MPE Bank of America Corp. Market Index Target Term Securities (Mitts) Linked TO The S&P 500 Index

ROCHESTER, N.Y., Nov. 3 /PRNewswire-FirstCall/ -- Mpower Holding Corporation (AMEX:MPE), the parent company of Mpower Communications Corp., a leading provider of data and voice services to retail and wholesale business customers, today announced results of its operations for the third quarter ended September 30, 2005. Mpower's total operating revenue for the third quarter of 2005 was $49.1 million, a 4% increase over the second quarter of 2005 and a 31% increase over the third quarter of 2004. Core customer revenue, which represents revenue from the sale of data and voice services, grew to $45.8 million in the third quarter of 2005, up nearly 4% over the second quarter of 2005 and 33% over the third quarter of 2004. "Mpower's business reached a milestone this quarter as the revenue base on our T1 voice and data platform has reached a level equal to the revenue base on our legacy POTS and DSL platform," stated Mpower Chairman and Chief Executive Officer Rolla P. Huff. "Over the past 36 months T1-based revenue has increased from just 7% of our customer revenue to 50% of our customer revenue today. We expect the scale to tip even further towards our higher- margin data platform as we continue to sell and provision larger data- intensive orders." Adjusted Gross Margin from continuing operations was $26.3 million or 53.4% of revenue in the third quarter of 2005, as compared to $25.1 million or 53.2% of revenue in the second quarter of 2005 and $19.6 million or 52.1% of revenue in the third quarter of 2004. Adjusted Gross Margin is calculated as gross margin excluding depreciation, amortization and incremental transition expenses related to the cost of operating revenues. Gross margin, which includes depreciation, amortization and incremental transition expenses, was $22.2 million in the third quarter of 2005, $21.1 million in the second quarter of 2005 and $17.6 million in the third quarter of 2004. Third quarter 2005 selling, general and administrative (SG&A) expenses from continuing operations, excluding depreciation and amortization expense, were $22.6 million, down approximately 2% from second quarter 2005 SG&A expenses and 28% higher than third quarter 2004 SG&A expenses. Mpower's reported SG&A expenses include incremental transition expenses related to the acquisition of ICG's California assets, network facility relocation costs, agent selling expense-warrants and stock-based compensation, all of which are excluded from Adjusted EBITDA. These items totaled $0.5 million in the third quarter of 2005, $1.3 million in the second quarter of 2005 and $0.1 million in the third quarter of 2004. Adjusted EBITDA was $4.2 million in the third quarter of 2005, a 24% increase over $3.4 million in Adjusted EBITDA in the second quarter of 2005 and more than double the $2.0 million of Adjusted EBITDA in the third quarter of 2004. "The evolution in our business and the growth on our T1 platform is reflected in the substantial Adjusted EBITDA growth we have reported over the last three years," added Huff. Mpower's loss from operations for the third quarter of 2005 was $1.6 million, as compared to a $3.8 million loss in the second quarter of 2005, and a $1.9 million loss in the third quarter of 2004. The company's third quarter 2005 net loss was $2.3 million versus a $4.3 million loss in the second quarter of 2005 and a $1.3 million net loss in the third quarter of 2004. Basic and diluted loss per common share from continuing operations was $0.03 in the third quarter of 2005 as compared to $0.05 in the second quarter of 2005 and $0.02 in the third quarter of 2004. All reported results for the third quarter of 2004 do not include results from the ICG California business acquired on January 1, 2005. Capital expenditures in the third quarter of 2005 were $6.3 million. Mpower ended the quarter with approximately $26.4 million in unrestricted cash, cash equivalents and investments available-for-sale, as compared to $32.4 million at the end of the second quarter of 2005. Financial Statements and Reconciliation to GAAP The accompanying financial statements include Mpower's financial guidance for the full year 2005 and 2006. Today the Company announced that it expects to end full year 2005 at the higher