ITC DELTACOM INC
424B3, 1999-02-16
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>
                                                Filed Pursuant to Rule 424(b)(3)
                                                      Registration No. 333-71735

PROSPECTUS
 
                                  $125,000,000
 
                       Offer To Exchange All Outstanding
                   9 3/4% Senior Notes Due November 15, 2008
                for 9 3/4% Senior Notes Due November 15, 2008 of
                             ITC/\DeltaCom, Inc.
 
        Interest Payable May 15 and November 15, Commencing May 15, 1999
 
                      Material Terms of the Exchange Offer
 
 .  In the Exchange Offer, we are           .  The Exchange Offer will expire
   offering to exchange, for all              at 5:00 p.m., New York City
   Outstanding Notes that are                 time, on March 16, 1999, unless
   validly tendered and not validly           extended.
   withdrawn before the expiration
   of the Exchange Offer, an equal         .  The exchange of notes should not
   amount of a new series of notes            be a taxable exchange for U.S.  
   which are registered under the             federal income tax purposes.    
   Securities Act of 1933.                                                    
                                                                              
 .  The terms of the Exchange Notes         .  ITC/\DeltaCom will not receive   
   to be issued are substantially             any proceeds from the Exchange   
   identical to the Outstanding               Offer.                           
   Notes, except for some of the                                               
   transfer restrictions and               .  Affiliates of ITC/\DeltaCom may  
   registration rights relating to            not participate in the Exchange  
   the Outstanding Notes.                     Offer.                           
                                                                               
 .  You may tender Outstanding Notes                                             
   only in denominations of $1,000         .  The Exchange Offer is subject to  
   and multiples of $1,000.                   customary conditions, including   
                                              the condition that the Exchange   
 .  You may withdraw tenders of                Offer not violate applicable law  
   Outstanding Notes at any time              or any applicable interpretation  
   prior to the expiration of the             of the Staff of the Securities    
   Exchange Offer.                            and Exchange Commission.          
                                                                                
Holders of Outstanding Notes should consider carefully the risk factors
beginning on page 15 of this prospectus in connection with the Exchange Offer.
 
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
 
We are not making this Exchange Offer in any state or jurisdiction where it is
not permitted.
 
               The date of this Prospectus is February 11, 1999.


<PAGE>
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Important Information About This Prospectus................................  ii
Where You Can Find More Information........................................ iii
Cautionary Note Regarding Forward-Looking Statements.......................  iv
Prospectus Summary.........................................................   1
Risk Factors...............................................................  15
The Exchange Offer.........................................................  31
Use of Proceeds............................................................  39
Capitalization.............................................................  40
Description of Certain Indebtedness........................................  41
Description of the Exchange Notes..........................................  45
Plan of Distribution.......................................................  73
Certain United States Federal Tax Considerations...........................  74
Legal Matters..............................................................  78
Experts....................................................................  78
</TABLE>
 
                                       i
<PAGE>
 
                  IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
 
   We have filed with the SEC a Registration Statement under the Securities Act
of 1933, as amended, covering the Exchange Notes to be issued in exchange for
the Outstanding Notes pursuant to this prospectus. As permitted by SEC rules,
this prospectus omits important information included in the Registration
Statement. For further information pertaining to the Exchange Notes, reference
is made to the Registration Statement, including its exhibits. Any statement
made in this prospectus concerning the contents of any contract, agreement or
other document is not necessarily complete. If we have filed any such contract,
agreement or other document as an exhibit to the Registration Statement, you
should read the exhibit for a more complete understanding of the document or
matter involved. Each statement regarding a contract, agreement or other
document is qualified in its entirety by reference to the actual document.
 
   The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in this
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents contain
important information about us and our financial condition.
 
  . Our Annual Report on Form 10-K for our fiscal year ended December 31,
    1997, filed with the SEC on March 30, 1998;
 
  . Our Current Reports on Form 8-K, filed with the SEC on March 5, 1998 and
    July 31, 1998;
 
  . Our Proxy Statement, filed with the SEC on April 30, 1998; and
 
  . Our Quarterly Reports on Form 10-Q for the quarterly periods ended March
    31, 1998, June 30, 1998 and September 30, 1998, filed with the SEC on May
    15, 1998, August 14, 1998 and November 16, 1998, respectively.
 
   In addition, this prospectus incorporates by reference any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
until the offering of securities covered by this prospectus is completed.
 
   We will provide a copy of the information we incorporate by reference, at no
cost, to each person to whom this prospectus is delivered. To request a copy of
any or all of this information, you should contact us at the following address
and telephone number:
 
                               ITC/\DeltaCom, Inc.
                            1241 O.G. Skinner Drive
                           West Point, Georgia 31833
                         Attention: Investor Relations
                        Telephone Number: (706) 645-3880
 
To obtain timely delivery, you must request this information by March 9, 1999.
 
  You should rely only on the information incorporated by reference or provided
in this prospectus. We have not authorized anyone else to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
 
                                       ii
<PAGE>
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
   We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. You may read and copy any of the information
we file with the SEC at the SEC's public reference rooms at:
 
      Room 1024            7 World Trade Center             Citicorp Center
450 Fifth Street, N.W.           13th Floor            500 West Madison Street,
Washington, D.C. 20549    New York, New York 10048            Suite 1400 
                                                       Chicago, Illinois 60661
                                  
 
   You also can obtain copies of filed documents by mail from the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. You may call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference rooms.
 
   We file information electronically with the SEC. Our SEC filings also are
available to the public at the SEC's web site at http://www.sec.gov, which
contains reports, proxy and information statements, registration statements and
other information regarding issuers that file electronically.
 
   Our Common Stock, $.01 par value per share, is quoted on The Nasdaq National
Market under the symbol "ITCD," and such reports, proxy statements and other
information concerning our Company also can be inspected at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
 
   We are required by the indenture that governs the Outstanding Notes and
which will govern the Exchange Notes to furnish the trustee for the notes with
annual reports containing consolidated financial statements audited by our
independent public accountants and with quarterly reports containing unaudited
condensed consolidated financial statements for each of the first three
quarters of each fiscal year. The trustee for the notes is United States Trust
Company of New York.
 
                                      iii
<PAGE>
 
              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
   This prospectus and the information incorporated by reference in it, as well
as any prospectus supplement that accompanies it, include "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. We intend the forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements in these sections.
All statements regarding our expected financial position and operating results,
our business strategy and our financing plans are forward-looking statements.
These statements can sometimes be identified by our use of forward-looking
words such as "may," "will," "anticipate," "estimate," "expect" or "intend."
These statements are subject to known and unknown risks, uncertainties and
other factors that could cause the actual results to differ materially from
those contemplated by the statements. The forward-looking information is based
on various factors and was derived using numerous assumptions. Although we
believe that our expectations in such forward-looking statements are
reasonable, we cannot promise that our expectations will turn out to be
correct. Our actual results could be materially different from and worse than
our expectations. Important factors that could cause our actual results to be
materially different from our expectations include those disclosed in this
prospectus under the caption "Risk Factors," beginning on page 15, and
elsewhere throughout this prospectus.
 
                                       iv
<PAGE>
 
                               PROSPECTUS SUMMARY
 
   The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. You should
read the entire prospectus, including our financial statements and the notes to
those statements, and the other financial data contained or incorporated by
reference in this prospectus. You should carefully consider the factors set
forth under the caption "Risk Factors," and you should read the entire Letter
of Transmittal. Unless otherwise indicated, dollar amounts over $1 million have
been rounded to one decimal place and dollar amounts less than $1 million have
been rounded to the nearest thousand.
 
                               ABOUT ITC/\DELTACOM
 
   We provide integrated voice and data telecommunications services on a retail
basis to mid-sized and major regional businesses in the southern United States.
We are also a leading regional provider of wholesale long-haul services to
other telecommunications companies. In connection with these businesses, we
own, operate and manage an extensive fiber optic network in the southern United
States.
 
Our Retail Services Segment
 
   We provide integrated retail telecommunications services to mid-sized and
major regional businesses in a bundled package tailored to the business
customer's specific needs. These Retail Services include:
 
  .  local exchange telephone services;
 
  .  long distance services;
 
  .  calling, calling card and operator services;
 
  .  Asynchronous Transfer Mode, or "ATM," frame relay, high capacity
     broadband private line services;
 
  .  Internet, Intranet and Web page hosting and development services; and
 
  .  customer premise equipment sales, installation and repair.
 
   As of September 30, 1998, we provided Retail Services to over 10,000
business customers in 21 metropolitan areas. As of the same date, we had sold
approximately 33,200 access lines, of which approximately 25,500 had been
installed. Over the next five years, we intend to provide a full range of
Retail Services in a total of approximately 40 metropolitan areas throughout
the southern United States.
 
   In connection with offering local exchange services, we have entered into
interconnection agreements with the following incumbent local exchange
carriers:
 
  .  BellSouth Telecommunications, Inc., for all of its markets;
 
  .  GTE Corporation, for its Alabama market; and
 
  .  Sprint Corporation, for its Florida markets.
 
   The interconnection agreements allow us to resell the local exchange
services of the incumbent carrier and to interconnect our network with their
networks. This allows us to offer local exchange services to our current
customer base and to enter new markets with minimal capital expenditures. We
intend to complete interconnection agreements with GTE, SBC and Sprint for
other markets that we serve or intend to serve.
 
                                       1
<PAGE>
 
Our Carriers' Carrier Services Segment
 
   We also provide wholesale long-haul services, which we call our "Carriers'
Carrier Services," to other telecommunications carriers. This means we sell
capacity on our network to, and switch and transport telecommunications traffic
for, such carriers. Our Carriers' Carrier customers include AT&T Corp., MCI
WorldCom, Inc., Sprint Corporation, Cable & Wireless Communications, Inc., and
Allnet Communications Services, Inc. d/b/a Frontier Communications Services. As
of September 30, 1998, we had approximately $129.6 million of remaining future
long-term contract commitments for our Carriers' Carrier Services. These
contracts expire on various dates through 2006 and are expected to generate
approximately $107.8 million in revenues for the Company through 2002.
 
Summary of ITC/\DeltaCom Revenues by Business Segment
 
<TABLE>
<CAPTION>
                           Years Ended December 31,   Nine Months Ended September 30,
                         ---------------------------- --------------------------------
                             1996           1997           1997             1998
                         ------------- -------------- --------------- ----------------
<S>                      <C>           <C>            <C>             <C>
Retail Services......... $59.9 million $ 83.6 million $  61.2 million $   86.7 million
Carriers' Carrier
 Services............... $ 6.6 million $ 31.0 million $  21.6 million $   36.5 million
Total................... $66.5 million $114.6 million $  82.8 million $  123.2 million
</TABLE>
 
Our Fiber Optic Network
 
   Our fiber optic network reaches over 70 points of presence, or POPs, in the
following ten southern states: Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee and Texas. The network
extends approximately 7,850 route miles from Florida to Texas. We own
approximately 4,170 miles of our network. Approximately 3,680 miles are owned
and operated principally by three public utilities and managed and marketed by
us. The public utilities are Duke Power Company, Florida Power & Light Company
and Entergy Technology Company. We expect to add approximately 1,200 route
miles to our fiber optic network by the end of the second quarter of 1999
through a combination of construction and long-term dark fiber leases. Our
network includes seven Nortel DMS-500 voice switches, one Nortel DMS-250 voice
switch, thirteen Ascend 9000 frame relay switches and five ATM switches.
 
Our Business Strategy
 
   Our objectives are to maintain our position as a leading provider of
Carriers' Carrier Services and to become a leading provider of Retail Services
in the southern United States. To achieve these objectives, we intend to
increase our market share in existing markets and expand into new markets.
 
   The principal elements of our business strategy are to:
 
  .  Provide Integrated Telecommunications Services, Including Local
     Telephone Exchange Services, to Our Existing Base of Mid-sized and Major
     Regional Business Customers
 
     We expect to increase our revenues at relatively low incremental cost by
     providing additional telecommunications services, such as local
     telephone exchange services, to our existing long distance customers. We
     are able to bundle the customer's selection of a variety of
     telecommunications services, and present the customer with a single,
     integrated monthly billing statement for all of those services. We
     believe this capability will allow us to penetrate our target markets
     rapidly and build customer loyalty.
 
