MCLD - McLeod USA, Inc. (MCLD)

[full house]

Ghost town no more..things picking up! PS what the hell does this company do anyway? LOL!

[tnew2004]

BIG NEWS TODAY! GLAD I BOUGHT @ .027 YESTERDAY

[Zorkkum]

In Connecticut, a Pension Fund Trial Could Shake Wall Street
By ANDREW ROSS SORKIN

Published: May 27, 2004

A way from the limelight of recent corporate trials, a six-member jury in a Connecticut hamlet will begin hearing a little-publicized case next week that could have far reaching implications for Wall Street buyout firms and the big-money investors and institutions that back them.

On Tuesday morning, the colorful financier Theodore J. Forstmann and his private equity firm, Forstmann Little & Company, will go on trial in Rockville, about 130 miles north of Manhattan, to face accusations from Connecticut's attorney general and state treasurer that the firm improperly invested $125 million of the state's pension fund money and subsequently lost it.

The civil case, one of the first in which a state pension fund has sued such a vaunted buyout shop, could, if the plaintiffs prevail, presage a wave of potentially crippling suits against Forstmann Little and other buyout firms that have lost investors' money. Indeed, state pension funds across the nation, which have invested $40 billion in private equity funds and are increasingly taking activist roles in their investments, could seek the return of billions of dollars in bad investments.

"If Connecticut wins, everybody else will start piling on," said Kenneth A. Lefkowitz, a chairman of the mergers and acquisitions practice group at the law firm of Hughes Hubbard & Reed in New York. "It would open up every one of these kind of funds."

Still, that may not be so easy. Every other investor in Forstmann Little's fund refused to join the suit, and legal experts suggest that the firm may be standing on firmer ground than Connecticut's outspoken attorney general, Richard Blumenthal, and its treasurer, Denise L. Nappier, who some have accused of being more interested in her political career than in the merits of the case.

There has also been speculation about other political motivation: Mr. Blumenthal and Ms. Nappier, who are Democrats, named Mr. Forstmann, a major Republican fund-raiser, in their original suit but did not name Erskine B. Bowles, a former partner who oversaw many of the investments in question but who is a Democrat running for a Senate seat in North Carolina. He was later named in an amended complaint.

Mr. Blumenthal and Ms. Nappier have repeatedly denied any political motivation behind their suit.

The case turns in large part on Forstmann Little's decision to invest in stakes in two telecommunications companies, McLeodUSA Inc. and XO Communications, high-growth, high-risk companies that Connecticut contends did not conform to the conservative investment strategy that it had signed onto when it invested about $200 million with the firm in 1997. Forstmann Little lost about $2 billion of its investors' money on those two deals, writing down its $1.5 billion investment in XO to zero in 2002 before the company filed for bankruptcy, in what could be the largest single loss ever by such a firm. Forstmann Little is still trying to salvage its investment in McLeodUSA.

When Mr. Blumenthal and Ms. Nappier filed their suit in 2002, they used their entire legal arsenal, accusing Forstmann Little of breach of fiduciary responsibilities, breach of contractual obligations and violations of securities law.

"This firm Enronized Connecticut, through its blatant abuse of trust," Mr. Blumenthal said in a statement at the time. "They double-crossed us, pretending to be our partner but really selling us out."

But in an early victory for Forstmann Little, the firm persuaded the judge in the case to throw out two securities law charges, removing the potentially most inflammatory accusations.

The trial is now at its core a contractual dispute, a "he said, she said" fight. Connecticut contends Forstmann Little was not allowed to invest its money in minority stakes in risky ventures. Forstmann Little says the contractual language allowed for a broad array of investments, including the kind being challenged.

"This firm treated Connecticut like a patsy," Mr. Blumenthal said. "It solicited and took our money with promises that it would apply its time-tested, trustworthy investment strategy suitable for our pension funds. Instead, it squandered our funds on unsafe, speculative telecommunications investments that tanked - lousy companies in a losing industry."

But Forstmann Little says the partnership agreements that Connecticut signed allowed for such investments.