end of its revenue and ICG incremental transition expense guidance, at the lower end of its Adjusted EBITDA guidance, and within its capital expenditure guidance. Mpower also reaffirmed its 2006 revenue, Adjusted EBITDA and capital expenditure guidance. Also included with the financial statements is a reconciliation of the most directly comparable GAAP measures, Gross Margin and Net Loss, to the non-GAAP financial measures used by Mpower, Adjusted Gross Margin and Adjusted EBITDA. Company Presentation A PowerPoint presentation and business model detailing Mpower's quarterly results and financial projections can be found on the company's Web site at http://www.mpowercom.com/. Webcast/Audio Stream & Conference Call to Discuss Third Quarter 2005 Results Mpower will host a Webcast and conference call to discuss the details of its third quarter 2005 financial and operating results. Date: Thursday, November 3, 2005 Time: 10:00 a.m. (Eastern time) Audio Live Number: 1-888-802-8577, PIN #6635531 Webcast & Audio Streaming Link/Instructions: http://showvisuals.mshow.com/findshow.aspx?usertype=0&cobrand=128&shownumber=2 58256 This link will access both the audio and PowerPoint presentation for the call. Advanced registration on the site is recommended. Click on the link above to register in advance and/or join the conference call at the designated time. Webcast Replay: Available for 30 days after the call at above link Audio Replay Number: 1-877-519-4471, PIN #6635531 From November 3, 2005 at 1:00 p.m. Eastern through November 10, 2005 at 5:00 p.m. Eastern Use of Non-GAAP Financial Information The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of Mpower's use of non-GAAP financial measures, Adjusted Gross Margin and Adjusted EBITDA, to supplement Mpower's consolidated financial statements presented on a GAAP basis, as well as the use of Adjusted EBITDA in forecasted guidance, Regulation G requires Mpower to include in this press release a presentation of the most directly comparable GAAP measures, which are Gross Margin, which includes depreciation, amortization and incremental transition expenses related to cost of operating revenues, and Net Loss, and a reconciliation of the measures to GAAP. Mpower has presented a reconciliation of these measures for each of the periods presented. The non-GAAP measure Adjusted EBITDA provides an enhancement to an overall understanding of Mpower's past financial performance and prospects for the future as well as useful information to investors because of (i) the historical use by Mpower of Adjusted EBITDA as a performance measurement; (ii) the value of Adjusted EBITDA as a measure of performance before gains, losses or other charges considered to be outside the company's core business operating results; and (iii) the use of Adjusted EBITDA, or a similar term, by almost all companies in the CLEC sector as a measurement of performance. Mpower has excluded from its presentation of Adjusted EBITDA, incremental transition expense, stock-based compensation, gains on sales of assets, agent selling expense -- warrants, network facility relocation expense, other income (expense), and (loss) income from discontinued operations because Mpower does not believe that including such items in Adjusted EBITDA provides investors with an appropriate measure of determining Mpower's performance in its core business. The non-GAAP measure Adjusted Gross Margin provides an enhancement to an overall understanding of Mpower's past financial performance and prospects for the future as well as useful information to investors because of (i) the historical use by Mpower of this measure as a performance measurement and (ii) the use of a similar calculation by almost all companies in the CLEC sector as a measurement of performance. Adjusted Gross Margin is calculated as gross margin excluding depreciation, amortization and incremental transition expenses because Mpower does not believe that including such items in the calculation of Adjusted Gross Margin provides investors with an appropriate measure of analyzing Mpower's historical financial performance or for comparing other similar companies in the CLEC sector. Mpower's utilization of non-GAAP measurements is not meant to be considered in isolation or as a substitute for net loss, loss from continuing operations, cash