Xo communications, a telephone company controlled by financier Carl Icahn, will sell its Internet-access unit to Icahn for $700 million...

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XO Communications, a telephone company controlled by financier Carl Icahn, will sell its Internet-access unit to Icahn for $700 million to focus on wireless.

Icahn’s Elk Associates will take over the Web-access business by early next year, XO spokesman Chad Couser said. XO will remain a public company, selling wireless broadband service to businesses and other telecommunications companies in more than 70 major U.S. cities, he said.

Icahn, 69, who owned 61 percent of XO as of April 1, is splitting apart a company he brought out of bankruptcy in 2003. XO, formerly known as Nextlink, was founded by Craig McCaw in 1994. The Reston, Va.-based company’s loss in 2004 quadrupled to $405.5 million on sales of $1.45 billion.

“The action we take today will create a pure-play fixed broadband wireless provider,” Chief Executive Carl Grivner said in the statement.

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XO said it’s still open to other bids for the business Icahn is buying, and that Elk will receive a 1 percent breakup fee if another buyer surfaces.

Shares of XO fell 1 cent to $2.54 Friday in over-the-counter trading. Shares have dropped 16 percent this year.

The agreement was negotiated by a special committee of non- management directors not affiliated with Icahn, the statement said.

XO will use the proceeds to become debt-free and will have $300 million in cash.