XO Holdings dramatically cut its losses on relatively flat revenue in the third quarter.

The carrier’s third-quarter revenue was up 2% from a year earlier to more than $359 million, while revenue for the first nine months of the year was flat compared with the same period last year.

But XO’s net loss, at less than $4.5 million, was less than a fifth the size it was a year earlier. And the loss over nine months, $61 million, was down 40% from 2006.
In reducing its loss, the company has been helped in recent quarters by changes in accounting estimates, including a revision in the cost of services provided to other carriers under the Federal Communications Commissions’ Triennial Review Order, which cut the company’s net loss by $9 million in the third quarter and $22 million so far this year.

XO also got help in the third quarter from a $21.5-million payment that represented the final installment of a settlement in a lawsuit against former Global Crossing executives relating to XO’s investments in that company.

Revenue from XO’s fastest growing segment, its Xoptions Flex IP service, a voice-over-IP bundle for mid-market customers, more than doubled from a year earlier to $20 million in the third quarter. And data service revenue grew 20% year-over-year to $122 million. Meanwhile, XO’s largest source of revenue, traditional voice and other services, dropped 6% from a year earlier to $167 million. And revenue from carrier VoIP service was down 37% from a year earlier to $4 million, the result of financial difficulties among customers for that service, XO said.