flow, gross margin and other measures of financial performance prepared in accordance with GAAP. Adjusted Gross Margin and Adjusted EBITDA are not GAAP measurements and Mpower's use of them may not be comparable to similarly titled measures employed by other companies in the telecommunications industry. About Mpower Holding Corporation Founded in 1996, Mpower Holding Corporation (AMEX:MPE) is the parent company of Mpower Communications, a leading facilities-based broadband communications provider offering a full range of data, telephony, Internet access and network services for retail business and wholesale customers in California, Nevada and Illinois. Further information about the company can be found at http://www.mpowercom.com/. Forward-Looking Statements Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Mpower cautions investors that certain statements contained in this press release that state our and/or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. Management wishes to caution the reader that these forward-looking statements are not historical facts and are only estimates or predictions. Actual results may differ materially from those projected as a result of risks and uncertainties including, but not limited to, our ability to retain ICG customers and to increase revenues from the acquired ICG business, our ability to effectively integrate the ICG business into our operations, unexpected costs of integrating the ICG business into our operations, future sales growth, changes in federal or state telecommunications regulations, market acceptance of our product and service offerings, the liquidity of our common stock, our ability to secure adequate financing or equity capital to fund our operations and network expansion, our ability to manage growth and maintain a high level of customer service, the performance of our network and equipment, our ability to enter into strategic alliances or transactions, the cooperation of incumbent local exchange carriers in provisioning lines and interconnecting our equipment, regulatory approval processes, the effect of regulatory decisions on our access charges and operating costs, changes in technology, price competition, and other market conditions and risks detailed from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise. FINANCIAL STATEMENTS BALANCE SHEET (amounts in $ thousands) September 30, June 30, December 31, 2005 2005 2004 Current Assets Cash and Cash Equivalents $16,220 $22,299 $27,327 Investments Available-for-Sale 9,758 9,841 8,064 Accounts Receivable, net 15,254 12,518 10,140 Other Receivables 1,304 2,770 3,164 Prepaid Expenses and Other Current Assets 2,989 3,144 3,060 Total Current Assets 45,525 50,572 51,755 Property and Equipment, net 66,043 64,315 33,012 Long-Term Restricted Cash and Cash Equivalents 9,531 9,530 9,515 Long-Term Investments Available-for- Sale 448 260 2,041 Goodwill 8,861 8,798 - Intangibles, net 4,036 4,669 4,367 Other Long-Term Assets 4,535 4,623 4,274 Total Assets $138,979 $142,767 $104,964 Current Liabilities Current Maturities of Capital Lease Obligations $538 $749 $ - Accounts Payable 14,644 13,160 20,462 Accrued Sales Tax Payable 2,210 2,436 2,190 Accrued Bonus 723 777 2,508 Deferred Revenue 5,133 5,197 5,059 Accrued Other Expenses 14,138 16,406 11,756 Total Current Liabilities 37,386 38,725 41,975 Long-Term Capital Lease Obligations 23,141 23,353 - Other Long-Term Liabilities 2,212 2,244 1,833 Total Liabilities 62,739 64,322 43,808 Common Stock 91 91 79 Additional Paid-in Capital 121,891 121,785 104,054 Accumulated Deficit (45,742) (43,431) (42,977) Total Stockholders' Equity 76,240 78,445 61,156 Total Liabilities and Stockholders' Equity $138,979 $142,767 $104,964 STATEMENT OF OPERATIONS (amounts in $ thousands, Three Months Three Months Three Months except common share and per Ended Ended Ended common share amounts) September 30, June 30, September 30, 2005 2005 2004 Operating Revenues: Core Customer $45,807 $44,200 $34,360 Switched Access 3,342 3,062 3,233 Total Operating Revenues 49,149 47,262 37,593 Operating Expenses: Cost of Operating Revenues (exclusive of depreciation and amortization shown separately below. See Note 1.) 22,998 22,120 18,007 Selling, General and Administrative (exclusive of depreciation and amortization shown separately below. See Note 2.) 