
million as a result of this repurchase which has been reflected as an
extraordinary item in the Consolidated Statement of Operations.

         In July 2001, pursuant to the terms of the 13% Senior Notes due 2010,
as a result of Holding becoming our publicly held parent holding company and
after satisfying other preconditions set forth in the indenture governing the
notes, we were released from our obligations on the 13% Senior Notes due 2010.
As a result, Holding is now the sole obligor on the 13% Senior Notes due 2010.
In addition, pursuant to a supplemental indenture, Holding became a co-obligor
on our 13% Senior Notes due 2004.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141). The standard is effective for acquisitions initiated after June 30, 2001.
This standard eliminates the pooling-of-interests method of accounting for
business combinations and requires the purchase method of accounting for
business combinations. The adoption of SFAS No. 141 has not had a material
effect on our financial results.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). We will adopt this standard on January 1, 2002. Upon
adoption of SFAS No. 142, goodwill and other acquired intangible assets with
indefinite lives will no longer be amortized, but will be subject to at least an
annual assessment for impairment through the application of a fair-value-based
test. We do not expect the adoption of SFAS No. 142 to have a material effect on
our financial results.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). We will adopt this standard on January 1, 2003.
Upon adoption of SFAS No. 143, the fair value of a liability for an asset
retirement obligation will be recognized in the period in which it is incurred.
The associated retirement costs will be capitalized as part of the carrying
amount of the long-lived asset and subsequently allocated to expense over the
asset's useful life. We do not expect the adoption of SFAS No. 143 to have a
material effect on our financial results.

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). We will adopt this
standard on January 1, 2002. This standard addresses financial accounting and
reporting for the impairment and disposal of long-lived assets. We do not expect
the adoption of SFAS No. 144 to have a material effect on our financial results.

<PAGE>

FORWARD LOOKING STATEMENTS

         Under the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, we caution investors that certain statements contained in
this Report regarding our and/or management's intentions, hopes, beliefs,
expectations or predictions of the future are forward-looking statements. We
wish to caution the reader these forward-looking statements are not historical
facts and are only estimates or predictions. Actual results may differ
materially from those projected as a result of risks and uncertainties
including, but not limited to, projections of future sales, market acceptance of
our product offerings, our ability to secure adequate financing or equity
capital to fund our operations and network expansion, our ability to maintain a
high level of customer service, the performance of our network and equipment,
the cooperation of incumbent local exchange carriers in provisioning lines and
interconnecting our equipment, regulatory rulings and processes, results of
litigation, changes in technology, price competition and other market
conditions.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

         All of our long-term debt bears fixed interest rates. However, the fair
market value of this debt is sensitive to changes in prevailing interest rates.
We run the risk that market rates will decline and the required payments will
exceed those based on the current market rate. We do not use interest rate
derivative instruments to manage our exposure to interest rate changes. Based
upon quoted market prices, the fair value of our long-term debt outstanding is
approximately $20.3 million at September 30, 2001 as compared to a carrying
value of $50.9 million. A hypothetical 1% decrease in interest rates would
increase the fair value of our long-term debt by $0.4 million.
<PAGE>
PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

    We are party to numerous state and federal administrative proceedings. In
these proceedings, we are seeking to define and/or enforce incumbent carrier
performance requirements related to the cost and provisioning of those network
elements we lease; the establishment of customer care and provisioning; the
allocation of subsidies; and collocation costs and procedures. The outcome of
these proceedings will establish the rates and procedures by which we obtain and
provide leased network elements and could have a material effect on our
operating costs.

    In July 2000, we filed a complaint in U.S. District Court District of
Nevada, to enjoin Sprint Corporation from anti-competitive conduct in the Las
Vegas market. In August 2000, we filed a complaint against BellSouth
Telecommunications, Inc. to enjoin BellSouth from anti-competitive conduct in
the Southern Florida area. Both of these disputes have been settled and the
actions dismissed during the third quarter of 2001.

    On September 20, 2000, a class action lawsuit was commenced against us and
our chief executive officer, Rolla P. Huff, in federal court for the Western
District of New York. On March 6, 2001, an amended consolidated class action
complaint was served in that action, seeking to recover damages for alleged
violations by us of the Securities Exchange Act of 1934 and rule 10(b)-5
thereunder (the "Exchange Act") and section 11 of the Securities Act of 1933.
The amended consolidated complaint also seeks to recover damages against several
of our officers and members of our board of directors in addition to Mr. Huff.
The amended consolidated complaint also named various underwriters as defendants
in the action. However, by agreement of the parties and order of the court, the
action against the underwriters has been discontinued, subject to the
plaintiffs' right to rename the underwriters as defendants prior to the
completion of discovery.