     We provide local exchange services by reselling the services of
     incumbent local exchange carriers and, in some of our markets, by using
     our own local switching facilities. Over time, we expect to provide
     local exchange services by primarily using our own switching facilities
     and our existing
 
                                       2
<PAGE>
 
     regional fiber optic network, supplemented by unbundled facilities of
     incumbent local exchange carriers or other competitive local exchange
     carriers. To access the unbundled network elements of incumbent local
     exchange carriers, we collocate our access nodes in the incumbent local
     exchange carrier's central office. These access nodes operate in
     conjunction with our Nortel DMS-500 switches to provide facilities-based
     local services. To date, we have collocated 30 such access nodes.
     Because access nodes are less expensive to purchase and install than
     Nortel DMS-500 switches and can be installed more quickly than Nortel
     DMS-500 switches, we believe that we will be able to enter new markets
     at less expense than many of our competitors. At present, we do not plan
     to construct intra-city local loop facilities.
 
  .  Take Advantage of Our Extensive Fiber Optic Network
 
     We intend to take advantage of our extensive fiber optic network, which
     currently reaches over 70 POPs, by:
 
    -- continuing to provide switched and transport services to other
       communications carriers throughout our region to enable such carriers
       to diversify their routes and expand their networks;
 
    -- targeting customers that need to transmit large amounts of data
       within our service region, such as banks and local and state
       governments; and
 
    -- offering local exchange services to our business customers as part of
       our integrated package of telecommunications services.
 
  .  Focus on the Southern United States
 
     We intend to continue to focus on the southern United States. We believe
     that our regional focus and the regional concentration of our network
     will enable us to:
 
    -- take advantage of economies of scale in management, network
       operations and sales and marketing;
 
    -- increase opportunities for improved margins because a large portion
       of our customers' telecommunications traffic originates and
       terminates within the region; and
 
    -- build on our long-standing customer and business relationships in the
       region.
 
  .  Build Market Share Through Personalized Customer Service
 
     We believe that the key to revenue growth in our target markets is
     capturing and retaining customers by emphasizing marketing, sales and
     customer service. We believe that customers prefer one company to be
     accountable for their telecommunications services. We also believe that
     a consultative, face-to-face sales and service strategy is the most
     effective method of acquiring and maintaining a high quality customer
     base. We seek to obtain long-term commitments from our business
     customers by responding rapidly and creatively to their
     telecommunications needs.
 
     We currently operate 23 branch offices in 22 markets in Alabama,
     Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina and
     South Carolina. Each branch office is staffed by personnel capable of
     marketing all of our products and providing comprehensive support to our
     customers. As part of our strategy to continue to grow our Retail
     Services business, we plan to open branch offices in Texas by the end of
     1999 and increase our provision of local exchange services to Internet
     service providers. In the future, we expect to expand significantly our
     direct sales force and open branch offices in additional major and
     secondary population centers in the southern United States.
 
                                       3
<PAGE>
 
  .  Expand Our Fiber Optic Network and Switching Facilities
 
     We expect to expand our fiber optic telecommunications network and
     switching facilities to include additional markets within the southern
     United States. We currently own and operate approximately 4,170 route
     miles of fiber optic network extending from Florida to Texas and we plan
     to add approximately 1,200 miles to our network by the end of the second
     quarter of 1999. We expect our expanded network will include Austin and
     San Antonio.
 
     We also market and manage capacity on approximately 3,680 additional
     network route miles through our strategic relationships principally with
     public utilities. We have a buy-sell agreement with Carolinas Fibernet,
     LLC, which manages fiber optic facilities in North Carolina and South
     Carolina. This agreement enables the parties to buy and sell capacity on
     each other's networks and allows us to provide customers with access to
     points of presence throughout those states.
 
     We believe that, by continuing to combine our own network with the
     networks of public utilities and adding switching facilities throughout
     our network, we will be able to achieve capital efficiencies and rapidly
     expand our network in a cost-effective manner.
 
  .  Benefit From the Experience of Our Proven Management Team
 
     Our management team consists of experienced telecommunications managers.
     These individuals have previously been successful in implementing a
     customer-focused long distance telecommunications strategy in the
     southern United States.
 
  A Brief Overview of Our History
 
   March 24,        ITC/\DeltaCom was incorporated as a wholly owned subsidiary
     1997           of ITC Holding Company, Inc.
 
   June 3, 1997     We completed the sale of $200.0 million principal amount of
                    our 11% Senior Notes due 2007.
 
   July 25, 1997
   to October 20,   As part of a reorganization of ITC Holding, we became a
   1997             separate company from ITC Holding. The main steps in this
                    reorganization were:
 
                    .  ITC Holding contributed to us certain of its
                       subsidiaries, which became our wholly owned
                       subsidiaries, Interstate FiberNet, Inc. and ITC/\DeltaCom
                       Communications, Inc.
 
                    .  ITC Holding then transferred all of its assets, other
                       than its ownership of shares of our common stock, and
                       all of its liabilities, to another entity.
 
                    .  ITC Holding then merged with us. We were the surviving
                       corporation in the merger.
 
   October 29,      We completed our initial public offering, in which we
     1997           issued 5,750,000 shares of our common stock, par value $.01
                    per share, at a price of $16.50 per share. After giving
                    effect to the two-for-one stock split that we completed in
                    the third quarter of 1998, our initial public offering
                    would have been of 11,500,000 shares at a per share price
                    of $8.25.
 
                                       4
<PAGE>
 
 
March 3, 1998       We completed the sale at a price of 99.9% of $160.0 million
                    principal amount of our 8 7/8% Senior Notes due 2008.
                   
April 2, 1998       We redeemed $70.0 million of our 11% Senior Notes due 2007,
                    at a redemption price of $77.7 million plus accrued and    
                    unpaid interest on the redeemed notes of approximately $2.6
                    million.                                                   
                   
July 29, 1998       We announced a two-for-one stock split to be effected in
                    the form of a stock dividend on our common stock. The
                    record date for the stock split was August 18, 1998 and the
                    payment date was September 4, 1998.
                   
November 5, 1998    We completed the sale of $125.0 million principal amount of
                    our 9 3/4% Senior Notes due 2008. These are the notes we   
                    are offering to exchange in this Exchange Offer.           
                                                                               
 
Risk Factors
 
   You should read and consider carefully the "Risk Factors" section of this
prospectus, beginning on page 15, before tendering your Outstanding Notes for
Exchange Notes.
 
Our Principal Executive Offices, Telephone Number And Internet Address
 
   Our headquarters are located at 1241 O.G. Skinner Drive, West Point, Georgia
31833, our telephone number at this address is (706) 645-3880 and our Internet
site is located at http://www.itcdeltacom.com. Information contained on our
website is not, and should not be deemed to be, a part of this prospectus.
 
                                       5
<PAGE>
 
                       INTRODUCTION TO THE EXCHANGE OFFER
 
The Exchange Offer................  In this Exchange Offer, we are offering to
                                    exchange $1,000 principal amount of our 9
                                    3/4% Senior Notes due November 15, 2008,
                                    which "Exchange Notes" have been registered
                                    under the Securities Act of 1933, as
                                    amended, for each $1,000 principal amount
                                    of our outstanding 9 3/4% Senior Notes due
                                    November 15, 2008. As of the date of this
                                    prospectus, $125.0 million in aggregate
                                    principal amount of these "Outstanding
                                    Notes" are outstanding. In this prospectus,
                                    we sometimes use the term "Notes" to refer
                                    to the Exchange Notes together with the
                                    Outstanding Notes.
 
                                    Outstanding Notes may be tendered for
                                    exchange in whole or in part in integral
                                    multiples of $1,000 principal amount.
 
Registration Rights Agreement.....  We are making the Exchange Offer to satisfy
                                    our obligations under a Registration Rights
                                    Agreement relating to the Outstanding
                                    Notes, dated November 5, 1998, that we
                                    entered into with Morgan Stanley & Co.
                                    Incorporated and First Union Capital
                                    Markets, a division of Wheat First
                                    Securities, Inc., who were the Initial
                                    Purchasers of the Outstanding Notes. For a
                                    description of the procedures for tendering
                                    Outstanding Notes, see "The Exchange
                                    Offer--Procedures for Tendering Outstanding
                                    Notes."
 
Expiration Date...................  The Exchange Offer will expire at 5:00
                                    p.m., New York City time, on March 16,
                                    1999, unless we extend the Exchange Offer,
                                    in which case the term "Expiration Date"
                                    will mean the latest date and time to which
                                    the Exchange Offer is extended. See "The
                                    Exchange Offer--Expiration Date;
                                    Extensions; Amendments ."
 
Conditions to the Exchange                                                      
Offer.............................  The Exchange Offer is subject to            
                                    conditions, some of which we may waive at   
                                    our sole discretion. The Exchange Offer is  
                                    not conditioned upon any minimum aggregate  
                                    principal amount of Outstanding Notes being 
                                    tendered.    
                               
                                    We reserve the right, in our sole and
                                    absolute discretion, subject to applicable
                                    law, at any time and from time to time to:
 
                                    .  delay the acceptance of the Outstanding
                                       Notes;
 
                                    .  terminate the Exchange Offer if
                                       specified conditions have not been
                                       satisfied;
 
                                    .  extend the Expiration Date of the
                                       Exchange Offer and retain all
                                       Outstanding Notes tendered pursuant to
                                       the Exchange Offer, subject, however, to
                                       the right of
 
                                       6
<PAGE>
 
                                       holders of Outstanding Notes to withdraw
                                       their tendered Outstanding Notes prior
                                       to such extended Expiration Date; and
 
                                    .  waive any condition or otherwise amend
                                       the terms of the Exchange Offer in any
                                       respect.
 
                                    See "The Exchange Offer--Conditions to the
                                    Exchange Offer" and "The Exchange Offer--
                                    Expiration Date; Extensions; Amendments."
 
Withdrawal Rights.................  You may withdraw the tender of your
                                    Outstanding Notes at any time prior to the
                                    Expiration Date by delivering a written
                                    notice of your withdrawal to the Exchange
                                    Agent for this Exchange Offer in conformity
                                    with the procedures set forth below under
                                    "The Exchange Offer--Withdrawal Rights."
 
Procedures For Tendering
 Outstanding Notes................  If you wish to tender your Outstanding
                                    Notes for exchange in the Exchange Offer,
                                    you must complete and sign a Letter of
                                    Transmittal according to its instructions
                                    and forward the same by mail, facsimile
                                    transmission or hand delivery, together
                                    with any other required documents, to the
                                    Exchange Agent, either with the Outstanding
                                    Notes to be tendered or in compliance with
                                    the specified procedures for guaranteed
                                    delivery of Outstanding Notes.
 
                                    Certain brokers, dealers, commercial banks,
                                    trust companies and other nominees may also
                                    effect tenders by book-entry transfer.
 
                                    If your Outstanding Notes are registered in
                                    the name of a broker, dealer, commercial
                                    bank, trust company or other nominee, we
                                    urge you to contact such nominee promptly
                                    if you wish to tender your Outstanding
                                    Notes pursuant to the Exchange Offer. See
                                    "The Exchange Offer--Procedures for
                                    Tendering Outstanding Notes."
 
                                    Please do not send your Letter of
                                    Transmittal or the certificate representing
                                    your Outstanding Notes to us. You should
                                    only send those documents to the Exchange
                                    Agent. You should direct questions
                                    regarding how to tender Outstanding Notes
                                    and requests for information to the
                                    Exchange Agent. See "The Exchange Offer--
                                    Exchange Agent."
 
Resales Of Exchange Notes.........  We believe that the Exchange Notes issued
                                    in the Exchange Offer may be offered for
                                    resale, resold and otherwise transferred by
                                    you without compliance with the
 
                                       7
<PAGE>
 
                                    registration and prospectus delivery
                                    requirements of the Securities Act,
                                    provided that:
 
                                    .  you acquire the Exchange Notes issued in
                                       the Exchange Offer in the ordinary
                                       course of your business;
 
                                    .  you are not participating, and have no
                                       arrangement or understanding with any
                                       person to participate, in the
                                       distribution, as that term is defined
                                       under the Securities Act, of the
                                       Exchange Notes; and
 
                                    .  you are not an affiliate of ITC/\DeltaCom
                                       within the meaning of Rule 405 under the
                                       Securities Act.
 
