AsUNITED ~~filed with the Securities and~~STATES ~~Exchange~~SECURITIES ~~Commission~~AND onEXCHANGE ~~April 20, 2004~~COMMISSION

~~UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington~~WASHINGTON, ~~D.C.~~DC 20549

FORM 8-K

CURRENT REPORT

~~PURSUANT~~Pursuant to TOSection ~~SECTION~~ 13 ORor 15(d) OF ~~THE~~of ~~SECURITIES~~the ~~EXCHANGE~~Securities ~~ACT~~Exchange OFAct of 1934

Date of ~~Report~~report (Date of earliest event reported): April 1514, 2004

ALLEGIANCE TELECOM, INC. ~~(Exact Name of Registrant as Specified in Charter)~~

Delaware (State or Other Jurisdiction of Incorporation)	0-24509 (Commission File No.)	75-2721491 (I.R.S. Employer Identification No.)
	9201 North Central Expressway Dallas, Texas 75231 214/261-7100 (Address of Principal Executive Offices) (Zip Code) (Registrant’s telephone number including area code)
	Not applicable (Former Name or Former Address, if Changed Since Last Report)

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

ITEM 7. EXHIBITS.

Delaware	0-24509	75-2721491
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

9201 North Central Expressway Dallas, Texas 75231
(Address of Principal Executive Offices, including Zip Code)

(214) 261-7100
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

~~(c) The following~~Item ~~exhibit~~5. isOther ~~furnished as part of this report:~~Events.

~~Exhibit 99.1 Press~~On ~~Release~~May 14, 2003, Allegiance ~~dated~~Telecom, ~~April~~Inc. 15and all of its direct and indirect subsidiaries (collectively, “Allegiance”) ~~2004~~filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).

~~ITEM~~Sale ~~12.~~of ~~RESULTS~~Certain OFAssets ~~OPERATIONS~~to ~~AND~~XO ~~FINANCIAL CONDITION~~Communications, Inc.

On ~~April~~ 15February 12 and 13, 2004, Allegiance ~~Telecom~~conducted an auction for its assets in which XO Communications, Inc. (“XO”) ~~issued~~was aselected ~~press~~as ~~release~~the ~~discussing~~winning ~~its~~bidder. ~~results~~On ofFebruary ~~operations~~18, 2004, Allegiance entered into an Asset Purchase Agreement with XO and ~~financial~~the ~~condition~~Bankruptcy ~~for~~Court approved the ~~fiscal~~XO ~~year~~Asset ~~and~~Purchase Agreement ~~fourth~~on February 20, 2004. Under ~~quarter~~the ~~ended~~terms ~~December~~of 31the XO Asset Purchase Agreement, ~~2003~~XO agreed to purchase, for approximately $311 million in cash and approximately 45.38 ~~The~~million ~~full~~shares ~~text~~of XO common stock, substantially all of the ~~press~~assets ~~release~~of isAllegiance ~~being~~Telecom and its ~~furnished~~subsidiaries, asexcept ~~Exhibit 99.1~~for Allegiance’s customer premises equipment sales and maintenance isbusiness ~~incorporated~~operated inunder the name of Shared Technologies, its dedicated ~~entirety~~dial ~~herein~~up byaccess services business operated under an agreement with ~~reference~~Level 3 Communications, its shared hosting business and certain other Allegiance assets and operations.

2On April 14, 2004, pursuant to the terms of the XO Asset Purchase Agreement, Allegiance and XO closed this sale transaction into “escrow.” On the same date, Allegiance announced that it had entered into an Operating Agreement with XO that will allow XO to operate the Allegiance assets XO is acquiring subject to Allegiance’s consent and in accordance with applicable law, regulations, and tariffs; such Operating Agreement is in place until the final closing of the transactions contemplated by the XO Asset Purchase Agreement. A copy of the related press release is included herein as Exhibit 99.1. The final closing of this transaction remains subject to, among other things, approval by the Bankruptcy Court of Allegiance’s plan of reorganization under Chapter 11 of the United States Bankruptcy Code.

