Paetec

PAETEC Holding Corp. (NASDAQ GS: PAET) announced that it and McLeodUSA Inc. have received Federal Communications Commission (FCC) approval required in connection with PAETEC’s proposed acquisition of McLeodUSA.

On September 17, 2007, PAETEC announced that it and McLeodUSA had entered into a definitive merger agreement.

As previously announced, the companies have received notice from the Federal Trade Commission that early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to their proposed transaction has been granted.

The transaction, which remains subject to other regulatory approvals and closing conditions, is expected to close in the first quarter of 2008.

About PAETEC
PAETEC (NASDAQ GS: PAET) is personalizing business communications for medium-sized and large businesses, enterprise organizations and institutions across the United States. We offer a comprehensive suite of voice, data, and IP services, as well as enterprise communications management software, network security solutions, CPE, and managed services. For more information, visit www.paetec.com.

About McLeodUSAMcLeodUSA provides managed IP-based communications services to small and medium-sized enterprises, and traditional circuit-switched telephony services to commercial customers in the Midwest, Rocky Mountain, Southwest and Northwest regions of the nation. McLeodUSA delivers a wide variety of broadband IP-based voice and data solutions, targeting primarily small and medium-sized enterprises and multilocation commercial customers. For more information, visit www.McLeodUSA.com.

Additional Information and Where to Find it
PAETEC Holding Corp. has filed with the SEC a registration statement on Form S-4 (File No. 333-146778), which contains a proxy statement/prospectus, subject to completion, regarding the proposed merger transaction, as well as other relevant documents concerning the transaction. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS AND THESE OTHER DOCUMENTS AS AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PAETEC, MCLEODUSA INCORPORATED AND THE PROPOSED TRANSACTION. A definitive proxy statement/prospectus will be sent to PAETEC’s stockholders seeking their approval of PAETEC’s issuance of shares in the transaction and to security holders of McLeodUSA Incorporated. Investors and security holders may obtain a free copy of the registration statement and proxy statement/prospectus (when available) and other documents filed by PAETEC with the SEC at the SEC’s web site at www.sec.gov. Free copies of PAETEC’s SEC filings are available on PAETEC’s web site at www.paetec.com and also may be obtained without charge by directing a request to PAETEC Holding Corp., One PAETEC Plaza, Fairport, New York 14450, Attn: Investor Relations.

PAETEC and its directors and executive officers may be deemed, under SEC rules, to be participants in the solicitation of proxies from PAETEC’s stockholders with respect to the proposed transaction. Information regarding PAETEC’s directors and executive officers is included in its annual report on Form 10-K filed with the SEC on April 2, 2007. More detailed information regarding the identity of potential participants and their direct or indirect interests in the transaction, by securities holdings or otherwise, will be set forth in the registration statement and proxy statement/prospectus and other documents to be filed with the SEC in connection with the proposed transaction.

PAETEC Holding Corp. (NASDAQ GS: PAET) today announced that its Dynamic IP service is compliant with key Internet protocol (IP) telephony solutions from Avaya Inc., a leading global provider of business communications applications, systems and services.

The Dynamic IP solution offers businesses true bandwidth allocation for voice and data while leveraging existing voice equipment. The application now is compliance-tested by Avaya for compatibility with the Avaya IP Office, a secure, easy-to-use converged voice and data system for small and medium businesses. To date more than 100,000 Avaya IP Office systems have been sold worldwide.

“Our goal is to offer our customers the most cost-effective solution possible,” said PAETEC Chief Marketing Officer Jack Baron. “Part of the way we do this is through relationships with market leaders such as Avaya, which ensures a level of quality and consistency to our service and also sets the stage for future technical innovations.”

PAETEC is a member of the Avaya DevConnect program - an initiative to develop, market and sell innovative third-party products that interoperate with Avaya technology and extend the value of a company’s investment in its network.  

As a Gold member of the program, PAETEC is eligible to submit products for compatibility testing by the Avaya Solution Interoperability and Test Lab in Lincroft, N.J. There a team of Avaya engineers develops a comprehensive test plan for each application to verify whether it is Avaya compliant. Doing so ensures businesses can confidently add best-in-class capabilities to their network without having to replace their existing infrastructure—speeding deployment of new applications and reducing both network complexity and implementation costs.  