                                    Our belief is based upon interpretations by
                                    the staff of the SEC, as set forth in no-
                                    action letters issued to third parties
                                    unrelated to ITC/\DeltaCom. The staff of the
                                    SEC has not considered the Exchange Offer
                                    in the context of a no-action letter, and
                                    we cannot assure you that the staff of the
                                    SEC would make a similar determination with
                                    respect to this Exchange Offer.
 
                                    If our belief is inaccurate and you
                                    transfer an Exchange Note without
                                    delivering a prospectus meeting the
                                    requirements of the Securities Act or
                                    without an exemption from registration of
                                    your Exchange Notes from such requirements,
                                    you may incur liability under the
                                    Securities Act. We do not and will not
                                    assume or indemnify you against such
                                    liability.
 
                                    Each broker-dealer that receives Exchange
                                    Notes for its own account in exchange for
                                    Outstanding Notes which were acquired by
                                    such broker-dealer as a result of market-
                                    making or other trading activities must
                                    acknowledge that it will deliver a
                                    prospectus meeting the requirements of the
                                    Securities Act in connection with any
                                    resale of such Exchange Notes.
 
Exchange Agent....................  The Exchange Agent with respect to the
                                    Exchange Offer is United States Trust
                                    Company of New York. The address, telephone
                                    number and facsimile number of the Exchange
                                    Agent are set forth in this prospectus
                                    under "The Exchange Offer--Exchange Agent"
                                    and in the Letter of Transmittal.
 
Use of Proceeds...................  We will not receive any cash proceeds from
                                    the issuance of the Exchange Notes offered
                                    hereby. See "Use of Proceeds."
 
                                       8
<PAGE>
 
 
Certain United States Federal
Income Tax  Consequences..........  Your acceptance of the Exchange Offer and
                                    the related exchange of your Outstanding
                                    Notes for Exchange Notes will not be a
                                    taxable exchange for United States federal
                                    income tax purposes. You should not
                                    recognize any taxable gain or loss or any
                                    interest income as a result of such
                                    exchange. See "Certain United States
                                    Federal Income Tax Consequences."
 
   See "The Exchange Offer" for more detailed information concerning the
Exchange Offer.
 
                                       9
<PAGE>
 
                       INTRODUCTION TO THE EXCHANGE NOTES
 
   The Exchange Offer relates to the exchange of up to $125.0 million principal
amount of Exchange Notes for up to an equal principal amount of Outstanding
Notes. The form and terms of the Exchange Notes are the same as the form and
terms of the Outstanding Notes, except that the Exchange Notes will be
registered under the Securities Act. Therefore, the Exchange Notes will not be
subject to some of the transfer restrictions, registration rights and other
provisions providing for an increase in the interest rate of the Outstanding
Notes under certain circumstances relating to the registration of the Exchange
Notes. The Exchange Notes issued in the Exchange Offer will evidence the same
debt as the Outstanding Notes, which they will replace, and both the
Outstanding Notes and the Exchange Notes are governed by the same Indenture.
 
Securities Offered................  $125.0 million principal amount of 9 3/4%
                                    Senior Notes due November 15, 2008.
 
Interest..........................  Interest on the Exchange Notes will accrue
                                    at the rate of 9 3/4% per annum and will be
                                    payable semi-annually in cash and in
                                    arrears on each May 15 and November 15,
                                    commencing on May 15, 1999.
 
Ranking...........................  The Exchange Notes will not be secured by
                                    any assets and:
 
                                    .  will be effectively subordinated to any
                                       of our and our subsidiaries' existing
                                       and future secured indebtedness,
                                       including secured indebtedness under our
                                       $50.0 million Credit Facility with
                                       NationsBank, N.A. of Texas, to the
                                       extent of the value of the assets
                                       securing such indebtedness;
 
                                    .  will be effectively subordinated to all
                                       existing and future liabilities of our
                                       subsidiaries, including trade payables;
 
                                    .  will rank equal in right of payment with
                                       all of our existing and future senior
                                       unsecured indebtedness; and
 
                                    .  will rank senior in right of payment to
                                       all of our existing and future
                                       subordinated indebtedness.
 
                                    At September 30, 1998, as adjusted to
                                    reflect the issuance of the Outstanding
                                    Notes as if it had occurred on that date:
 
                                    .  ITC/\DeltaCom, on an unconsolidated
                                       basis, had $414.8 million of
                                       subordinated indebtdeness and $289.8
                                       million of outstanding indebtedness that
                                       would rank equal in right of payment
                                       with the Exchange Notes;
 
                                    .  our subsidiaries had approximately $44.9
                                       million of liabilities, excluding
                                       intercompany payables but
 
                                       10
<PAGE>
 
                                      including approximately $3.3 million of
                                      indebtedness, which includes capital
                                      leases; and
 
                                   .  neither we nor our subsidiaries had any
                                      outstanding secured indebtedness,
                                      including under the Credit Facility.
 
                                   To date, we have not borrowed any amounts
                                   under the Credit Facility. See "Description
                                   of the Exchange Notes--General" and
                                   "Description of Certain Indebtedness--
                                   Credit Facility."
 
Optional Redemption..............  The Exchange Notes may be redeemed at our
                                   option, in whole or in part, at any time on
                                   or after November 15, 2003, at the
                                   redemption prices set forth herein, plus
                                   accrued and unpaid interest thereon, if
                                   any, to the date of redemption. In
                                   addition, at any time prior to November 15,
                                   2001, we may redeem up to 35% of the
                                   principal amount of the Exchange Notes with
                                   the proceeds of one or more Public Equity
                                   Offerings, at any time or from time to time
                                   in part, at a redemption price of 109.750%
                                   of their principal amount, plus accrued and
                                   unpaid interest; provided, that at least
                                   $81.25 million aggregate principal amount
                                   of the Exchange Notes must remain
                                   outstanding after each such redemption.
 
Change Of Control................  Upon a Change of Control, as defined in the
                                   Indenture, we will be required to make an
                                   offer to purchase the Exchange Notes at a
                                   purchase price equal to 101% of their
                                   principal amount, plus accrued interest.
                                   However, we cannot assure you that we will
                                   have sufficient funds available at the time
                                   of any Change of Control to repurchase the
                                   Exchange Notes. See "Description of the
                                   Exchange Notes--Repurchases of Exchange
                                   Notes upon a Change of Control" and
                                   "Description of the Exchange Notes--Certain
                                   Definitions."
 
Restrictive Covenants............  The Indenture contains restrictive
                                   covenants that, among other things, limit
                                   our ability to:
 
                                   .  incur indebtedness;
                                   .  pay dividends;
                                   .  prepay subordinated indebtedness;
                                   .  repurchase capital stock;
                                   .  make investments;
                                   .  engage in transactions with stockholders
                                      and affiliates;
                                   .  create liens;
                                   .  sell assets; and
                                   .  engage in mergers and consolidations.
 
                                   These covenants, however, are subject to a
                                   number of important qualifications and
                                   exceptions. See "Description of the
                                   Exchange Notes--Covenants."
 
                                      11
<PAGE>
 
                      SUMMARY FINANCIAL AND OPERATING DATA
 
   You should read the following summary historical financial and operating
data together with the section entitled "Use of Proceeds" included elsewhere in
this prospectus, and our consolidated financial statements and notes thereto,
and the other financial data incorporated by reference into this prospectus.
 
<TABLE>
<CAPTION>
                                      Year Ended                      Nine Months Ended
                                     December 31,                       September 30,
                          -------------------------------------    -------------------------
                             1995       1996(a)     1997(b)(c)     1997(b)(c)       1998
                          ----------  -----------  ------------    -----------  ------------
                                                                   (Unaudited)  (Unaudited)
<S>                       <C>         <C>          <C>             <C>          <C>
Statement of Operations
 Data:
  Operating revenues....  $5,750,587  $66,518,585  $114,589,998    $82,804,136  $123,222,398
                          ----------  -----------  ------------    -----------  ------------
Operating expenses:
  Cost of service.......   3,149,231   38,756,287    54,550,348     39,292,394    58,619,396
  Selling, operations
   and administration
   expense..............   1,626,678   18,876,572    38,254,893     27,058,041    46,290,548
  Depreciation and
   amortization.........   1,267,882    6,438,074    18,332,451     12,791,330    21,434,941
                          ----------  -----------  ------------    -----------  ------------
    Total operating
     expenses...........   6,043,791   64,070,933   111,137,692     79,141,765   126,344,885
                          ----------  -----------  ------------    -----------  ------------
Operating income
 (loss).................    (293,204)   2,447,652     3,452,306      3,662,371    (3,122,487)
Equity in losses of
 unconsolidated
 subsidiaries...........    (258,242)  (1,589,812)          --             --            --
Interest expense........    (297,228)  (6,172,421)  (21,367,351)   (14,917,907)  (23,322,107)
Interest and other
 income.................      41,734      171,514     4,251,088      1,860,476     7,359,160
Other expense...........         --           --            --             --     (2,824,501)
                          ----------  -----------  ------------    -----------  ------------
Loss before income
 taxes, preacquisition
 losses and
 extraordinary item.....    (806,940)  (5,143,067)  (13,663,957)    (9,395,060)  (21,909,935)
Income tax benefit......    (302,567)  (1,233,318)   (3,324,466)    (2,191,974)   (5,611,225)
Preacquisition losses...         --           --         74,132         74,132           --
                          ----------  -----------  ------------    -----------  ------------
Loss from continuing
 operations.............    (504,373)  (3,909,749)  (10,265,359)    (7,128,954)  (16,298,710)
Extraordinary item (net
 of tax benefit)........         --           --       (507,515)      (507,515)   (8,436,170)
                          ----------  -----------  ------------    -----------  ------------
Net loss................  $ (504,373) $(3,909,749) $(10,772,874)   $(7,636,469) $(24,734,880)
                          ==========  ===========  ============    ===========  ============
Basic and diluted net
 loss per common share:
  Before extraordinary
   loss.................  $    (0.01) $     (0.10) $      (0.26)   $     (0.19) $      (0.32)
  Extraordinary loss....         --           --          (0.01)         (0.01)        (0.17)
                          ----------  -----------  ------------    -----------  ------------
  Net loss..............  $    (0.01) $     (0.10) $      (0.27)   $     (0.20) $      (0.49)
                          ==========  ===========  ============    ===========  ============
Basic weighted average
 common shares
 outstanding(d).........  38,107,350   38,107,350    40,249,816     38,107,350    50,861,035
Diluted weighted average
 common shares
 outstanding(d).........  38,203,852   38,203,852    40,249,816     38,203,852    50,861,035
Other Financial Data:
Capital expenditures....  $1,805,742  $ 6,172,660  $ 43,873,990    $25,251,029  $ 95,555,491
Cash flows provided by
 operating activities...   1,437,317    8,188,618     6,302,123      7,171,364     8,392,779
Cash flows used in
 investing activities...   1,478,758   72,693,282    93,854,836     87,384,575    72,261,182
Cash flows provided by
 financing activities...     180,000   65,149,983   180,624,908    105,896,838    77,144,296
EBITDA, as adjusted(e)..     974,678    8,885,726    21,784,757     16,453,701    18,312,454
Pro forma interest
 expense................         --           --     42,104,795(f)         --     33,039,579(g)
Ratio of earnings to
 fixed charges(h).......         --           --            --             --            --
</TABLE>
 
                                       12
<PAGE>
 
 
 
