XO Communications Inc. announced yesterday that it emerged from Chapter 11 bankruptcy protection with reduced debt, new management and a new owner, billionaire financier Carl C. Icahn.

The Reston-based telecommunications company earlier received the necessary approvals for its new business plan from state and federal regulators and yesterday received final approval to emerge from bankruptcy from the U.S. Bankruptcy Court in the Southern District of New York.

XO, which provides phone and data services to businesses in 65 U.S. metropolitan areas, shed all but $500 million of its original $5.3 billion in debt. Icahn, who purchased the bulk of XO's bank debt and a large chunk of its bonds, will own more than 80 percent of the company. XO ended September with $554 million worth of cash and cash equivalents.

Through the seven-month-long bankruptcy process, the company lost an undisclosed number of customers and roughly 800 people from its workforce. It now employs 5,000 people, down from its peak of more than 6,400.

The restructured company will be owned by its creditors. Founder Craig O. McCaw will lose his 15 percent ownership in XO, and Forstmann Little & Co. will lose its 24 percent ownership. The company may try to raise an additional $200 million through a shareholder rights offering.

The company is looking for a replacement for chairman and chief executive Daniel F. Akerson, who announced late last month that he would retirr after the company's emergence from bankruptcy.

Nathaniel A. Davis, XO's president and chief operating officer, will run the company until a successor is named. That decision is in the hands of Icahn, Davis said.

"I feel like the rain and the dark cloud that have been following us around" during the bankruptcy have lifted, Davis said. "We've been telling people that while our balance sheet was sick, operationally we were strong, and this proves us right."

XO plans to market new services to customers who had been skeptical about the company's longevity, Davis said. "We won't have to answer questions about our financial integrity anymore."

Akerson, who has run the company since 1999, molded XO into one of the most ambitious businesses in the local phone industry. The company, which was founded by billionaire cellular pioneer McCaw in 1994, at one point planned to build its own fiber-optic network across the country, as well as in Europe -- a plan it abandoned when it became difficult to raise new money. XO was known as Nextlink until Akerson took over and it purchased Internet service provider Concentric Network Corp. for $2.54 billion; it was renamed XO in 2000.

XO shares closed yesterday at 7.4 cents, up 1.5 cents.

XO is one of only a handful of local companies to survive the bankruptcy process, and those that have generally have done so as smaller companies. In the past two years, Motient Corp., Teligent Inc., Metrocall Inc., U.S. Office Products Co., USinternetworking Inc. and AMF Bowling Worldwide Inc. have emerged from reorganization. Many more have shut their doors, including Hechinger Co., PSINet Inc., Winstar Communications Inc. and Net2000 Communications Inc.

Other Washington area firms still trying to come out from under bankruptcy court supervision include US Airways and WorldCom Inc.

Researcher Julie Tate contributed to this report.