"Connecticut and dozens of other sophisticated limited partners signed contracts with Forstmann Little which clearly permit the investments in dispute," said George Sard, a spokesman for Forstmann Little. "Connecticut claims minority investments are not permitted, but the contracts say, over and over again, that such investments are specifically permitted. Connecticut was informed in over 20 written disclosures exactly the nature and details of these investments and also received dividends on multiple occasions."

Forstmann Little also suggested that Connecticut complained only after it began losing money.

"Despite knowing everything it now complains about, Connecticut took the dividends and never raised any issues regarding the propriety of the investments until after the general turndown in the telecom sector," Mr. Sard said. Connecticut has kept the profits generated from another investment Forstmann Little made, in Citadel Communications.

Legal experts say that it is going to be hard for Connecticut to prove that Forstmann Little breached its duty and made investment decisions outside of the parameters of its agreement because the contracts appear to give the firm wide latitude in its investments.

"I find it incredible," said Mr. Lefkowitz, who is not involved in the case. "These pension funds know, if you want to play with the big boys, you have to understand there is risk."

[sdhollen]

Colorado Regulatory Criticism of Qwest Revives Telecom
By Tom McGhee, The Denver Post

Mar. 8--A bill requiring state regulators to investigate the extent of telephone competition in Colorado was all but dead, until a report critical of Qwest revived it.

That report by Public Utilities Commission staff claims Qwest Communications made secret agreements with certain competitors and raises questions about whether the market really is open to competition.

Qwest met Federal Communications Commission requirements to open its network as part of its quest to offer long distance in its 14-state service region.

But critics, including telecom titans AT&T Corp. and MCI, say the network still isn't truly open.

Qwest's senior vice president, Steve Davis, said there is no reason for state lawmakers to consider the PUC findings when debating the bill. "Everything in this report was known at the FCC and commissions at the time they approved our long-distance entry," he said.

The bill that resurrected their findings will be heard by the House today, said its sponsor, Rep. Mike May, R-Parker.

Qwest and its competitors are wrangling for market share, and the local phone company is losing customers at a rapid clip, mostly to wireless and cable companies.

The company recently reported that total access lines in service throughout its service region last year fell to 16.21 million from 17.01 million in 2002. "There is plenty of competition," Guzman and Co. analyst Patrick Comack said.

But traditional wire-line competitors -- companies such as McLeodUSA and Boulder-based CCOM -- account for very little of the customer loss.

Davis says that is because those companies have not invested in Colorado, opting instead to piggyback on Qwest's network.

Competitors counter that they pay lease rates approved by regulators and that they bear the cost of any upgrades Qwest makes to service them.

Federal regulations require regional Bells such as Qwest to lease access on their phone lines and switches to competitors.

The rationale is that it would be too costly and would take too long to build an alternate network, which would further delay competition.

So when a customer wants to switch phone-service providers, Qwest technicians at the company's central offices disconnect and reconnect a few wires in a process that in theory takes about six minutes.

Order processing adds time to the process, so it can take several days to complete the switch, Qwest says.

But AT&T spokeswoman Kieren Porter calls that time frame a "best-case scenario." Many customers face delays of two weeks and it isn't unusual for someone to give up in the midst of the process to avoid frustration, she said.

Fred Chernow, chief executive of small carrier CCOM, said there are cases where Qwest takes longer than necessary to switch customers who are leasing expensive high-speed access lines. But he disagrees with Porter's conclusion that the company delays switching residential and small-business customers.

Most residential line switches are accomplished within three days, he said.

"This is not the problem that AT&T is painting," Chernow said. AT&T asked CCOM to support May's bill, but Chernow declined.

"We try to look at Qwest and say, 'This is our community, it can be either hostile or friendly.' We want to keep it friendly," he said.

May's legislation ran into resistance from legislators who believe it could cost Qwest too much money and who were concerned that it represented one more skirmish in an ongoing telecommunications battle between Qwest and its rivals, said Rep. Jack Pommer, D-Boulder.

Some were also put off by the confusion inherent in the web of regulations that surround telephone service, he said.

"This bill is really complicated (when) you get into technical issues. Most people look at it and say, 'Good grief, what is this about?' " Pommer said.