<TABLE>
<CAPTION>
                                                     At September 30, 1998
                                                  ----------------------------
                                                   Historical     Pro Forma
                                                  Consolidated Consolidated(I)
                                                  ------------ ---------------
                                                  (Unaudited)    (Unaudited)
<S>                                               <C>          <C>
Balance Sheet Data:
Working capital.................................. $109,730,814  $231,355,814
Property and equipment, net......................  222,967,810   222,967,810
Total assets.....................................  469,276,355   594,276,355
Long-term debt and capital lease obligations,
 including current portions......................  293,117,449   418,117,449
Total stockholders' equity.......................  127,639,028   127,639,028
</TABLE>
- --------
(a) On January 29, 1996, ITC Holding purchased DeltaCom, Inc. (which is now
    called ITC/\DeltaCom Communications, Inc.), an Alabama corporation
    ("DeltaCom"). DeltaCom became our wholly owned subsidiary in the
    reorganization of ITC Holding. DeltaCom's results of operations are
    included in the historical consolidated statement of operations data since
    the date of acquisition.
(b) On March 27, 1997, we purchased certain fiber and fiber-related assets,
    including a significant customer contract for network services in Georgia
    (the "Georgia Fiber Assets"). The results of operations for the Georgia
    Fiber Assets were included in the consolidated statements of operations
    beginning March 27, 1997. See Note 15 to the financial statements.
(c) On March 27, 1997, we purchased the remaining 64% partnership interest in
    Gulf States FiberNet, a partnership between ITC Holding and SCANA
    Communications, Inc. Gulf States FiberNet's revenues and expenses have been
    included in the consolidated statement of operations effective January 1,
    1997 with the preacquisition losses attributable to the previous owner from
    January 1, 1997 through March 27, 1997 deducted to determine our
    consolidated net loss for the year ended December 31, 1997.
(d) Pursuant to Staff Accounting Bulletin ("SAB") 98, for periods prior to our
    initial public offering, basic net loss per share is computed using the
    weighted average number of shares of common stock outstanding during the
    period. Diluted net loss per share is computed using the weighted average
    number of shares of common stock outstanding during the period and nominal
    issuances of common stock and common stock equivalents, regardless of
    whether they are anti-dilutive. For 1997 and for the nine months ended
    September 30, 1998, the effect of the Company's potential common stock
    equivalents is not included in the computation of diluted net loss per
    share as their effect is anti-dilutive.
(e) EBITDA, as adjusted, represents earnings before extraordinary item,
    preacquisition (earnings) losses, other income (expense), equity in losses
    of unconsolidated subsidiaries, net interest, income taxes, depreciation
    and amortization. EBITDA, as adjusted, is provided because it is a measure
    commonly used in the industry. EBITDA, as adjusted, is not a measurement of
    financial performance under generally accepted accounting principles and
    should not be considered an alternative to net income as a measure of
    performance or to cash flow as a measure of liquidity. EBITDA, as adjusted,
    is not necessarily comparable with similarly titled measures for other
    companies .
(f) Reflects (i) the sale by us of $200.0 million principal amount of our 11%
    Senior Notes due 2007 (the "1997 Senior Notes") after giving effect to the
    redemption of $70.0 million principal amount of the 1997 Senior Notes (the
    "Redemption"), (ii) the sale by us of $160.0 million principal amount of
    our 8 7/8% Senior Notes due 2008 (the "March 1998 Senior Notes"), (iii) the
    sale by us of the Outstanding Notes and (iv) the elimination of (A)
    indebtedness incurred by ITC Holding in 1996 to finance the acquisition of
    DeltaCom and to refinance existing DeltaCom debt and (B) indebtedness
    incurred by Gulf States Fiber Net, as if each had occurred on January 1,
    1997. After giving effect to (i) these adjustments to interest expense,
    (ii) a pro forma adjustment to reduce interest income relating to the
    release of restricted assets after giving effect to the Redemption, and
    (iii) an adjustment for the related pro forma income tax effects, as if
    each had occurred on January 1, 1997, pro forma net loss per share before
    extraordinary items would have been $(0.58).
 
                                       13
<PAGE>
 
(g) Reflects (i) the sale by us of the March 1998 Senior Notes, (ii) the
    Redemption, and (iii) the sale by us of the Outstanding Notes, as if each
    had occurred on January 1, 1997. After giving effect to: (i) these
    adjustments to interest expense, (ii) the elimination of the non-recurring
    charge of $1,864,171 net of tax, or $(0.04) per share, related to
    reclassifying our interest rate swap from a hedge of an anticipated
    transaction to a trading security as a result of the issuance of the March
    1998 Senior Notes (the "March 1998 Senior Notes Offering"), (iii) a pro
    forma adjustment to reduce interest income relating to the release of
    restricted assets after giving effect to the Redemption, and (iv) an
    adjustment for the related pro forma income tax effects, as if each had
    occurred on January 1, 1997, the pro forma net loss per share before
    extraordinary items would have been $(0.42).
(h) Earnings consist of income before income taxes, plus fixed charges. Fixed
    charges consist of interest charges and amortization of debt issuance costs
    and the portion of rent expense under operating leases representing
    interest (estimated to be one-third of such expense). Earnings were
    insufficient to cover fixed charges for the years ended December 31, 1995,
    1996, and 1997 and the nine months ended September 30, 1997 and 1998 by $.8
    million, $5.1 million, $13.7 million, $9.4 million, and $21.9 million,
    respectively. For the year ended December 31, 1997 and the nine months
    ended September 30, 1998, as adjusted to reflect the issuance of the
    Outstanding Notes as if it had occurred at the beginning of the period,
    earnings would have been insufficient to cover fixed charges by $34.7
    million and $29.2 million, respectively.
(i) Reflects the sale by us of the Outstanding Notes, net of estimated
    underwriting discounts and other offering costs of $3.4 million.

 
                                       14
<PAGE>
 
                                  RISK FACTORS
 
   You should read and carefully consider the following risk factors and the
other information in this prospectus before tendering your Outstanding Notes
for Exchange Notes. You should also consider the additional information set
forth in our SEC Reports on Forms 10-K, 10-Q and 8-K and in the other documents
incorporated by reference into this prospectus.
 
We Expect to Continue to Have Operating Losses and Negative Cash Flow After
Capital Expenditures Which May Result in Our Failure to Meet Our Working
Capital and Debt Service Requirements, Including Our Obligations Under the
Notes
 
   As we have implemented our business strategy to expand our
telecommunications service offerings, expand our fiber optic network and enter
new markets, we have experienced operating losses and negative cash flow after
capital expenditures. We expect this will continue during the next several
years as we continue to expand our business and make substantial capital
expenditures. If we cannot achieve or sustain operating profitability and
positive net cash flow, we may not be able to obtain the funds necessary to
continue our operations or to repay amounts due on our outstanding
indebtedness, including the Exchange Notes. We cannot assure you that we will
achieve or sustain profitability or positive net cash flow in the future. See
"--We May Not Have, or Be Able to Obtain, the Significant Amounts of Capital
That We Need to Expand Our Network, Operations and Services as Planned."
 
We May Not Have, or Be Able to Obtain, the Significant Amounts of Capital that
We Need to Expand Our Network, Operations and Services as Planned
 
   We need significant capital to expand our network, operations and services
in accordance with our business plans. We have continued to accelerate
expansion of our fiber optic network and our Retail Services segment for which
we have made significant capital expenditures. During 1998, we made capital
expenditures of approximately $148 million on a consolidated basis. We
currently estimate that our capital expenditures will total approximately
$130.0 million in 1999. In addition, we expect to make substantial capital
expenditures after 1999 and are in the process of evaluating those
requirements. If our estimates are inaccurate and/or we do not have access to
the capital that we require, we will need to change our business plans. This
could have a material adverse effect on our business, financial condition and
results of operations, and on our ability to repay the Exchange Notes.
 
   Our planned capital expenditures primarily will be for:
 
  .  continued development and construction of our fiber optic network,
     including transmission equipment;
 
  .  continued addition of facilities-based local telephone service to our
     bundle of integrated telecommunications services, including acquisition
     and installation of switches and related equipment;
 
  .  the addition of switching capacity, electrical equipment and additional
     collocation space in connection with the expansion of our provision of
     local telecommunications services to Internet service providers;
 
  .  market expansion; and
 
  .  infrastructure enhancements, principally for information systems.
 
   We expect to have sufficient funds to enable us to expand our business as
currently planned through 2002. We believe that these funds will be provided
by:
 
  .  approximately $121.6 million in net proceeds from the sale of the
     Outstanding Notes;
 
  .  cash on hand, which amounted to approximately $107.6 million at
     September 30, 1998;
 
  .  cash flow from operations; and
 
  .  borrowings available under our $50.0 million Credit Facility with
     NationsBank.

 
                                       15
<PAGE>
 
However, we cannot assure you that our capital resources will permit us to fund
the planned expansion of our network, operations and services.
 
   If our current sources of funds are unavailable to fund our business plans,
we may need to seek additional funds. These additional funds may come from
public and private equity and debt financings, but we cannot assure you that we
will be able to obtain any additional funds on a timely basis, on terms that
are acceptable to us or at all. Our inability to obtain the capital that we
need to implement our current business plans could have a material adverse
effect on our business, financial condition and results of operations, and on
our ability to repay the Exchange Notes. See "Description of Certain
Indebtedness."
 
   After 2002, or sooner if our estimates are not accurate for any reason, we
may need to seek additional financing:
 
  .  to fund capital expenditures;
 
  .  for working capital;
 
  .  to fund new business activities related to our current and planned
     businesses; and
 
  .  to acquire, or enter into joint ventures and strategic alliances with,
     other businesses.
 
   These additional funds may come from public and private equity and debt
financings, or from borrowing from one or more lenders. We cannot assure you
that we will be able to obtain any additional funds on a timely basis, on terms
that are acceptable to us, or at all. If we cannot generate or obtain these
additional funds, we may have to delay or abandon some or all of our future
plans or expenditures. This could have a material adverse effect on our
business, financial condition and results of operations, and on our ability to
repay the Exchange Notes.
 
   Our estimate of future capital requirements is a "forward-looking statement"
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The actual amount and timing of our future
capital requirements may differ substantially from our estimate due to factors
such as:
 
  .  regulatory, technological, or competitive developments;
 
  .  unforeseen delays;
 
  .  cost overruns;
 
  .  changes in demand for our services; and
 
  .  new market developments and opportunities.

 
                                       16
<PAGE>
 
We Have Significant Debt and We May Be Unable to Service that Debt
 
   We have significant debt. Set forth below are some of our recent results on
a consolidated basis, adjusted to reflect our issuance of the Outstanding Notes
as if it had occurred on the date, or at the beginning of the periods, shown.
 
<TABLE>
<CAPTION>
                                        Year Ended                 Nine Months Ended
     At September 30, 1998           December 31, 1997            September 30, 1998
     ---------------------           -----------------       ----------------------------
 <C>                           <C>                           <S>
 Indebtedness of $418.1        Earnings insufficient to      Earnings insufficient to
 million                       cover fixed charges by $34.7  cover fixed charges by $29.2
                               million                       million
 Stockholders' equity of       EBITDA, as adjusted, less     EBITDA, as adjusted, less
 $127.6 million                capital expenditures and      capital expenditures and
                               interest expense of negative  interest expense of negative
                               $64.2 million                 $110.3 million
</TABLE>
 
See "Summary Financial and Operating Data."
 
   We cannot assure you that we will be able to improve our earnings before
fixed charges or that we will be able to meet our debt service obligations,
including our obligations to repay the Exchange Notes. We will be in default
under the terms of our debt obligations if (1) we are unable to generate
sufficient cash flow or otherwise obtain funds necessary to make required
payments or (2) we otherwise fail to comply with the various covenants in our
debt obligations. A default would permit the holders of the indebtedness to
accelerate its maturity. This, in turn, could cause defaults under our other
indebtedness and would have a material adverse effect on our business,
financial condition and results of operations, and on our ability to repay the
Exchange Notes. See "Description of Certain Indebtedness."
 
   Even if we are able to meet our debt service obligations, the amount of debt
we have could adversely affect us in a number of ways, including by:
 
  .  limiting our ability to obtain any necessary financing in the future for
     working capital, capital expenditures, debt service requirements or
     other purposes;
 
  .  limiting our flexibility in planning for, or reacting to, changes in our
     business;
 
  .  placing us at a competitive disadvantage relative to our competitors who
     have lower levels of debt;
 
  .  making us more vulnerable to a downturn in our business or the economy
     generally; and
 
  .  requiring us to use a substantial portion of our cash flow from
     operations to pay principal and interest on our debt, instead of
     contributing those funds to other purposes, such as working capital and
     capital expenditures.
 
