Operating margins improved as expenses grew only 58 percent resulting in a net loss for the quarter of $229 million. Pro forma loss per share, assuming full conversion of Class B common stock, was $0.24.

Executing on our business strategy has paid off in an outstanding third quarter, said Paul R. Gudonis, chairman and CEO of Genuity. We remain firmly on track to meet our annual financial targets, as well as consensus analyst estimates. Our strategy to increase shareholder value is to continue to drive top line growth, move our revenue mix toward higher margin value-added services, improve cost efficiency and deploy our capital economically. We made significant progress in each of these areas in the third quarter, even as we introduced an innovative new industry solution with the announcement of our Black Rocket(TM) Network Services Platform (NSP).

In October, Genuity began selling and provisioning its new Black Rocket NSP, creating an entirely new industry category. In the past quarter, we’ve seen the industry trying to react to a trend we identified earlier–the customer’s need for integrated eBusiness services including network access, hosting and security. With the launch of the industry’s first NSP, Black Rocket, we have gained first-mover advantage in this new industry category, said CEO Paul Gudonis. In the short time that we’ve offered this new platform, we’ve seen very strong demand from the market and have already provisioned several Black Rocket platforms, representing millions of dollars in new business.

In addition, Genuity launched its first major brand building effort with its Black Rocket promotional and advertising campaign, covering TV, newspapers, magazines, the Web and various outdoor venues. Since the launch of the service on October 2, Genuity has sold five Black Rocket platforms.

Strong Revenue Growth in All Service Lines

In addition to the 70 percent year-over-year growth, Genuity drove overall sequential quarterly revenue growth of 15 percent, or $40 million, reflecting new revenue producing contracts.

Genuity’s access revenues (excluding AOL) increased 167 percent or $68 million, in the quarter, reflecting a 155 percent increase in dial-up revenues, and a 104 percent increase in dedicated access. DSL revenues in the quarter were $17 million versus less than $1 million in the prior year quarter. Revenues from the AOL long-term contract increased 21 percent and now represent 39 percent of total Genuity revenues, versus 55 percent in last year’s third quarter.

Web hosting revenue growth was 151 percent or $18 million over the same quarter last year, primarily the result of new orders won through Genuity’s sales team and with our ePartners.

Value-added and other services, which includes managed security (Site Patrol), Virtual Private Networks (VPN’s), Voice over IP (VoIP), and international revenues jumped 83 percent or $9 million. Transport revenues also grew strongly and increased 57 percent or nearly $10 million, as compared with the same quarter last year.

Operational Highlights

Third quarter operational highlights include:

Doubled the number of new orders from a year ago with more than 400 new customers, including: McDonald’s, Spinway, Qwest, EMC, Arbella Insurance, Honeywell and Earthlink DSL.

Signed new contracts totaling more than $200 million in First-year Contract Value (FCV), a more than 170 percent increase from the same quarter last year.

Added 71 new managed Web hosting customers in the quarter.

Increased the average annual size of new hosting contracts from $187,000 in the third quarter of 1999 to $284,000 this quarter, an increase of 52 percent over the prior year.

Increased dedicated access connections to 3,950, a 23 percent increase from the third quarter of 1999, with average annual revenue per connection increasing 26 percent to approximately $46,100. Increased network service delivery points in the quarter to 233, a 68 percent increase from the third quarter last year.

Increased DSL users to 138,500, an 81 percent sequential increase from the second quarter of this year.

Expanded Genuity’s position as the leading carrier of VoIP traffic, by adding 341 million Minutes of Use during the quarter. Cumulative traffic for the year to date now stands at approximately 1 billion MOUs.

Grew total dial-up modems to 813,000, an increase of 13 percent, or 92,000 modems, from the previous quarter, and a 65 percent increase from the third quarter of 1999. Genuity operates the second-largest dial-up access network in the United States.