• United States
by Carly Suppa

Dallas carrier files for bankruptcy

May 16, 20032 mins
Financial Services IndustryNetworking

Enterprises might be facing the prospect of one less telecom option as yet another competitive carrier filed for bankruptcy protection this week.

Dallas-based competitive local exchange carrier (CLEC) Allegiance Telecom announced Wednesday it is pursuing restructuring plans under Chapter 11 of the U.S. bankruptcy code.

The announcement was made on the heels of a small disaster Wednesday morning, which left Allegiance data customers in the Boston area without service for more than five hours. According to reports, a backhoe accidentally sliced through Allegiance-owned cable, cutting Internet service and some telephone service to the CLEC’s Boston users. Allegiance restored service by late Wednesday afternoon, with the help of Veroxity Technology Partners, a Boston-based Internet provider, which loaned 100M bits of data-carrying capacity to Allegiance.

While this week has been difficult for the telco, Allegiance said in a statement it was not putting the “for sale” sign up just yet. The CLEC reported first quarter revenues, ending Mar. 31, of $204.6 million, up 26.2% over the first quarter of 2002. The company said it has reduced its cash consumption, using approximately $20.7 million in cash and short-term investments to fund operational and capital expenses and service debt, a $6 million reduction in spending from the fourth quarter of 2002.

And although filing for Chapter 11 casts a dim shadow on the fate of the CLEC, Allegiance said that its new and current customers will continue to receive normal service, and that filing for bankruptcy protection is only an attempt at reducing the company’s long-term debt. The company said it plans to restructure its existing customer programs including customer promotions and warrantees, but at the moment has no intention of reorganizing its management team. The CLEC has also assured its suppliers that it will pay outstanding invoices for goods and services rendered post-petition.

The restructuring timeline has yet to be established; however Allegiance has set up a customer information Web site to keep its clients up to date. Allegiance was unavailable for comment.