Forstmann, Telmex May Drop XO Deal

Forstmann Little & Co. and Telefonos de Mexico told XO Communications Inc. that they may drop a plan to invest $400 million each in the phone company because its finances have deteriorated in the last six months.

In a letter to XO’s law firm, Willkie Farr & Gallagher, Forstmann Little and Telmex cited “a substantial decline in the value of the company” since they made their pledge to invest in November.

Financier Carl Icahn last month dropped a bid for XO.

XO spokesman Todd Wolfenbarger said that the investors are bound by contract to provide the company with $800 million and that XO won’t release them from their commitment.