Qwest claims the proposed bill would result in the company's being forced to spend $1 billion or more to upgrade its network so customers who wished to move to another carrier could make the move almost instantaneously.

The bill's proponents, which include Colorado Public Interest Research Group, AARP and other organizations that represent consumers, say the legislation would only require the Public Utilities Commission to recommend changes needed to further open the market.

The company's competitors would have to help pay the cost of any necessary changes that they would benefit from, said Rex Wilmouth, CoPIRG state director.

May said the bill still faces a fight.

But reluctance to hear the legislation faded when PUC staff suggested that by giving breaks to some smaller rivals for access to Qwest's network, Qwest may have hidden from regulators the extent to which it bars competitors entry to the market.

State regulators recommended the Federal Communications Commission allow Qwest to provide interstate long-distance service -- something they might not have done had they known about the deals, the report said.

Qwest's Davis said there is no reason for lawmakers to consider the staff findings when debating the bill.

That's because they were known to the FCC and commissions when they approved Qwest's entry into long-distance, he said.

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To see more of The Denver Post, or to subscribe to the newspaper, go to http://www.denverpost.com

(c) 2004, The Denver Post. Distributed by Knight Ridder/Tribune Business News. Q, T, MCWEQ, MCLD

[sdhollen]

Sports-Related Persons Added to Board of Cedar Rapids, Iowa-Based McLeodUSA
By George C. Ford, The Gazette, Cedar Rapids, Iowa

Feb. 26--CEDAR RAPIDS, Iowa -- Former Dallas Cowboys quarterback Roger Staubach and David Checketts, the former president of Madison Square Garden, have been elected to the McLeodUSA Inc. board of directors.

Staubach is chairman and chief executive officer of The Staubach Co., a global, full-service real estate advisory firm. Checketts is chairman of Sports Capital Partners, a consulting and investment capital firm.

Staubach and Checketts join two other sports-related executives on the 17-member board of directors of the Cedar Rapids-based telecommunications provider.

Dan Snyder is the owner and chairman of the board of The Washington Redskins. Peter Ueberroth, former baseball commissioner and U.S. Olympics president, is the managing director of The Contrarian Group and owner and co-chairman of Pebble Beach Co.

Chris A. Davis, McLeodUSA chairwoman and CEO, said the company is pleased to have Checketts and Staubach join its board.

"This is another example of Ted Forstmann's commitment to attracting world-class leadership to the McLeodUSA board," Davis said. "Both Dave and Roger have extensive business experience and broad executive relationships, which will be valuable to McLeodUSA as we continue to execute on our focused business strategy to provide a world-class customer experience and profitably grow revenue in our 25-state footprint."

Forstmann is chairman of McLeodUSA's executive committee and senior partner of Forstmann Little & Co., majority owner of McLeodUSA. McLeodUSA's board includes 11 current or former chief executives.

McLeodUSA recently signed a two-year promotional agreement with Vijay Singh, the top PGA money winner in 2003.

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To see more of The Gazette, or to subscribe to the newspaper, go to http://www.gazetteonline.com

(c) 2004, The Gazette, Cedar Rapids, Iowa. Distributed by Knight Ridder/Tribune Business News. MCLD

[sdhollen]

McLeodUSA Board Elects Two New Directors

CEDAR RAPIDS, Iowa, Feb 25, 2004 (BUSINESS WIRE) -- McLeodUSA Incorporated (Nasdaq:MCLD):
-- David W. Checketts, Chairman, Sports Capital Partners
-- Roger T. Staubach, Chairman & Chief Executive Officer, The Staubach Company

McLeodUSA Incorporated (Nasdaq:MCLD), one of the nation's largest independent, competitive telecommunications services providers, today announced that it has elected David W. Checketts, Chairman of Sports Capital Partners and former President and CEO of Madison Square Garden, and Roger T. Staubach, Chairman and CEO of The Staubach Company, to its Board of Directors.

