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ICG warns of lower 2000, 2001 results

ICG Communications, Inc. (Nasdaq: ICGX) said slower growth and service problems forced it to issue a revised outlook Monday, trimming estimates for revenues and earnings into 2001. Despite a reduction in expenditures under the revised plan, the company still needs funding, and is exploring strategic alternatives.

Shares in the communications infrastructure company closed down 0.28 to 3.91 Friday, as their decline from a 52-week high of 39.25 accelerates. The company announced disappointing results in its second quarter, and reduced its estimates for 2000 and 2001.

Network outages, equipment failures and technical difficulties ICG has led to severe problems with ICG's Internet Remote Access Service business. Some customers have told ICG that it is not in compliance with its service agreements, reduced their commitments to ICG, and have said that unless the issues are resolved, they will terminate their contracts with the company.

Due to these issues, ICG now expects to receive minimal revenues in the third and fourth quarters of this year from IRAS services from 150,000 installed IRAS lines. Some customers have also slowed adding lines. ICG had previously anticipated net line additions of 470,000 lines in the third and fourth quarters and one million lines in 2001. The revised plan expects net line additions of 125,000 during the second half of 2000 and 500,000 to 600,000 lines for the year 2001.

Monday's revised business plan is intended to conserve cash and address customer service issues. It calls for controlled expansion, quality of service enhancements and cost savings. For the rest of 2000 and in 2001, ICG will have lower capital and corporate expenditures, slower expansion, significantly lower line installations, lower overhead costs and significantly reduced revenues and EBITDA.

For the third and fourth quarters of 2000, reduced estimates are for $300 million of revenues and negative EBITDA of $25 million. Previously, ICG had anticipated in excess of $400 million of revenues and $60 million of EBITDA.

For the year 2000, revenue is expected to be about $630 million, EBITDA about $17 million and capital expenditures about $1 billion.

For 2001, revenues are now expected to be from $700 million to $800 million and EBITDA from $100 million to $150 million. This compares to prior estimates for 2001 of $1.4 billion in revenue, and $350 million in EBITDA.

Capital expenditures in 2001 have been reduced by $450 million to $550 million, a 56 percent to 69 percent reduction.

Under the revised business plan, the company will be in breach of certain covenants under its $200 million senior secured bank credit facility. It will also still need additional funding, and has signed on advisors to explore "strategic options."

ICG said it is working to resolve all the existing quality and service issues.

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