“By offering compliance testing to the many innovative companies like PAETEC who are members of our DevConnect program, Avaya promotes fully interoperable solutions that help businesses unleash powerful new possibilities,” said Eric Rossman, vice president, developer relations and technical alliances, Avaya. “They are able to use Intelligent Communications to connect employees and customers to information from wherever they are, over whatever device they have available – getting more out of their multivendor network and delivering new value to their bottom line.”

About Avaya
Avaya delivers Intelligent Communications solutions that help companies transform their businesses to achieve marketplace advantage. More than 1 million businesses worldwide, including more than 90 percent of the FORTUNE 500®, use Avaya solutions for IP Telephony, Unified Communications, Contact Centers and Communications-Enabled Business Processes. Avaya Global Services provides comprehensive service and support for companies, small to large. For more information visit the Avaya Web site: http://www.avaya.com.  For more information on the Avaya DevConnect program, visit www.avaya.com/devconnect.

About PAETEC
PAETEC (NASDAQ GS: PAET) is personalizing business communications for medium-sized and large businesses, enterprise organizations and institutions across the United States. We offer a comprehensive suite of IP, voice, data and Internet services, as well as enterprise communications management software, network security solutions, customer premises equipment (CPE) and managed services. For more information, visit www.paetec.com.

 PAETEC Holding Corp. (NASDAQ GS: PAET) today announced third quarter 2007 financial and operating results. “We are very pleased with our third quarter results, highlighted by strong revenue growth, as well as continued margin and free cash flow expansion,” said PAETEC Chairman and CEO Arunas A. Chesonis. “We have completed our second full quarter since closing the US LEC transaction and continue to be gratified with the rapid integration of our operations and the progress we have made on our continuing integration of back office systems.” Highlights of the quarter include the following:

• Revenue of $283.9 million, which represented a 91% increase over third quarter 2006 revenue of $148.4 million;
• Adjusted EBITDA* of $53.8 million, which represented a 188% increase over third quarter 2006 adjusted EBITDA of $18.7 million;
• Free cash flow* of $35.5 million, which represented the 19th consecutive quarter in which PAETEC Holding or its predecessor generated positive free cash flow;
• Successful completion on July 10, 2007 of amendments to PAETEC’s existing bank credit facility and a $300 million senior notes offering;
• Net loss of $(5.1) million largely due to the expense of $4.3 million on the extinguishment of debt in connection with the senior notes offering, and an increase in depreciation and amortization expense of $8.2 million, due to the catch up of expenses associated with the acquired US LEC intangible assets, compared to a third quarter 2006 net loss of $(1.5) million;
• A quarter-end cash balance of $105.5 million;
• An increase of 120% in the number of access line equivalents in service, from 1.26 million as of December 31, 2006, to 2.76 million as of September 30, 2007; and
• Announced agreements to acquire McLeodUSA Incorporated and Allworx Corp.

The complete Q3 2007 PAETEC report can be found here

 PAETEC Holding Corp. today announced that it is one of several providers awarded a 10-year Comprehensive Telecommunications Services contract by the State of New York Office of General Services (OGS). This contract (PS63070) will allow PAETEC to offer advanced communications solutions to more than 6,800 municipal, city, and state agencies, educational institutions, and not-for-profit organizations throughout the state.

This award provides PAETEC with the ability to deliver services such as Local, Long Distance, Toll-Free, Voice over Internet Protocol (VoIP), Internet Access, Conferencing, MPLS, and more to organizations located in New York State. With this multiple award contract, OGS has provided a simplified, competitive process for organizations to procure these services without going to bid. PAETEC has operations in eight markets within New York State.

“With this contract, the State of New York has provided governments, institutions, and other organizations with an increased number of telecommunications services providers to choose from,” said Paul Bolz, vice president of government solutions for PAETEC. “We look forward to working with these organizations and becoming their trusted Communications Solutions Provider.”

About PAETEC
PAETEC (NASDAQ GS: PAET) is personalizing business communications for medium-sized and large businesses, enterprise organizations and institutions across the United States. We offer a comprehensive suite of voice, data, and IP services, as well as enterprise communications management software, network security solutions, CPE, and managed services. For more information, visit www.paetec.com.