Chris A. Davis, Chairman and CEO of McLeodUSA, said, "We are very pleased to have Dave Checketts and Roger Staubach join our Board of Directors. This is another example of Ted Forstmann's commitment to attracting world-class leadership to the McLeodUSA Board. Both Dave and Roger have extensive business experience and broad executive relationships, which will be valuable to McLeodUSA as we continue to execute on our focused business strategy to provide a world-class customer experience and profitably grow revenue in our 25-state footprint."

McLeodUSA's 17-member Board now includes 11 current or former chief executives. In addition to Ted Forstmann, who is Chairman of the Executive Committee and Senior Partner of Forstmann Little & Co., the Board includes the following non-management Directors: Jeff Benjamin, Senior Advisor, Apollo Management; Ed Breen, Chairman and Chief Executive Officer of Tyco International Ltd.; Tom Collins, Of Counsel at Shuttleworth & Ingersoll, P.C.; Dale Frey, Former Chairman and Chief Executive Officer of General Electric Investment Corporation and Vice President and Treasurer of General Electric; Jim Hoffman, Executive Vice President of Alliant Energy Corporation; Jeong H. Kim, Chief Executive Officer of Yurie Holdings and former President of the Optical Networking Group at Lucent Technologies; Tom Lister, General Partner of Forstmann Little & Co.; Dan Snyder, Owner and Chairman of the Board of The Washington Redskins; Farid Suleman, Chairman and Chief Executive Officer of Citadel Communications; Peter Ueberroth, Managing Director of The Contrarian Group, Inc. and Owner and Co-Chairman of Pebble Beach Company; and Juan Villalonga, former Chairman and Chief Executive Officer of Telefonica Group.

Biography of New Directors

David W. Checketts is currently Chairman of Sports Capital Partners, a consulting and investment capital firm. From 1994 to 2001, Mr. Checketts was President and Chief Executive Officer of Madison Square Garden. From March 1991 to September 1994, Mr. Checketts was the President of the New York Knicks basketball team. From September 1990 to March 1991, he was Vice President of Development for the National Basketball Association. From 1984 to 1990, Mr. Checketts was President of the Utah Jazz basketball team. Dave serves on the board of directors of Citadel Broadcasting and JetBlue Airways Corporation.

Roger T. Staubach is Chairman and Chief Executive Officer of The Staubach Company, a global, full-service real estate advisory firm that delivers cost effective solutions for users of office, industrial and retail space. A 1965 graduate of the United States Naval Academy with a bachelor of science in engineering, Roger spent four years in the Navy as an officer. He joined the Dallas Cowboys professional football team as a quarterback in 1969 and launched his real estate career while playing football. Roger currently serves on the boards of directors of AMR Corporation, the parent of American Airlines, and Brinker International.

About McLeodUSA

McLeodUSA provides integrated communications services, including local services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company is a facilities-based telecommunications provider with, as of December 31, 2003, 38 ATM switches, 44 voice switches, 663 collocations, 435 DSLAMs and 3,119 employees. On April 16, 2002, Forstmann Little & Co. became a 58% shareholder in the Company. Visit the Company's website at mcleodusa.com.

Some of the statements in this press release include statements about our future expectations. Statements that are not historical facts are "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. Such statements may include projections of financial and operational results and goals, including revenue, EBITDA, Adjusted EBITDA, profitability, savings and cash. These forward-looking statements are subject to known as well as unknown risks and uncertainties that may cause actual results to differ materially from our expectations. Our expectations are based on various factors and assumptions and reflect only our predictions. Factors that could cause actual results to differ materially from the forward-looking statement include technological, regulatory, public policy or other developments in our industry, availability and adequacy of capital resources, current and future economic conditions, the existence of strategic alliances, our ability to generate cash, our ability to implement process and network improvements, our ability to attract and retain customers, our ability to migrate traffic to appropriate platforms and changes in the competitive climate in which we operate. These and other risks are described in more detail in our most recent Annual Report on Form 10-K and Form 10-K/A both filed with the SEC. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

SOURCE: McLeodUSA Incorporated

McLeodUSA Incorporated, Cedar Rapids
Investor Contact:
Bryce Nemitz, 319-790-7800
or
Press Contact:
Bruce Tiemann, 319-790-7800

[jmhollen]

TheSUBWAY.com Announces Investment Opinion on Kanakaris Wireless, Natural Health Trends Corp., PACEL Corp., McLeodUSA Incorporated and Constellation 3D, Inc.