   To be able to meet our debt service requirements, including our obligations
under the Exchange Notes, we must successfully implement our business strategy.
Therefore, we will need to:
 
  .  expand our network;
 
  .  obtain and retain a significant number of customers; and
 
  .  experience significant and sustained growth in our cash flow.
 
   We cannot assure you that we will successfully implement our business
strategy or that we will be able to generate sufficient cash flow from
operating activities to meet our debt service obligations and working capital
requirements. Our ability to meet our obligations will be dependent upon our
future performance, which will be subject to prevailing economic conditions and
to financial, business and other factors.
 
   If the implementation of our business strategy is delayed or unsuccessful,
or if we do not generate sufficient cash flow to meet our debt service and
working capital requirements, we may need to seek additional financing. If we
are unable to obtain such financing on terms that are acceptable to us, we
could be forced to dispose of assets to make up for any shortfall in the
payments due on our indebtedness under circumstances
 
                                       17
<PAGE>
 
that might not be favorable to realizing the highest price for those assets. A
substantial portion of our assets consist of intangible assets, the value of
which will depend upon a variety of factors, including without limitation the
success of our business. As a result, we cannot assure you that our assets
could be sold quickly enough, or for amounts sufficient, to meet our
obligations.
 
Our Current Indebtedness Contains Restrictive Covenants
 
   We are subject to restrictions under:
 
  .  the Indenture;
 
  .  the indenture pursuant to which our $160.0 million principal amount of 8
     7/8% Senior Notes due March 1, 2008 were issued (the "March 1998 Note
     Indenture");
 
  .  the indenture pursuant to which our $200.0 million principal amount of
     11% Senior Notes due June 1, 2007 were issued (the "1997 Note
     Indenture"); and
 
  .  the Credit Facility.
 
   These restrictions affect, and in certain cases significantly limit or
prohibit, among other things, our ability and the ability of our subsidiaries
to:
 
  .  incur additional indebtedness;
 
  .  create liens;
 
  .  make investments;
 
  .  issue stock; and
 
  .  sell assets.
 
   The indentures restrict our ability to incur indebtedness, other than
indebtedness to finance the acquisition of equipment, inventory or network
assets, by requiring compliance with specified leverage ratios. In addition, if
and when we borrow funds under the Credit Facility, the Credit Facility will
require us to maintain certain financial ratios. We cannot assure you that we
will be able to maintain the required ratios following such borrowing. In
addition, these restrictive covenants may adversely affect our ability to
finance our future operations or capital needs, or to engage in other business
activities that may be in our interest. See "Description of Certain
Indebtedness."
 
We May Not Be Able to Manage Our Growth Successfully
 
   The expansion and development of our business will depend upon, among other
things, our ability to:
 
  .  successfully implement our sales and marketing strategy;
 
  .  evaluate markets;
 
  .  design fiber routes;
 
  .  secure financing;
 
  .  install facilities;
 
  .  acquire rights of way;
 
  .  obtain any required government authorizations;
 
  .  interconnect to, and collocate with, facilities owned by incumbent local
     exchange carriers; and
 
  .  obtain appropriately priced unbundled network elements and wholesale
     services from the incumbent local exchange carriers.
 
   These all must be accomplished in a timely manner, at reasonable cost and on
satisfactory terms and conditions. Our rapid growth, particularly in the
provision of Retail Services, has placed, and the growth we anticipate in our
other services may in the future also place, a significant strain on our
administrative,
 
                                       18
<PAGE>
 
operational and financial resources. Our ability to continue to manage our
growth successfully will require us to:
 
  .  enhance our operational, management, financial and information systems
     and controls; and
 
  .  hire and retain qualified sales, marketing, administrative, operating
     and technical personnel.
 
   We cannot assure you that we will be able to do so. In addition, as we
increase our service offerings and expand our targeted markets, there will be
additional demands on customer support, sales and marketing, administrative
resources and network infrastructure. These demands will be intensified if we
continue to accelerate our expansion plans. Our inability to manage our growth
effectively could have a material adverse effect on our business, results of
operations and financial condition, and on our ability to repay the Exchange
Notes.
 
Development and Expansion of Our Business, Including Through Acquisitions, is
Subject to Regulatory and Market Risks
 
   The successful implementation of our business strategy to provide an
integrated bundle of telecommunications services and expand our operations will
be subject to a variety of risks, including:
 
  .  competition and pricing;
 
  .  the availability of capital on favorable terms;
 
  .  regulatory uncertainties;
 
  .  operating and technical problems;
 
  .  the need to establish and maintain interconnection and collocation
     arrangements with incumbent local exchange carriers in our target
     markets; and
 
  .  the potential difficulties of offering local exchange services.
 
   In addition, the expansion of our business may involve acquisitions of other
telecommunications businesses and assets that, if made, could divert our
resources and management time and could require integration with our existing
operations. We cannot assure you that any acquisitions could be successfully
integrated into our operations or that any acquired business will perform as
expected. Our failure to implement our expansion and growth strategy
successfully would have a material adverse effect on our business, results of
operations and financial condition, and on our ability to repay the Exchange
Notes.
 
Our Business is Subject to Significant Competitive Pressures
 
   Our industry is highly competitive, and the level of competition,
particularly with respect to pricing, is increasing. For example, prices for
long distance services and for data transmission services have declined
substantially in recent years. These prices are expected to continue to
decline, which will adversely affect our gross margins as a percentage of
revenues. In addition, many of our existing and potential competitors have
financial, technical and other resources and customer bases and name
recognition far greater than our own. We cannot assure you that we will be able
to achieve or maintain adequate market share or revenues, or compete
effectively in any of our markets.
 
We Face Intense Competition From Incumbent Local Exchange Carriers, Especially
BellSouth
 
   Local telephone and intraLATA long distance services substantially similar
to those that we offer are also offered by the incumbent local exchange
carriers serving the markets that we serve or plan to serve. BellSouth is the
incumbent local exchange carrier and a particularly strong competitor in most
of these markets. BellSouth and other incumbent local exchange carriers already
have relationships with every customer. These carriers may be able to subsidize
services of the type we offer from service revenues not subject to effective
competition, which could result in even more intense price competition.

 
                                       19
<PAGE>
 
Other Competitors and Technologies in Our Industries May Further Increase
Competition
 
   Providers of Long Distance Services and Carriers' Carrier Services. We
compete with long distance carriers in the provision of interLATA long distance
services and Carriers' Carrier Services. The interLATA long distance market
consists of three major competitors, AT&T, MCI WorldCom and Sprint. Other
companies operate or are building networks in the southern United States and
other geographic areas. Our other competitors in the long distance services and
Carriers' Carrier Services markets are likely to include Regional Bell
Operating Companies providing out-of-region and, with the future removal of
regulatory barriers, in-region long distance services, other competitive local
exchange carriers, microwave and satellite carriers, and private networks owned
by large end-users. We also compete with direct marketers, equipment vendors
and installers, and telecommunications management companies with respect to
certain portions of our business.
 
   Wireless Providers. In the future, providers of wireless services may offer
products that increasingly become a substitute for, rather than only
supplement, a customer's wireline communications services. Competition with
providers of wireless telecommunications services may be intense. Many of our
potential wireless competitors have substantially greater financial, technical,
marketing, sales, manufacturing and distribution resources than our own. In
recent years, the Federal Communications Commission, or "FCC," has made
additional spectrum available through public auction for use in wireless
communications, including broadband local loops.
 
   New Transmission Technologies. We also may increasingly face competition
from companies offering long distance data and voice services over the
Internet. Such companies could enjoy a significant cost advantage because at
present they do not pay carrier access charges or universal service fees. Other
competitors are also deploying new transmission technologies in their networks
to upgrade capacity and reduce costs. For example, in June 1998, Sprint
announced its intention to offer voice, data and video services over its
nationwide ATM network, which Sprint anticipates will significantly reduce its
cost to provide such services. Sprint plans to bill its customers based upon
the amount of traffic carried, without regard to the time required to send the
traffic or the traffic's destination. Other advanced networks are being
deployed by other carriers.
 
   Competitive Local Exchange Carriers. We will face competition in the markets
in which we operate from one or more competitive local exchange carriers
operating fiber optic networks, in some cases in conjunction with the local
cable television operator. AT&T, MCI WorldCom, Sprint and others have begun to
offer local telecommunications services, either directly or in conjunction with
other competitive local exchange carriers in certain locations, and are
expected to expand that activity as opportunities created by the
Telecommunications Act develop. BellSouth has announced plans to provide local
service in areas of its region where it is not the incumbent local exchange
carrier, and to establish its own less regulated "competitive local exchange
carrier" subsidiaries.
 
Business Combinations and Strategic Alliances May Increase Competition
 
   A continuing trend toward business combinations and strategic alliances in
the telecommunications industry may further increase competition. For example,
the national long distance carrier WorldCom has merged with MCI. WorldCom also
has acquired competitive local exchange carriers, including MFS Communications
Company, Inc. and Brooks Fiber Properties, Inc. AT&T has acquired another
competitive local exchange carrier, Teleport Communications Group Inc., and has
announced plans to acquire Tele-Communications, Inc., a major cable television
operator. AT&T has also announced plans to enter into a joint venture with
British Telecommunications plc to combine the international assets and
operations of each company, including their existing international networks. On
May 11, 1998, SBC and Ameritech announced their merger which, if approved,
would mean that the seven original Regional Bell Operating Companies have been
reduced to four. Additionally, in June 1998, Qwest acquired LCI, which
combination created the nation's fourth-largest long distance carrier, and, in
July 1998, Bell Atlantic announced its intention to acquire GTE. These types of
strategic alliances and business combinations could put us at a significant
competitive disadvantage.
 
                                       20
<PAGE>
 
Recent Legislation and Regulation May Also Increase Competition
 
   Long Distance Services. The Telecommunications Act of 1996 creates the
foundation for increased competition in the long distance market from the
incumbent local exchange carriers. Such competition could affect the successful
implementation of our business plans. For example, certain provisions of the
Telecommunications Act eliminate previous prohibitions on the provision of both
retail and carriers' carrier interLATA long distance services by the Regional
Bell Operating Companies, subject to compliance by such companies with
requirements set forth in the Telecommunications Act and implemented by the
FCC. The FCC has rejected Regional Bell Operating Company applications to
provide interLATA services, including applications from BellSouth covering the
states of South Carolina and Louisiana. However, the FCC, states and other
parties are actively considering actions that could expedite approval of
interLATA service. BellSouth has filed new applications to provide such service
in Alabama, Georgia, Kentucky and North Carolina and is expected to apply for
authority in other states in the near future. In addition, legislation to relax
the interLATA restriction is expected to be introduced in the next session of
Congress. We could be adversely affected if the Regional Bell Operating
Companies, and particularly BellSouth, are allowed to provide wireline
interLATA long distance services within their own regions before local
competition is established.
 
   InterLATA Data or Enhanced Broadband Local Services. The FCC has recently
considered requests by the Regional Bell Operating Companies for relief from
the in-region interLATA service restrictions and interconnection requirements
of the Telecommunications Act and related regulation insofar as they are
providing interLATA data services or enhanced broadband local services. The FCC
denied the Regional Bell Operating Companies' requests, affirmed that the
Telecommunications Act provisions apply equally to voice and data services, and
proposed new rules to strengthen collocation and interconnection obligations of
incumbent local telephone companies to facilitate broadband data service
competition. However, the FCC also has proposed new rules that would give the
major incumbent local exchange carriers more freedom in these areas if they
offer such services through separate subsidiaries. Specifically, incumbent
local exchange carriers would be allowed to offer advanced data services
through such subsidiaries without dominant carrier regulation and without the
obligation to make network facilities and services of that affiliate available
to competitors. The FCC is expected to take action on this matter in early
1999. We are evaluating how such actions would impact our ability to compete
with BellSouth and other incumbent local exchange carriers.
 