Settlement Agreement ~~SIGNATURES~~and Sale of Certain Assets to Level 3 Communications, LLC

~~Pursuant~~On February 27, 2004, Allegiance entered into an Amended and Restated Confidential Settlement Agreement and Mutual Release (the “Settlement Agreement”) with Level 3 Communications, LLC (“Level 3”) and XO under which, among other things, Allegiance agreed to terminate its dedicated dial-up services contract with Level 3. On April 6, 2004, the ~~requirements~~Bankruptcy ofCourt entered an amended order approving the ~~Securities~~Settlement ~~Exchange~~Agreement. The Settlement ~~Act~~Agreement ofprovides, ~~1934~~among other things, ~~the~~for ~~registrant~~at ~~has~~consummation: Level 3 ~~duly~~to ~~caused~~pay ~~this~~Allegiance ~~report~~$54 million at closing; Level 3 to bereimburse ~~signed~~Allegiance for amounts paid by Allegiance to KMC Telecom since February 1, 2004 and additional amounts intended to reimburse Allegiance for expenses associated with operating the dial-up access business for Level 3 since February 1, 2004 and on ~~its~~a ~~behalf~~going forward basis; Allegiance to pay Level 3 an amount equal to all reciprocal compensation related to traffic under the agreement from February 1, 2004 until the closing under the Settlement Agreement; the termination of the agreement under which Allegiance provides Level 3 with dedicated dial-up access services; the transfer of the dedicated physical assets used by Allegiance to provide the dial-up ~~undersigned~~access ~~hereunto~~services to Level 3; and a significant reduction (and ultimate ~~duly~~cessation) ~~authorized~~of revenues to Allegiance under this service agreement on a going-forward basis. The Settlement Agreement also provides that Allegiance will retain a continuing obligation to provide certain termination assistance services to Level 3 and that XO will assume this obligation after the closing under the XO Asset Purchase Agreement. On April 2019, 2004, Allegiance and Level 3 closed the initial transactions contemplated by the Settlement Agreement including the payment of $54 million by Level 3 to Allegiance. A copy of the related press release is included herein as Exhibit 99.2.

~~ALLEGIANCE~~The ~~TELECOM,~~exhibits ~~INC.~~described ~~By:~~below ~~/s/~~are ~~MARK~~incorporated herein B.by ~~TRESNOWSKI Mark B~~reference. ~~Tresnowski Executive Vice President, General Counsel and Secretary~~

3Item 7. Exhibits.

10.1 Asset Purchase Agreement, ~~EXHIBIT~~dated ~~INDEX~~February 18, 2004, by and among Allegiance Telecom, Inc., Allegiance Telecom Company Worldwide and XO Communications, Inc. (incorporated herein by reference from Exhibit 10.39 of Allegiance Telecom, Inc.’s Form 10-K for the year ended December 31, 2003).

EXHIBIT NO.		DESCRIPTION
99.1		Press Release dated April 15, 2004

10.2 Amendment No. 1 to Asset Purchase Agreement, dated April 13, 2004, by and among Allegiance Telecom, Inc., Allegiance Telecom Company Worldwide and XO Communications, Inc.

410.3 Operating Agreement, dated April 13, 2004, by and among Allegiance Telecom, Inc., Allegiance Telecom Company Worldwide and XO Communications, Inc.

99.1 Allegiance Telecom, Inc. Press Release dated April 14, 2004.

99.2 Allegiance Telecom, Inc. Press Release dated April 20, 2004.

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 hereunto duly authorized on April 21, 2004.

	ALLEGIANCE TELECOM, INC.


	/s/ Mark B. Tresnowski
	By: Mark B. Tresnowski
	Its: Executive Vice President, General Counsel and Secretary

EXHIBIT INDEX

10.1 Asset Purchase Agreement, dated February 18, 2004, by and among Allegiance Telecom, Inc., Allegiance Telecom Company Worldwide and XO Communications, Inc. (incorporated herein by reference from Exhibit 10.39 of Allegiance Telecom, Inc.’s Form 10-K for the year ended December 31, 2003).

10.2 Amendment No. 1 to Asset Purchase Agreement, dated April 13, 2004, by and among Allegiance Telecom, Inc., Allegiance Telecom Company Worldwide and XO Communications, Inc.

10.3 Operating Agreement, dated April 13, 2004, by and among Allegiance Telecom, Inc., Allegiance Telecom Company Worldwide and XO Communications, Inc.

99.1 Allegiance Telecom, Inc. Press Release dated April 14, 2004.

99.2 Allegiance Telecom, Inc. Press Release dated April 20, 2004.

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