WESTON, Fla., Jul 17, 2001 (BUSINESS WIRE) -- TheSUBWAY.com releases the
following investment opinions on Kanakaris Wireless (OTCBB: KKRS), Natural Health
Trends Corp. (OTCBB: NHTC), PACEL Corp. (OTCBB: PLRP), McLeodUSA Incorporated
(Nasdaq: MCLD) and Constellation 3D, Inc. (Nasdaq: CDDD).

McLeodUSA Incorporated (Nasdaq: MCLD) Previous Close: Down 2% to $2.84 on vol.
6,493,800 Shares: ACCUMULATE

McLeodUSA Incorporated (Nasdaq: MCLD), the nation's largest independent
competitive local exchange carrier, announced it has declared a regular
quarterly dividend on its 6.75 percent Series A Cumulative Convertible Preferred
Stock. The dividend is payable in shares of the Company's Class A Common Stock
at a rate of $4.21875 per share of Series A Preferred Stock owned, with
fractional shares to be paid in cash.

McLeodUSA provides integrated communications services, including local services,
in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company also
provides data and voice services in all 50 states. McLeodUSA is a
facilities-based telecommunications provider with, as of March 31, 2001, 396 ATM
switches, 50 voice switches, nearly 30,000 route miles of fiber optic network
and 11,300 employees.

The Company's fiber optic network is capable of transmitting integrated
next-generation data, Internet, video and voice services, reaching 800 cities
and approximately 90% of the U.S. population. In the next 12 months, McLeodUSA
plans to distribute 34 million telephone directories in 26 states, serving a
population of 56 million.

[jmhollen]

McLeodUSA Incorporated Announces Quarterly Dividend On Series A Preferred Stock

CEDAR RAPIDS, Iowa, Jul 16, 2001 (BUSINESS WIRE) -- McLeodUSA Incorporated
(Nasdaq: MCLD), the nation's largest independent competitive local exchange
carrier, today announced it has declared a regular quarterly dividend on its
6.75 percent Series A Cumulative Convertible Preferred Stock.

The dividend is payable in shares of the Company's Class A Common Stock at a
rate of $4.21875 per share of Series A Preferred Stock owned, with fractional
shares to be paid in cash. The shares of Class A Common Stock to be issued will
be valued based on the average daily closing price of the Class A Common Stock
for the five consecutive trading days ending on, and including August 9, 2001.
The dividend is payable on August 15, 2001 to stockholders of record as of July
31, 2001.


 About McLeodUSA

McLeodUSA provides integrated communications services, including local services,
in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company also
provides data and voice services in all 50 states. McLeodUSA is a
facilities-based telecommunications provider with, as of March 31, 2001, 396 ATM
switches, 50 voice switches, nearly 30,000 route miles of fiber optic network
and 11,300 employees. The Company's fiber optic network is capable of
transmitting integrated next-generation data, Internet, video and voice
services, reaching 800 cities and approximately 90% of the U.S. population. In
the next 12 months, McLeodUSA plans to distribute 34 million telephone
directories in 26 states, serving a population of 56 million. McLeodUSA is a
Nasdaq-100 company traded under the symbol MCLD. Visit the Company's web site at
www.mcleodusa.com.


CONTACT: McLeodUSA, Cedar Rapids
 Bryce E. Nemitz, 319/790-7800
 Fax: [phone]
 [e-mail]

[jmhollen]

McLeodUSA Chairman & Co-CEO Clark McLeod Attends CLEC CEO Summit at FCC

CEDAR RAPIDS, Iowa--(BUSINESS WIRE)--July 10, 2001--McLeodUSA Incorporated (Nasdaq:MCLD), the nation's largest independent competitive local exchange carrier, today announced that Chairman and Co-CEO Clark McLeod attended the CEO Summit for Competitive Local Exchange Carriers (CLECs) hosted by FCC Chairman Michael K. Powell on Tuesday, July 10, 2001 in Washington, D.C.