   Additional Flexibility for Incumbent Local Exchange Carriers. The FCC is
considering proposed new policies and rules that would grant the incumbent
local exchange carriers additional flexibility in the pricing of interstate
access services, and states are considering or are expected to consider
incumbent local exchange carrier requests for similar regulatory relief with
respect to intrastate services. Such flexibility is likely to come first for
services offered in the business market. Any pricing flexibility or other
significant deregulation of the incumbent local exchange carriers could have a
material adverse effect on ITC/\DeltaCom. If the incumbent local exchange
carriers are permitted to engage in increased volume and discount pricing
practices prior to full competition in local services, or if the incumbent
local exchange carriers seek to delay implementation of interconnection by
competitors to their networks or charge excessive interconnection fees, our
results of operations and financial condition could be adversely affected.
 
   Access Charges; Universal Service. We also could be adversely affected by
FCC or state regulatory decisions affecting access charges and universal
service. Such decisions could increase our costs of providing service or limit
our ability to recover those costs from rates charged to customers. The effect
on ITC/\DeltaCom would be particularly adverse to the extent that it bears a
disproportionate share of these costs compared to its competitors. These
matters are the subject of ongoing regulation, and important issues regarding
the future of access and universal service charges remain to be resolved.
 
                                       21
<PAGE>
 
We Face Significant Challenges in Offering Local Services, Including the Need
to Make Significant Investments and Compete with Established Providers
 
   We will have to continue to make significant operating and capital
investments, and address numerous operating complexities, to implement our
local exchange services strategy. We are required to:
 
  .  develop new products, services and systems;
 
  .  develop new marketing initiatives;
 
  .  train our sales force in connection with selling these services; and
 
  .  implement the necessary billing and collecting systems for these
     services.
 
   In addition, we expect to continue to face significant pricing and product
competition from the Regional Bell Operating Companies, whose core business is
providing local dial tone service and who are currently the dominant providers
of services in their markets. We also will face significant competitive product
and pricing pressures from other incumbent local exchange carriers and from
other companies like us which attempt to compete in the local services market.
 
   We also expect that the addition of local service to our bundle of
telecommunications services will continue to have a negative impact on our
gross margin as a percentage of revenues. This is because the gross margin on
the resale of local services through incumbent local exchange carrier
facilities is lower than the gross margin on our other lines of business. Gross
margin means gross revenues less cost of services.
 
The Long Distance Transmission Industry is Subject to Pricing Pressures and
Risks of Industry Over-Capacity
 
   Since shortly after the AT&T divestiture in 1984, the long distance
transmission industry generally has experienced over-capacity and declining
prices. These trends have exerted downward pressure affecting our Carriers'
Carrier Services and we anticipate that prices for our Carriers' Carrier
Services will continue to decline over the next several years. Dramatic and
substantial price reductions in the long distance industry could force us to
reduce our prices significantly, which could have a material adverse effect on
our business, financial condition and results of operations, including our
ability to repay the Exchange Notes.
 
   We expect these price declines will occur because:
 
  .  some long distance carriers are expanding their capacity generally;
 
  .  other existing long distance carriers and potential new carriers are
     constructing new fiber optic and other long distance transmission
     networks in the southern United States;
 
  .  expansion and new construction of transmission networks is likely to
     create substantial excess capacity relative to demand in the short or
     medium term. Persons building such lines are likely to install fiber
     that provides substantially more transmission capacity than will be
     needed because the cost of the actual fiber is a relatively small
     portion of the overall cost of constructing new lines;
 
  .  recent technological advances may also greatly expand the capacity of
     existing and new fiber optic cable; and
 
  .  the marginal cost of carrying an additional call over existing fiber
     optic cable is extremely low.
 
   An increase in the capacity of our competitors could adversely affect our
business, even if we are also able to increase our capacity. If industry
capacity expands so much that available capacity exceeds overall demand along
any of our routes, severe additional pricing pressure could develop. See "--Our
Business is Subject to Significant Competitive Pressures."
 
 
                                       22
<PAGE>
 
The Local and Long Distance Industries are Subject to Significant Government
Regulation, and the Regulations May Change
 
   We are required to obtain authorizations from the FCC and state public
utility commissions to offer some of our telecommunications services. We are
also required to file tariffs for many of our services and to comply with local
license or permit requirements relating to installation and operation of our
network. Any of the following could have a material adverse effect on our
business, results of operations and financial condition, and on our ability to
repay the Exchange Notes:
 
  .  failure to maintain proper federal and state tariffs;
 
  .  failure to maintain proper state certifications;
 
  .  failure to comply with federal, state or local laws and regulations;
 
  .  failure to obtain and maintain required licenses and permits;
 
  .  burdensome license or permit requirements to operate in public rights-
     of-way; and
 
  .  burdensome or adverse regulatory requirements or developments.
 
   In addition, we recently entered the newly-created competitive local
telecommunications services industry. The local telephone services market was
opened to competition through the passage of the Telecommunications Act in 1996
and subsequent state and federal regulatory actions arising from the
Telecommunications Act. Because the FCC and the states are still implementing
many of the rules and policies necessary for local telephone competition, and
addressing other related issues, it is uncertain how successful the
Telecommunications Act will be in creating local competition. There is little
practical experience under the decisions that have been made to date. If we are
required to change or delay our offering of local services as a result of
changes in regulatory requirements, we may experience adverse effects on our
business, results of operations and financial condition, and on our ability to
repay the Exchange Notes.
 
We Depend on Access Service from Incumbent Local Exchange Carriers to Provide
Long Distance and Interexchange Private Services, and We Could be Adversely
Affected if We Do Not Benefit From Reduced Access Charges at Least as Much As
Our Competitors
 
   We depend on incumbent local exchange carriers to provide access service for
the origination and termination of our toll long distance traffic and
interexchange private lines. Historically, charges for such access service have
made up a significant percentage of the overall cost of providing long distance
service. In 1998, the FCC implemented changes to its interstate access rules
that, among other things, have reduced per-minute access charges and
substituted new per-line flat rate monthly charges. The FCC also approved
reductions in overall access rates, and established new rules to recover
subsidies to support universal service and other public policies. Additional
access charge adjustments will be implemented in the future. The impact of
these changes on us or our competitors is not yet clear. We could be adversely
affected if we do not experience access cost reductions proportionally
equivalent to those of our competitors. Insofar as new Internet-based
competitors continue to be exempt from these charges, they could enjoy a
significant cost advantage in this area.
 
If We Are Unable To Interconnect With BellSouth And Incumbent Local Exchange
Carriers On Acceptable Terms, Our Ability To Offer Local Telephone Services
Will Be Adversely Affected
 
   In August 1996, the FCC adopted rules and policies (1) implementing the
local competition provisions of the Telecommunications Act and (2) imposing
obligations on the incumbent local exchange carriers, including the Regional
Bell Operating Companies, to enter into interconnection agreements with new
competitive entrants like ITC/\DeltaCom. In January 1999, the Supreme Court
upheld the FCC's authority to adopt and implement these rules, but many aspects
of such implementation remain to be determined. Those obligations include
requirements that these local exchange carriers:
 
  .  offer wholesale local services for resale;
 
  .  sell their local network elements to competing carriers; and
 
  .  interconnect their networks with competitors' networks.
 
                                       23
<PAGE>
 
   Incumbent local exchange carriers meet these requirements under
interconnection agreements negotiated with competitive local exchange carriers
under regulatory supervision. Such agreements have been the subject of ongoing
disputes, and key issues remain open, including:
 
  .  whether the incumbent local exchange carriers retain the right to
     receive the access revenues associated with local service when a local
     service provider obtains all necessary elements, including loops and
     switches, from the incumbent local exchange carrier; and
 
  .  whether competitive local exchange carriers should receive reciprocal
     compensation from the incumbent local exchange carriers when the
     competitive carriers terminate traffic to Internet service providers.
 
   Our ability to successfully negotiate interconnection agreements on a timely
basis and on favorable terms is critical to our ability to provide local
services on a competitive and profitable basis. We cannot assure you that we
will be able to enter into or renew interconnection agreements that permit us
to offer local services at rates that are both profitable and competitive. Any
successful effort by the incumbent local exchange carriers to deny or
substantially limit our access to their network elements or wholesale services
would have a material adverse effect on our ability to provide local telephone
services. This would have a material adverse effect on our business, results of
operations, and financial condition, and on our ability to repay the Exchange
Notes.
 
   We depend on our interconnection agreements with incumbent local exchange
carriers such as BellSouth, GTE and Sprint to:
 
  .  provide local telephone service through access to local loops,
     termination service and, in some markets, central office switches of
     such carriers;
 
  .  resell local telephone services that we obtain from the incumbent local
     exchange carriers on a wholesale basis; and
 
  .  obtain operational support to ensure timely delivery to us of network
     elements and wholesale services from the incumbent local exchange
     carriers.
 
   Our interconnection agreement with BellSouth is our most significant
interconnection agreement, enabling us to provide local services in all nine
markets in which BellSouth operates. That agreement currently allows us to
provide local service on a resale basis or by purchasing all unbundled network
elements required to provide local service on a facilities basis, without
having to buy or build our own facilities. The terms of that interconnection
agreement, including interim pricing terms to which we and BellSouth have
agreed, have been approved by state regulatory authorities in all states in
which BellSouth operates. These interim pricing terms remain subject to review
and modification by such authorities. In addition, the BellSouth
interconnection agreement does not resolve all operational issues. We and
BellSouth are continuing to negotiate to resolve those issues.
 
   The BellSouth interconnection agreement expires on July 1, 1999. We have
begun negotiations with BellSouth to renew the terms of the interconnection
agreement. In the event we fail to agree with BellSouth on renewal terms by
July 1, 1999, the agreement provides that the parties will continue to exchange
traffic under the current agreement until such time as renewal terms,
conditions and prices are ordered by a state commission or negotiated by the
parties. The new terms, conditions and prices would then be effective
retroactive to July 1, 1999. We cannot assure you that we will be able to renew
the interconnection agreement with BellSouth on favorable terms, or at all.
 
   Under the Telecommunications Act, the Regional Bell Operating Companies will
not be permitted to provide in-region interLATA long distance services until
there is adequate competition in the local services industry. This provides
some incentive to the Regional Bell Operating Companies to provide access to
their facilities to competitive new entrants like ITC/\DeltaCom. We cannot
assure you, however, that once BellSouth or other Regional Bell Operating
Companies are permitted to offer long distance service, they will continue to
be willing to enter into interconnection agreements with us that will enable us
to provide local services on competitive and profitable terms.
 
                                       24
<PAGE>
 
We are Dependent Upon Rights of Way and Other Third Party Agreements to Expand
and Maintain Our Fiber Optic Network
 
   To construct and maintain our fiber optic network, we have obtained
easements, rights of way, franchises and licenses from various private parties,
including actual and potential competitors and local governments. We cannot
assure you that we will continue to have access to existing rights of way and
franchises after the expiration of our current agreements, or that we will
obtain additional rights necessary to extend our network on reasonable terms.
If a franchise, license or lease agreement were terminated and we were forced
to remove or abandon a significant portion of our network, such termination
could have a material adverse effect on our business, results of operations,
and financial condition, and on our ability to repay the Exchange Notes.
Similarly, our business plans could be adversely affected if our network
expansion is hindered through delays or denials of rights of way, easements or
related licenses on competitive terms.
 
We are Dependent on Our Network Infrastructure, Portions of Which We Do Not Own
 
   Network Agreements May be Terminated. We have effectively extended our
network with minimal capital expenditures by entering into marketing and
management agreements with three southern public utility companies to sell
long-haul private line services on the fiber optic networks owned by these
companies. Under these agreements, which have remaining terms ranging from
three to six years, we generally earn a commission based upon a percentage of
the gross revenues generated by the sale of capacity on the utility's networks.
We also have an agreement to buy and sell capacity with Carolinas Fibernet,
which manages fiber optic facilities in North Carolina and South Carolina.
Cancellation or non-renewal of any of these agreements could materially
adversely affect our business, results of operations, and financial condition,
and our ability to repay the Exchange Notes.
 
   Some of Our Agreements are Non-Exclusive. In addition, two of our three
agreements with the public utility companies are nonexclusive, and we may
encounter competition for capacity on the utilities' networks from other
service providers that enter into comparable arrangements with the utilities.
Any reduction in the amount of capacity that is made available to us could
adversely affect us. To the extent that we are unable to establish similar
arrangements in new markets, we may be required to make additional capital
expenditures to extend our fiber optic network.
 