    We and the individual defendant officers and board members have denied any
wrongdoing and will vigorously contest the class action suit. Any judgment that
is significantly greater than our available insurance coverage could have a
material adverse effect on our results of operations and/or financial condition.

    We and Mr. Huff have brought a motion to dismiss the amended consolidated
class action complaint. That motion is scheduled to be argued before the Court
in December 2001. All discovery and all other activity has been stayed pending
the resolution of the motion by defendants.

     On August 2, 2001 Fir Tree Partners, the owner of approximately $70 million
of our 13% Senior Notes due 2010, commenced an action in New York State Supreme
Court, New York County, seeking declaratory relief, but no compensatory damages
of any nature. Fir Tree requested that the Court declare (i) that we are
insolvent or in the vicinity of insolvency; and (ii) that we and our directors
owe a fiduciary duty to our creditors which stands in preference to any duties
owed to our shareholders.

     We and the individual directors named in the lawsuit believed the lawsuit
was groundless, denied any wrongdoing and vigorously contested the declaratory
judgment action commenced by Fir Tree. We and the individual directors brought a
motion to dismiss the complaint, which was argued on November 1, 2001. On
November 8, 2001, the Court granted our motion and dismissed the lawsuit.

    From time to time, we engage in other litigation and governmental
proceedings in the ordinary course of our business. We do not believe any other
pending litigation or governmental proceeding will have a material adverse
effect on our results of operations or financial condition.
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K

         (a)      The following exhibits are filed herewith or incorporated by
                  reference as indicated. Exhibit numbers refer to Item 60l of
                  Regulation S-K.

                  2.1      Amended and Restated Agreement and Plan of Merger
                           among Mpower Communications Corp., Mpower Holding
                           Corporation and Mpower Merger Company, Inc., dated as
                           of April 12, 2001.(1)

                  3.1      Amended and Restated Certificate of Incorporation of
                           Mpower Holding Corporation filed on June 27, 2001
                           with the Secretary of State of Delaware.(2)

                  3.2      Amended and Restated By-laws of Mpower Holding
                           Corporation adopted on June 27, 2001.(2)

                  3.3      Articles of Merger Merging Mpower Merger Company,
                           Inc. with and into Mpower Communications Corp.
                           becomes effective on June 28, 2001 with the Secretary
                           of State of Nevada.(2)

                  3.4      Certificate of Restated Articles of Incorporation of
                           Mpower Communications Corp. filed on June 28, 2001
                           with the Secretary of State of Nevada.(2)

                  3.5      Amended and Restated By-laws of Mpower Communications
                           Corp. adopted on June 28, 2001.(2)

                  3.6      Certificate of Merger Merging Mpower Merger Company,
                           Inc. with and into Mpower Communications Corp.
                           becomes effective on June 28, 2001 with Secretary of
                           State of Delaware.(2)

                  4.1      Certificate of Designation of Mpower Holding
                           Corporation's 10% Series C convertible preferred
                           stock filed on June 27, 2001 with the Secretary of
                           State of Delaware.(2)

                  4.2      Certificate of Designation of Mpower Holding
                           Corporation's 7.25% Series D convertible preferred
                           stock filed on June 27, 2001 with the Secretary of
                           State of Delaware.(2)

                  4.3      See the Articles of Incorporation filed as Exhibit
                           3.1 and 3.4 and the By-laws filed as Exhibit 3.2 and
                           3.5.

                  4.4      Indenture dated as of September 29, 1997, between
                           Mpower Communications Corp. and Marine Midland Bank,
                           as Trustee.(3)

                  4.5      Form of Note for Mpower Communications Corp.'s
                           registered 13% Senior Secured Notes due 2004.(3)

                  4.6      Stockholders Agreement dated as of November 26, 1997,
                           among Mpower Communications Corp., Maurice J.
                           Gallagher, Jr. and certain investors identified
                           therein.(3)

                  4.7      Warrant Registration Rights Agreement dated as of
                           September 29, 1997, among Mpower Communications
                           Corp., Bear, Stearns & Co. Inc. and Furman Selz
                           LLC.(3)

                  4.8      Amended and Restated Registration Rights Agreement
                           dated December 29, 1999, among Mpower Communications
                           Corp. and the purchasers of Series B convertible
                           preferred stock and Series C convertible preferred
                           stock.(5)