Describing the Summit, attended by CEOs of 12 competitive telecommunications providers, Mr. McLeod stated, "This beneficial exchange of information was devoted to the topic of ensuring that competitive local phone providers are able to compete on a level playing field with incumbent providers who have had monopoly control over the critical "last mile" connection for over a century. Chairman Powell is aware of the many roadblocks that have been artificially placed in the path of true competition and seems dedicated to ensuring that the promise of the 1996 Telecommunications Act becomes reality." McLeod stated, "I thank Chairman Powell for his initiative in hosting a Summit on this important topic. I appreciate the invitation to participate and applaud the Chairman's commitment to ensuring competitive choices for consumers."

About McLeodUSA McLeodUSA provides integrated communications services, including local services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company also provides data and voice services in all 50 states. McLeodUSA is a facilities-based telecommunications provider with, as of March 31, 2001, 396 ATM switches, 50 voice switches, nearly 30,000 route miles of fiber optic network and 11,300 employees. The Company's fiber optic network is capable of transmitting integrated next-generation data, Internet, video and voice services, reaching 800 cities and approximately 90% of the U.S. population. In the next 12 months, McLeodUSA plans to distribute 34 million telephone directories in 26 states, serving a population of 56 million.

McLeodUSA is a Nasdaq-100 company traded under the symbol MCLD. Visit the Company's web site at www.mcleodusa.com. --30--dm/ms* CONTACT: McLeodUSA Incorporated, Cedar Rapids Investor Contact: Bryce E. Nemitz Press Contact: Bruce A. Tiemann mcleodusa:[e-mail] Phone: [phone] Fax: [phone]

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[jmhollen]

FCC's Powell meets with upstart local phone carriers

WASHINGTON, July 10 — Federal Communications Commission Chairman Michael Powell met on Tuesday with heads of smaller local telephone companies, many of whom are struggling financially, to discuss the problems and challenges facing the industry.

Chief executives from WinStar Communications (NASDAQ:WCII), XO Communications (NASDAQ:XOXO), McLeodUSA (NASDAQ:MCLD), Covad Communications (NASDAQ:COVD), Allegiance Telecom (NASDAQ:ALGX) were among the dozen who attended the meeting, the FCC said.

"This was an outstanding opportunity for a frank dialogue on various issues surrounding the central question of what needs to be done for CLECs to fulfill the goal of the Telecommunications Act of 1996 and bring effective competition to local phone markets," Powell said in a statement.

Many competitive local carriers have struggled to survive against dominant local telephone companies like Verizon Communications (NYSE:VZ), BellSouth Corp. (NYSE:BLS), Qwest Communications International (NYSE:Q) and SBC Communications Inc. (NYSE:SBC)

WinStar and Teligent are two examples of startup local telephone companies that tried to enter the market but ended up in bankruptcy protection though McLeod and Allegiance have had more success penetrating the market.

McLeod earlier on Tuesday said it had enough money to fund its operations until it produces free cash-flow in 2003 and had tapped another $175 million from its $1.3 billion credit facility.

The FCC chairman and executives discussed what has and has not worked for the upstarts when entering the market, access to capital markets, the impact regulatory policy on them and what is needed for the new competitors to survive.

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[jmhollen]

McLeodUSA says funded into 2003

CEDAR RAPIDS, Iowa, July 10 — Emerging telephone and data services company McLeodUSA Inc. (NASDAQ:MCLD) on Tuesday said it has enough money to fund its operations until it produces free cash-flow in 2003 and reiterated confidence in its long-term outlook.

McLeodUSA said it accessed an additional $175 million of its $1.3 billion credit facility, leaving an undrawn balance of $550 million. It said it expects proceeds from the previously announced sale of wireless telephone licenses to exceed $120 million.

"We intend to maximize our cash flow, continue solid growth in a challenging market, and manage through tough industry conditions," McLeodUSA Co-Chief Executive Officer Steve Gray said in a statement.