22,577 22,971 17,705 Gain on Sale of Assets, net (28) (37) (108) Depreciation and Amortization 5,165 5,990 3,875 Total Operating Expenses 50,712 51,044 39,479 Loss from Operations (1,563) (3,782) (1,886) Other Income (Expense): Interest Income 214 238 104 Interest Expense (941) (764) (61) Other Income 11 12 - Loss on Sale of Investments - - (11) Loss from Continuing Operations (2,279) (4,296) (1,854) (Loss) Income from Discontinued Operations (32) (3) 508 Net Loss ($2,311) ($4,299) ($1,346) Basic and Diluted (Loss) Income per Common Share: Loss from Continuing Operations ($0.03) ($0.05) ($0.02) (Loss) Income from Discontinued Operations $0.00 $0.00 $0.00 Net Loss ($0.03) ($0.05) ($0.02) Basic and Diluted Weighted Average Common Shares Outstanding 91,473,028 91,441,361 78,476,418 Adjusted Gross Margin $26,264 $25,142 $19,586 Adjusted Gross Margin (% of Revenue) 53.4% 53.2% 52.1% Adjusted EBITDA $4,156 $3,434 $1,988 Adjusted EBITDA (% of Revenue) 8.5% 7.3% 5.3% Three Months Three Months Three Months Ended Ended Ended RECONCILIATION TO GAAP September 30, June 30, September 30, (amounts in $ thousands) 2005 2005 2004 Adjusted Gross Margin $26,264 $25,142 $19,586 Incremental Transition Expense (See Note 3) (113) - - Depreciation and Amortization (allocated to Cost of Operating Revenues. See Note 1.) (3,970) (4,077) (2,024) Gross Margin (GAAP) $22,181 $21,065 $17,562 Three Months Three Months Three Months Ended Ended Ended RECONCILIATION TO GAAP September 30, June 30, September 30, (amounts in $ thousands) 2005 2005 2004 Adjusted EBITDA $4,156 $3,434 $1,988 Agent Selling Expense - Warrants (See Note 4) (103) (90) (94) Stock-Based Compensation (See Note 4) - - (13) Incremental Transition Expense (See Note 3) (474) (1,173) - Network Facility Relocation Expense (See Note 4) (5) - - Gain on Sale of Assets, net 28 37 108 Depreciation and Amortization (5,165) (5,990) (3,875) Loss from Operations (1,563) (3,782) (1,886) Interest Income 214 238 104 Interest Expense (941) (764) (61) Other Income 11 12 - Loss on Sale of Investments - - (11) Loss from Continuing Operations (2,279) (4,296) (1,854) (Loss) Income from Discontinued Operations (32) (3) 508 Net Loss (GAAP) ($2,311) ($4,299) ($1,346) Note 1: Cost of operating revenues is exclusive of depreciation and amortization of $3,970, $4,077, and $2,024 for the three months ended September 30, 2005, June 30, 2005, and September 30, 2004. Note 2: Selling, general and administrative expense is exclusive of depreciation and amortization of $1,195, $1,913, and $1,851 for the three months ended September 30, 2005, June 30, 2005, and September 30, 2004. Note 3: Cost of operating revenues and selling, general and administrative expense includes Incremental Transition Expenses related to the ICG California acquisition, however these amounts are excluded from our Adjusted Gross Margin and Adjusted EBITDA c Note 4: Selling, general and administrative expense includes costs for Agent Selling Expense - Warrants, Stock-Based Compensation and Network Facility Relocation Expenses, however these amounts are excluded from our Adjusted EBITDA calculation. These amounts total $108, $90, and $107 for the three months ended September 30, 2005, June 30, 2005, and September 30, 2004. 2005 GUIDANCE ($ amounts in thousands) Low - High Operating Revenue $190,000 - $193,000 Adjusted EBITDA $18,000 - $21,000 Agent Selling Expense - Warrants ($400) - ($300) Stock-Based Compensation Expense ($200) Incremental Transition Expenses ($3,100) Network Facility Relocation Expense ($500) - ($300) Gain on Sale of Assets, net $300 Depreciation and Amortization ($22,700) - ($22,600) Loss from Operations ($8,600) - ($5,200) Other Income $7,300 Interest Income $800 Interest Expense ($3,600) - ($3,500) Loss from Continuing Operations ($4,100) - ($600) Loss from Discontinued Operations ($200) Net Loss (GAAP) ($4,300) - ($800) Total CAPEX $17,000 - $21,000 2006 GUIDANCE ($ amounts in thousands) Low - High Operating Revenue 3% - 7% growth Adjusted EBITDA 25% - 35% growth Total CAPEX $11,000 - $13,000 DATASOURCE: Mpower Holding Corporation CONTACT: Investor: Gregg Clevenger, Chief Financial Officer, +1-585-218-6547, , or Media: Michele Sadwick, Vice President, +1-585-218-6542, , both of Mpower Holding Corporation Web site: http://www.mpowercom.com/

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