   We May Experience Network Equipment Failures or Cable Cuts. Our business
also could be materially adversely affected by a cable cut or equipment failure
in our fiber optic network. A substantial portion of our owned and managed
fiber optic network is not protected by electronic redundancy in the event of a
total cable cut. Electronic redundancy enables us to reroute traffic to another
fiber in the same fiber sheath in the event of a partial fiber cut or
electronics failure.
 
We are Dependent on Certain Large Customers for a Significant Percentage of Our
Revenues and We Cannot Assure You That We Will Be Able to Retain Those
Customers
 
   The table below sets forth, for the year ended December 31, 1997 and the
nine months ended September 30, 1998, the percentage of our consolidated
revenues accounted for by our two largest Carriers' Carrier customers and our
five largest Retail Services customers.
 
<TABLE>
<CAPTION>
                                       Year Ended                 Nine Months Ended
                                    December 31, 1997            September 30, 1998
                              ----------------------------  ----------------------------
<S>                           <C>                           <C>
Two Largest Carriers'                                                             
 Carrier Customers..........  Approximately 12.5% of        Approximately 10.8% of
                              consolidated revenues         consolidated revenues 
Five Largest Retail Services                                                       
 Customers..................  Approximately 10.0% of        Approximately 11.7% of 
                              consolidated revenues         consolidated revenues  
</TABLE> 
 
                                       25
<PAGE>
 
   We cannot assure you that we will be able to retain our customers. The loss
of, or a significant decrease of business from, any of our largest customers
would have a material adverse effect on our business, results of operations and
financial condition, and on our ability to repay the Exchange Notes.
 
   For both Carriers' Carrier Services and Retail Services, our customers
generally have concurrent arrangements with more than one service provider.
This enables our customers to reduce their use of our services and switch to
other providers without incurring significant expense. Our agreements with our
customers generally provide that the customer may terminate service without
penalty in the event of specified types of outages in service and for other
defined causes. As of September 30, 1998, our Carriers' Carrier business had
remaining future long-term contract commitments totaling approximately $129.6
million. Some of those contractual commitments provide that, if the customer is
offered lower pricing with respect to any circuit by another carrier, the
customer's commitment to us will be reduced to the extent we do not match the
price for such circuit and the customer purchases such circuit from the other
carrier.
 
We Are Dependent on Sophisticated Billing, Customer Service and Information
Systems
 
   We depend on sophisticated information and processing systems to grow,
monitor costs, bill customers, provision customer orders and achieve operating
efficiencies. As we increase our provision of dial tone and switched local
access services, the need for enhanced billing and information systems will
also increase. Our inability to identify adequately all of our information and
processing needs, or to upgrade systems as necessary, could have a material
adverse effect on our ability to reach our objectives and on our financial
condition and results of operations, and on our ability to repay the Exchange
Notes.
 
Failure to Obtain Year 2000 Compliance May Have Adverse Effects on the Company
 
   The Year 2000 issue is the result of computer programs using two digits,
rather than four, to define the applicable year. Because of this programming
convention, software, hardware or firmware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including, among others, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Our Year 2000 readiness program is described below. However, we cannot know the
actual effects of the Year 2000 issue on our business and operations until the
Year 2000. If we and/or our major vendors, third party network service
providers, and other material service providers and customers fail to
adequately address our respective Year 2000 issues in a timely manner, this
could have a material adverse effect on our business, results of operations,
and financial condition, and on our ability to repay the Exchange Notes.
 
   We have undertaken a comprehensive program to address the Year 2000 issue
with respect to the following:
 
  .  our information technology and operating systems, including our network
     switching, customer service, call detail and billing systems;
 
  .  our non-information technology systems, such as buildings, plant,
     equipment and other infrastructure systems that may contain embedded
     microcontroller technology;
 
  .  the systems of our major vendors, third party network service providers
     and other material service providers, insofar as they relate to our
     business; and
 
  .  our major Carriers' Carrier and Retail Services customers.
 
   Our Year 2000 program involves:
 
  .  a wide-ranging assessment of the Year 2000 problems that may affect us;
 
  .  the development of remedies to address the problems discovered in the
     assessment phase;
 
  .  testing of the remedies; and
 
  .  the preparation of contingency plans to deal with worst case scenarios.

 
                                       26
<PAGE>
 
   As part of the assessment phase of this program, we have identified
substantially all of the major components of the systems described above. To
determine the extent to which those systems are vulnerable to the Year 2000
issue, we:
 
  .  evaluated our internally developed software applications; and
 
  .  made inquiries of substantially all of our significant hardware,
     software and other equipment vendors, third party network service
     providers, other material service providers and material customers
     requesting detailed, written information related to Year 2000
     compliance.
 
   To date, we have received and analyzed responses from a substantial majority
of our major vendors and service providers and from our significant Carriers'
Carrier and Retail Services customers. We are investigating, and intend to
closely monitor, the Year 2000 readiness of the three public utilities that own
and operate approximately 3,680 miles of our approximately 7,850-mile fiber
optic network. All of those utilities have indicated that they are addressing
the issue. In addition, we have begun to follow up with respect to those
entities that have not yet responded to our Year 2000 inquiries.
 
   Based upon the results to date of our assessment efforts, we have begun our
remediation and testing phase. We intend to complete this phase by the second
quarter of 1999. After we complete our internal, integrated systems testing, we
intend to conduct laboratory-simulated integrated systems testing in an effort
to demonstrate Year 2000 compliance of our systems as they interface with
external systems and equipment of major vendors, third party network providers,
other material service providers and customers. We have begun to develop
contingency plans to handle our most reasonably-likely worst case Year 2000
scenarios, which have not yet been identified fully. We intend to complete our
determination of worst case scenarios after we have received and analyzed
responses to substantially all of the inquiries we have made. Following that
phase, we intend to develop a timetable for completing our contingency plans.
 
   Through the end of 1998, we incurred approximately $1.1 million in costs for
our Year 2000 program. We currently estimate that, in 1999, we will incur
additional expenses which are not expected to exceed approximately $1.0 million
to complete our Year 2000 compliance work. These costs, which may vary from the
estimates, have been, and will continue to be, expensed as incurred.
 
We Are Subject to Risks Associated With Rapid Changes in Technology
 
   The telecommunications industry is subject to rapid and significant changes
in technology. In addition, we may be required to select in advance one
emerging technology over another, but it will be impossible to predict with any
certainty, at the time we are required to make our investment, which technology
will prove to be the most economic, efficient or capable of attracting customer
usage. Unexpected developments, or our failure to adapt to them, could have a
material adverse effect on our business, results of operations, financial
condition, and our ability to repay the Exchange Notes.
 
We Are a Holding Company and We are Dependent on Our Subsidiaries for Cash
Flows, Including to Pay Interest and Principal on the Notes; the Notes are
Subordinated to Debt of our Subsidiaries
 
   We are a holding company with no direct operations and no significant assets
other than the stock of our subsidiaries. We conduct all of our operations
through our subsidiaries. We are therefore dependent on cash flows from our
subsidiaries to meet our obligations, including the payment of interest and
principal on the Notes. Our subsidiaries are separate legal entities that have
no obligation to pay any amounts due on the Notes. They also have no obligation
to make any funds available to us for such purposes, whether by dividends,
loans or other payments.
 
   The Exchange Notes will be effectively subordinated in right of payment to
all liabilities of our subsidiaries. This means that in the event of a
bankruptcy, liquidation or reorganization, our subsidiaries must pay their
creditors in full before we could use their assets to pay you. If and to the
extent we are a creditor of a
 

                                       27
<PAGE>
 
subsidiary, our claims would still be effectively subordinated to any security
interest in the assets of such subsidiary held by other creditors. At September
30, 1998, our subsidiaries had approximately $44.9 million of liabilities,
excluding intercompany payables. These liabilities include approximately $3.3
million of indebtedness, including capital leases.
 
Our Secured Debt is Senior to the Exchange Notes
 
   The Exchange Notes will be unsecured and will be subordinated to our secured
debt. This means if we default on any of our secured debt, or if we are the
subject of a bankruptcy, liquidation, dissolution, reorganization or similar
proceeding, our secured creditors could foreclose on their collateral and
receive payment out of the proceeds of that collateral before we could use
those assets to pay you. If the value of the collateral is less than the amount
owed, our secured creditors would have equal rights with you to our remaining
assets. As a result, if our obligations to pay on the Exchange Notes are
accelerated because we have defaulted under the Exchange Notes, there may only
be a limited amount of assets available to satisfy any claims by holders of the
Exchange Notes.
 
   The indentures permit us and our subsidiaries to incur an unlimited amount
of debt to finance the acquisition of equipment, inventory and network assets
and to secure such debt. The indentures permit us and our subsidiaries to incur
additional secured debt--up to $100 million under the 1997 Note Indenture, and
up to $150 million under the Indenture and the 1998 Note Indenture, which may
be increased to $250 million under conditions specified in the indentures.
Under our Credit Facility, we have available borrowings of $50.0 million,
subject to compliance with the Credit Agreement. Our Credit Facility is secured
by substantially all of the assets of our subsidiaries.
 
Our Success Depends on Our Ability to Attract and Retain Key Personnel
 
   Our business is currently managed by a small number of key management and
operating personnel. We do not have any employment agreements with, nor do we
maintain "key man" insurance on, these employees. The loss of the services of
key personnel, or the inability to attract, recruit and retain sufficient or
additional qualified personnel, could have a material adverse effect on our
business, results of operations and financial condition, and on our ability to
repay the Exchange Notes.
 
Our Operating Results Could Vary Significantly from Period to Period Primarily
Due to High Expenses
 
   Our revenues and operating results could vary significantly from period to
period for many reasons, including:
 
  .  significant expenses associated with the construction and expansion of
     our network and services;
 
  .  competition and regulatory developments;
 
  .  changes in market growth rates for our products and services;
 
  .  availability or announcement of alternative technologies; and
 
  .  general economic conditions.
 
   These factors and any resulting fluctuations in our operating results will
make period to period comparisons of our financial condition less meaningful
and could have a material adverse effect on our business, results of
operations, financial condition and our ability to repay the Exchange Notes.
 
If You Are an Affiliate of ITC/\DeltaCom or a Broker-Dealer, Your Ability to
Transfer the Exchange Notes May Be Restricted
 
   You may generally sell the Exchange Notes without complying with the
registration requirements of the Securities Act, unless you are:
 
  .  an "affiliate" of ITC/\DeltaCom within the meaning of Rule 405 under the
     Securities Act;
 
                                       28
<PAGE>
 
  .  a broker-dealer that acquired Outstanding Notes as a result of market-
     making or other trading activities; or
 
  .  a broker-dealer that acquired Outstanding Notes directly from us for
     resale pursuant to Rule 144A or another available exemption under the
     Securities Act.
 
   "Affiliates" of ITC/\DeltaCom may sell Exchange Notes only in compliance with
the provisions of Rule 144 under the Securities Act or another available
exemption. The broker-dealers described above must deliver a prospectus in
connection with any resale of Exchange Notes. See "Plan of Distribution."
 
There is No Public Market for the Exchange Notes
 
   The Exchange Notes will constitute a new issue of securities for which there
is no established trading market. Although we have been advised by Morgan
Stanley & Co. Incorporated and First Union Capital Markets, the placement
agents for the Outstanding Notes, that, following completion of the Exchange
Offer, they intend to make a market in the Exchange Notes, they are not
obligated to do so and any market-making activities with respect to the
Exchange Notes may be discontinued at any time without notice.
 
   If a market for the Exchange Notes develops, any such market may cease at
any time. In addition, if a public trading market for the Exchange Notes
develops, future trading prices of the Exchange Notes will depend on many
factors, including, among other things:
 
  .  prevailing interest rates;
 
  .  the market for similar securities;
 
  .  our financial conditions and results of operations; and
 
  .  other factors beyond our control, including general economic conditions.
 