McLeodUSA, which competes against the dominant Baby Bells, is one of several emerging communications companies to be hurt by the slowing economy. In May it cut its revenue and cash flow forecasts for 2001 due to the slowdown, pricing pressures and delayed customer purchases. It also said it would reduce its work force by about 5 percent, or about 575 jobs.

McLeodUSA's fiber optic network transmits data, Internet, video and voice services and reaches 800 cities and about 90 percent of the U.S. population.

McLeodUSA's stock, which has plunged about 88 percent over the past year, gained 34 cents, or 12.45 percent, $34.07 in early morning trading on Nasdaq.

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[jmhollen]

Hold McLeodUSA, XO bonds - JP Morgan

NEW YORK, July 9 — Investors should still hold the bonds of McLeodUSA Inc. (NASDAQ:MCLD) and XO Communications Inc. (NASDAQ:XOXO) even though Moody's Investors Service downgraded the bonds last week, J.P. Morgan said in a report dated Friday.

US Corp Bonds-Flat in quiet trade; Junks see new cash
Junk bond funds enjoy first net inflow in 4 weeks
McLeodUSA Praises New Illinois Telecommunications Law

Both companies are among the many upstart telecommunications providers that compete with regional Bell operating companies. Many of these sprouted after the U.S. Congress passed the Telecommunications Act of 1996 to encourage competition with the Baby Bells.

Moody's last Tuesday cut Cedar Rapids, Iowa-based McLeodUSA's senior unsecured debt to "B3," its sixth highest junk grade, from "B1." with a negative outlook.

It said it is now unlikely McLeodUSA will have a 5-to-1 debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio by 2003, and that McLeodUSA may not improve EBITDA enough to meet its intermediate funding needs.


On the same day, Moody's cut Reston, Virginia-based XO's senior unsecured debt to "Caa1," its seventh highest junk grade, from "B2," with a negative outlook.

Moody's said XO is funded into the first half of 2003, but needs about $750 million of more funding to become cash flow positive. The public markets are closed to XO, it said, and there is no assurance that equity sponsors Craig McCaw or Forstmann Little will provide more support.

McLeodUSA's 8.125 percent senior notes maturing in 2009 were recently offered at 51 cents on the dollar, while XO's 10.75 percent senior notes maturing in 2009 were recently offered at 31 cents on the dollar.

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[jmhollen]

McLeodUSA Praises New Illinois Telecommunications Law

BUSINESS WIRE CEDAR RAPIDS, Iowa, July 3 — McLeodUSA Incorporated (Nasdaq:MCLD), the nation's largest independent competitive local exchange carrier (CLEC), today praised the new telecommunications legislation passed by the Illinois General Assembly last month and signed by Governor George Ryan late last week as beneficial for consumers and competitors alike.

FBR Expands Coverage of the Communications Services Sector

"This new law strengthens enforcement authority for the Illinois Commerce Commission to address carriers violating its rules or orders, imposes quality of service mandates, and explicitly defines the terms and conditions incumbent providers must follow when working with competitors like McLeodUSA," said Randall Rings, McLeodUSA Group Vice President and General Counsel. "These provisions will make it more efficient and consumer-friendly for McLeodUSA to overcome barriers previously imposed by Ameritech and to offer facilities-based services to our thousands of business and residential customers in Illinois."

McLeodUSA has argued that actions by Ameritech have negatively impacted competition in the telecommunications arena in Illinois, particularly in cases where competitors have tried to lease existing network elements in order to serve business and residential customers. As a result of the new law, Illinois consumers will have greater access to competitive choices for their telecommunications services.

About McLeodUSA

McLeodUSA provides integrated communications services, including local services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Company also provides data and voice services in all 50 states. McLeodUSA is a facilities-based telecommunications provider with, as of March 31, 2001, 396 ATM switches, 50 voice switches, nearly 30,000 route miles of fiber optic network and 11,300 employees. The Company's fiber optic network is capable of transmitting integrated next-generation data, Internet, video and voice services, reaching 800 cities and approximately 90% of the U.S. population. In the next 12 months, McLeodUSA plans to distribute 34 million telephone directories in 26 states, serving a population of 56 million. McLeodUSA is a Nasdaq-100 company traded under the symbol MCLD. Visit the Company's web site at www.mcleodusa.com.