                  4.9      Amended and Restated Securityholders' Agreement dated
                           December 29, 1999, among Mpower Communications Corp.
                           and the purchasers of Series B convertible preferred
                           stock and Series C convertible preferred stock.(5)

                  4.10     Certificate of Designation of Series E Preferred
                           Stock.(8)

                  4.11     Indenture dated as of March 24, 2000 between Mpower
                           Communications Corp., Mpower Holding Corporation and
                           HSBC Bank USA, as Trustee.(6)

                  4.12     First Supplemental Indenture dated as of May 31, 2000
                           between Mpower Communications Corp. and HSBC Bank USA
                           (successor to Marine Midland Bank), as Trustee.(7)

                  4.13     Registration Rights Agreement dated March 24, 2000 by
                           and between Mpower Communications Corp., Mpower
                           Holding Corporation, Bear Stearns, Salomon Smith
                           Barney, Goldman Sachs, Merrill Lynch and Warburg
                           Dillon.(4)

                  4.14     Form of Exchange Note for Mpower Communications
                           Corp.'s 13% Senior Notes due 2010.(6)

                  4.15     Agreement and Plan of Merger dated as of April 17,
                           2000, among Primary Network Holdings, Inc., Mpower
                           Communications Corp. and Mpower Merger Sub, Inc.(6)

                  4.16     Shareholders Agreement among Mpower Communications
                           Corp., Brian Matthews, Carol Matthews, Charles
                           Wiegert, Welton Brison, Tom Hesterman, Richard
                           Phillips, John Alden, EC Primary LLC, Quantum
                           Emerging Growth Partners, C.V.,
<PAGE>
                           and TGV Partners, dated as of April 17, 2000.(6)

                  4.17     Letter Agreement among Mpower Communications Corp.
                           and EC Primary, L.P., Quantum Emerging Growth
                           Partners C.V., Ravich Revocable Trust of 1989, The
                           Ravich Children Permanent Trust, U.S. Bancorp Libra,
                           and TGV/Primary Investors LLC, dated as of April 17,
                           2000.(6)

                  4.18     Rights Agreement dated as of December 11, 2000
                           between Mpower Communications Corp. and Continental
                           Stock Transfer and Trust Company.(8)

                  4.19     Second Supplemental Indenture dated as of July 12,
                           2001, between Mpower Communications Corp, Mpower
                           Holding Corporation and HSBC Bank USA (formerly known
                           as Marine Midland Bank), as trustee

                  10.1     Amendment To Employment/Stock Repurchase Agreement
                           dated August 1, 2001 between the Company and Rolla P.
                           Huff.

----------
(1)      Incorporated by reference to Mpower Holding Corporation's Registration
         Statement on Form S-4 (File No. 333-56746) previously filed with the
         Commission on April 13, 2001.

(2)      Incorporated by reference to Mpower Holding Corporation's Report on
         Form 8-K (File No. 0-24059) previously filed with the Commission on
         June 28, 2001.

(3)      Incorporated by reference to Mpower Communication Corp.'s Registration
         Statement on Form S-4 (File No. 333-38875) filed with the Commission on
         October 28, 1997, and amendments thereto.

(4)      Incorporated by reference to Mpower Communication Corp.'s Registration
         Statement on Form S-4 (file No. 333-39884) filed with the Commission on
         June 22, 2000, and amendments thereto.

(5)      Incorporated by reference to Mpower Communication Corp.'s Registration
         Statement on Form S-3 (File No. 333-91353) filed with the Commission on
         November 19, 1999, and amendments thereto.

(6)      Incorporated by reference to Mpower Communication Corp.'s Registration
         Statement on Form S-4 (File No. 333-36672) filed with the Commission on
         May 10, 2000, and amendments thereto.

(7)      Incorporated by reference to Mpower Communication Corp.'s Report on
         Form 8-K (File No. 0-24059) filed with the Commission on June 2, 2000.

(8)      Incorporated by reference to Mpower Communication Corp.'s annual report
         on Form 10-K (Commission File No. 0-24059) for the year ended December
         31, 2000.


(b)      There were no reports on Form 8-K filed during the quarter ended
         September 30, 2001.
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                       MPOWER COMMUNICATIONS CORP.

Date:   November 12, 2001              /s/ ROLLA P. HUFF
                                       -----------------------------------------
                                       Rolla P. Huff
                                       President, Chief Executive Officer

Date:   November 12, 2001              /s/ MICHAEL R. DALEY
                                       -----------------------------------------
                                       Michael R. Daley
                                       Executive Vice President, Chief Financial
                                       Officer