Feb 23, 2004 12:00 PM,

PAY ATTENTION TO THE MAN BEHIND THE CURTAIN

by Kevin Fitchard

Barely a year out of a difficult bankruptcy, XO Communications isn't behaving like a humbled CLEC given a second chance by the graces of Chapter 11. In fact, the new XO couldn't be characterized any other way but downright aggressive since emerging last January.

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That aggressive outlook culminated this month with the $630 million cash and stock purchase of Allegiance Telecom's assets, making it the largest independent local exchange carrier in the U.S.

“I think we're in a unique position,” said CEO Carl Grivner, who took over XO's helm from Dan Akerson after bankruptcy. “We could grow organically or inorganically, but because of the condition of the market it makes sense for us to grow inorganically.”

Grivner, though, isn't taking credit for XO's aggressiveness. That honor falls to Carl Icahn, XO's principal shareholder and the former bondholder who orchestrated XO's emergence from bankruptcy. Icahn not only precipitated XO's hunt for assets through the bankruptcy courts, he also participated in and guided every aspect of the acquisition strategy, Grivner said.

“What gave me the confidence?” Grivner said. “Two words: Carl Icahn. Carl was at the auction. Carl worked the deal, worked the auction process. His desire to make this asset part of XO and make it one of the dominant, prominent super CLECs was the reason we got it.”

In most bankruptcies, bondholders turned stockholders tend not to be quite as aggressive when it comes to company strategy, but Icahn has proved the exception. Icahn gives more than just his blessing and guidance, said Nancy Kaplan, an analyst with Adventis — he lends the new company credibility. His position as a top financier on Wall Street assures many of XO's more timid investors that the company will have continued backing, Kaplan said.

And XO probably will need Icahn's service again soon. XO went after the transport assets of Cable & Wireless and Global Crossing for a reason, and the company will be looking for another acquisition to meet that need, Kaplan said.