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[jmhollen]

FBR Expands Coverage of the Communications Services Sector
PR NEWSWIRE ARLINGTON, Va., June 29 — Coverage Initiated on Allegiance Telecom, McLeodUSA, and Time Warner Telecom

Friedman, Billings, Ramsey & Co., Inc., a subsidiary of Friedman, Billings, Ramsey Group, Inc. (NYSE:FBR), today expanded its coverage of the communications services sector by initiating coverage of Allegiance Telecom, Inc. Nasdaq:ALGX), McLeodUSA, Incorporated (Nasdaq:MCLD), and Time Warner Telecom Inc. (Nasdaq:TWTC).

Technology Research Managing Director Riyad M. Said identified these companies as positioned to survive and ultimately benefit from the 'Darwinian process' taking place in the CLEC and emerging broadband services sectors.
Coverage of Allegiance Telecom was initiated with an "Accumulate" rating and a 12-month price target of $30 per share. Mr. Said identified Allegiance as a competitive provider of telecommunications services to small- and medium- sized businesses in Tier 1 markets across the U.S. "Allegiance has emerged as one of the true leaders in the CLEC/ICP sector, utilizing a highly capital efficient 'smart build' strategy to provide integrated communications services," Mr. Said stated. "Allegiance has been able to provide service to its 32 markets-growing to 36 markets at the end of 2001-with relatively modest capital expenditure and little debt in comparison to most facilities-based service providers," he added. "In addition, the company's back office and provisioning systems are a key contributor to Allegiance's growth and success in scaling its business," Mr. Said stated.

Coverage of McLeodUSA, Incorporated, was initiated with a "Market Perform" rating. Mr. Said identifies McLeodUSA as an integrated communications service provider that offers telecommunication services to business and residential customers in 25 Midwest, Southwest, Northwest, and Rocky Mountain states. "McLeodUSA has leveraged its early mover advantage to capture significant market share in its target markets. The company is expanding its network and will grow its co-locations by about 50 percent this year, enabling it to expand its addressable business customer base in its 25 state contiguous footprint and drive more traffic on-net," Mr. Said stated. "In addition, McLeodUSA's directory publishing business provides a strong branding platform and generates growing cash flows which help fund the CLEC business," he added.

Coverage of Time Warner Telecom Inc. was initiated with a "Buy" rating and a 12-month price target of $57 per share. Mr. Said identified Time Warner Telecom as a leading fiber facilities-based integrated communications provider in selected metropolitan markets across the United States, offering medium and large businesses broadband connections for data, high-speed Internet access, local voice, and long distance services. "Time Warner Telecom's business model is predicated on building out metro fiber networks, primarily through its strategic relationship with Time Warner Cable," Mr. Said stated. "Consequently, more than 80 percent of the company's revenue is fully on-net, which translated into industry-leading gross margins of 54.5 percent and EBITDA margins of 25.6 percent in its core business last quarter," he added. "We would argue that Time Warner Telecom possesses the best combination of network assets, strategic partners, business model and capital structure of any emerging broadband service provider," Mr. Said stated.

Yesterday, ALGX closed at $14.34 per share; MCLD closed at $4.25 per share; and TWTC closed at $31.15 per share.

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Friedman, Billings, Ramsey Group, Inc. (NYSE:FBR), the parent company of Friedman, Billings, Ramsey & Co., Inc., is a financial holding company for businesses that provide investment banking, institutional brokerage, specialized asset management, and banking products and services. FBR provides capital and financial expertise throughout a company's lifecycle and affords investors access to a range of proprietary financial products and services. Headquartered in the Washington metropolitan area, FBR has offices in Arlington and Reston, Va., Bethesda, Md., Boston, Charlotte, Chicago, Cleveland, Dallas, Irvine, Ca., New York City, Portland, Seattle, London, and Vienna. Bank products and services are offered by FBR National Bank & Trust, member FDIC and an Equal Housing Lender. For more information, see http://www.fbr.com .

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