   We do not intend to list the Exchange Notes on any national securities
exchange or seek approval for quotation through any automated quotation system.
Accordingly, we cannot assure you:
 
  .  that an active public or other market will develop for the Exchange
     Notes; or
 
  .  of the liquidity of any trading market for the Exchange Notes following
     the Exchange Offer.
 
   If a trading market does not develop or develops but is not maintained,
holders of the Exchange Notes may experience difficulty in reselling the
Exchange Notes or may be unable to sell them at all.
 
If You Do Not Exchange Your Outstanding Notes, Your Outstanding Notes Will
Remain Subject to Transfer Restrictions
 
   We have not registered nor do we intend to register any of the Outstanding
Notes under the Securities Act or any state securities laws. Therefore, you may
not offer, sell or otherwise transfer any Outstanding Notes that remain
outstanding after consummation of the Exchange Offer:
 
  .  unless you comply with the registration requirements of the Securities
     Act and any other applicable securities laws; or
 
  .  pursuant to an exemption from all applicable laws or in a transaction
     not subject to those laws.
 
   In each case, you must comply with other applicable conditions and
restrictions.
 
   Outstanding Notes that remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting these restrictions on transfer.
In addition, if you do not exchange your Outstanding Notes pursuant to the
Exchange Offer, you will have no right to require us to register Outstanding
Notes, except under certain limited circumstances. To the extent that you do
not successfully tender your Outstanding Notes in the Exchange Offer, your
ability to sell Outstanding Notes could be adversely affected.
 
                                       29
<PAGE>
 
You Bear the Risks of Not Complying With Exchange Offer Procedures
 
   You are responsible for complying with all Exchange Offer procedures. You
will only receive Exchange Notes in exchange for your Outstanding Notes if,
prior to the Expiration Date, you deliver to the Exchange Agent:
 
  .  your Outstanding Notes or a book-entry confirmation of a book-entry
     transfer of the Outstanding Notes into the Exchange Agent's account at
     The Depository Trust Company, or "DTC";
 
  .  the Letter of Transmittal, or a facsimile thereof, properly completed
     and duly executed by you, with any required signature guarantees; and
 
  .  any other documents required by the Letter of Transmittal.
 
   You should allow sufficient time to ensure that the Exchange Agent receives
all required documents prior to the Expiration Date. Neither we nor the
Exchange Agent has any duty to inform you of defects or irregularities with
respect to the tender of your Outstanding Notes for exchange. See "The Exchange
Offer."



 
                                       30
<PAGE>
 
                              THE EXCHANGE OFFER
 
Purpose and Effect of the Exchange Offer
 
   In connection with the sale of the Outstanding Notes, we entered into the
Registration Rights Agreement with Morgan Stanley & Co. Incorporated and First
Union Capital Markets, the placement agents for the Outstanding Notes (the
"Placement Agents"). Pursuant to the Registration Rights Agreement, we agreed
to file and to use our best efforts to cause to become effective with the
Securities and Exchange Commission (the "SEC" or "Commission") a registration
statement with respect to the exchange of the Outstanding Notes for Exchange
Notes with terms identical in all material respects to the terms of the
Outstanding Notes. A copy of the Registration Rights Agreement has been filed
as an exhibit to the Registration Statement of which this prospectus is a part
(the "Registration Statement"). The Exchange Offer is being made to satisfy
our contractual obligations under the Registration Rights Agreement.
 
   By tendering Outstanding Notes in exchange for Exchange Notes, each holder
will represent to us that:
 
    (i)  any Exchange Notes to be received by such holder will be acquired
         in the ordinary course of such holder's business;
 
    (ii)  such holder has no arrangement or understanding with any person to
          participate in a distribution (within the meaning of the
          Securities Act) of the Exchange Notes;
 
    (iii) such holder is not an "affiliate" of ITC/\DeltaCom (within the
       meaning of Rule 405 under the Securities Act), or if such holder is
       an affiliate, that such holder will comply with the registration and
       prospectus delivery requirements of the Securities Act to the extent
       applicable;
 
    (iv)  such holder has full power and authority to tender, exchange,
          sell, assign and transfer the tendered Outstanding Notes;
 
    (v)  we will acquire good, marketable and unencumbered title to the
         tendered Outstanding Notes, free and clear of all liens,
         restrictions, charges and encumbrances; and
 
    (vi)  the Outstanding Notes tendered for exchange are not subject to any
          adverse claims or proxies.
 
   Each tendering holder also will warrant and agree that such holder will,
upon request, execute and deliver any additional documents that we or the
Exchange Agent deem to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Outstanding Notes tendered pursuant to
the Exchange Offer. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Outstanding Notes, where such Outstanding Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
 
   The Exchange Offer is not being made to, nor will we accept tenders for
exchange from, holders of Outstanding Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
 
   Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Outstanding Notes are
registered on the books of ITC/\DeltaCom or any other person who has obtained a
properly completed bond power from the registered holder, or any participant
in DTC whose name appears on a security position listing as a holder of
Outstanding Notes (which, for purposes of the Exchange Offer, include
beneficial interests in the Outstanding Notes held by direct or indirect
participants in DTC and Outstanding Notes held in definitive form).
 
Terms of the Exchange Offer
 
   ITC/\DeltaCom hereby offers, upon the terms and subject to the conditions
set forth in this prospectus and in the accompanying Letter of Transmittal, to
exchange $1,000 principal amount of Exchange Notes for each $1,000 principal
amount of Outstanding Notes properly tendered prior to the Expiration Date and
not properly
 
                                      31
<PAGE>
 
withdrawn in accordance with the procedures described below. Holders may tender
their Outstanding Notes in whole or in part in integral multiples of $1,000
principal amount.
 
   The form and terms of the Exchange Notes will be the same as the form and
terms of the Outstanding Notes except that:
 
    (i)  the Exchange Notes will have been registered under the Securities
         Act and therefore will not be subject to certain restrictions on
         transfer applicable to the Outstanding Notes; and
 
    (ii)  holders of the Exchange Notes will not be entitled to certain
          rights of holders of the Outstanding Notes under the Registration
          Rights Agreement.
 
   The Exchange Notes will evidence the same indebtedness as the Outstanding
Notes (which they will replace) and will be issued pursuant to, and entitled to
the benefits of, the Indenture.
 
   The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. We reserve the right,
in our sole discretion, to purchase or make offers for any Outstanding Notes
that remain outstanding after the Expiration Date or, as set forth under "--
Conditions to the Exchange Offer," to terminate the Exchange Offer. We also
reserve the right, to the extent permitted by applicable law, to purchase
Outstanding Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer. As of the date of this prospectus, $125.0 million
aggregate principal amount of Outstanding Notes is outstanding.
 
   Holders of Outstanding Notes do not have any appraisal or dissenters' rights
in connection with the Exchange Offer. Outstanding Notes that are not tendered,
or are tendered but not accepted, in connection with the Exchange Offer will
remain outstanding and continue to accrue interest in accordance with their
terms, but will not retain any rights under the Registration Rights Agreement.
See "Risk Factors--If You Do Not Exchange Your Outstanding Notes, Your
Outstanding Notes Will Remain Subject to Transfer Restrictions."
 
   If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering holder thereof promptly after the
Expiration Date.
 
   Holders who tender Outstanding Notes in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Outstanding Notes in connection with the Exchange Offer. The
Company will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
 
   THE BOARD OF DIRECTORS OF ITC/\DELTACOM MAKES NO RECOMMENDATION TO HOLDERS OF
OUTSTANDING NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION,
NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF
OUTSTANDING NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OUTSTANDING NOTES TO
TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR FINANCIAL POSITION AND
REQUIREMENTS.
 
Expiration Date; Extensions, Amendments
 
   The term "Expiration Date" means 5:00 p.m., New York City time, on March 16,
1999, unless we extend the Exchange Offer (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended).
 
                                       32
<PAGE>
 
   We expressly reserve the right, in our sole and absolute discretion, subject
to applicable law, at any time and from time to time:
 
    (i)  to delay the acceptance of the Outstanding Notes for exchange;
 
    (ii)  to terminate the Exchange Offer (whether or not any Outstanding
          Notes have theretofore been accepted for exchange) if we
          determine, in our sole and absolute discretion, that any of the
          events or conditions referred to under "--Conditions to the
          Exchange Offer" has occurred or exists or has not been satisfied;
 
    (iii) to extend the Expiration Date of the Exchange Offer and retain
          all Outstanding Notes tendered pursuant to the Exchange Offer,
          subject, however, to the right of holders of Outstanding Notes to
          withdraw their tendered Outstanding Notes as described under "--
          Withdrawal Rights"; and
 
    (iv)  to waive any condition or otherwise amend the terms of the
          Exchange Offer in any respect (whether or not any Outstanding
          Notes have theretofore been accepted for exchange).
 
   If the Exchange Offer is amended in a manner that we determine constitutes a
material change, or if we waive a material condition of the Exchange Offer, we
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders of the Outstanding Notes, and we
will extend the Exchange Offer to the extent required by Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
 
   Any such delay in acceptance, termination, extension or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent (any
such oral notice to be promptly confirmed in writing) and by making a public
announcement thereof, and such announcement in the case of an extension will be
made no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which we may choose to make any public announcement, and subject to applicable
laws, we will have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by issuing a release to an appropriate
news agency.
 
Acceptance for Exchange and Issuance of Exchange Notes
 
   Upon the terms and subject to the conditions of the Exchange Offer, we will
exchange, and will issue to the Exchange Agent, Exchange Notes for Outstanding
Notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "--Withdrawal Rights") promptly after the Expiration Date.
 
   In all cases, delivery of Exchange Notes in exchange for Outstanding Notes
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of:
 
    (i)  Outstanding Notes or a book-entry confirmation of a book-entry
         transfer of Outstanding Notes into the Exchange Agent's account at
         DTC;
 
    (ii)  the Letter of Transmittal (or facsimile thereof), properly
          completed and duly executed, with any required signature
          guarantees; and
 
    (iii) any other documents required by the Letter of Transmittal.
 
   Accordingly, the delivery of Exchange Notes might not be made to all
tendering holders at the same time, and will depend upon when Outstanding
Notes, book-entry confirmations with respect to Outstanding Notes and other
required documents are received by the Exchange Agent.
 
   The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Outstanding Notes into the Exchange Agent's account at DTC.
 
   Subject to the terms and conditions of the Exchange Offer, we will be deemed
to have accepted for exchange, and thereby exchanged, Outstanding Notes validly
tendered and not withdrawn as, if and when we
 
                                       33
<PAGE>
 
give oral or written notice to the Exchange Agent (any such oral notice to be
promptly confirmed in writing) of our acceptance of such Outstanding Notes for
exchange pursuant to the Exchange Offer. Our acceptance for exchange of
Outstanding Notes tendered pursuant to any of the procedures described above
will constitute a binding agreement between the tendering holder and
ITC/\DeltaCom upon the terms and subject to the conditions of the Exchange
Offer. The Exchange Agent will act as our agent for the purpose of receiving
tenders of Outstanding Notes, Letters of Transmittal and related documents, and
as agent for tendering holders for the purpose of receiving Outstanding Notes,
Letters of Transmittal and related documents and transmitting Exchange Notes to
holders who validly tendered Outstanding Notes. Such exchange will be made
promptly after the Expiration Date. If for any reason whatsoever the acceptance
for exchange or the exchange of any Outstanding Notes tendered pursuant to the
Exchange Offer is delayed (whether before or after our acceptance for exchange
of Outstanding Notes), or if we extend the Exchange Offer or are unable to
accept for exchange or exchange Outstanding Notes tendered pursuant to the
Exchange Offer, then, without prejudice to our rights set forth in this
prospectus, the Exchange Agent may, nevertheless, on our behalf and subject to
Rule 14e-1(c) under the Exchange Act, retain tendered Outstanding Notes and
such Outstanding Notes may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "--Withdrawal
Rights."
 
Procedures for Tendering Outstanding Notes
 
   Valid Tender. Except as set forth below, in order for Outstanding Notes to
be validly tendered pursuant to the Exchange Offer, either (i) (a) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at the address set forth under "--Exchange
Agent" prior to the Expiration Date and (b) tendered Outstanding Notes must be
received by the Exchange Agent, or such Outstanding Notes must be tendered
pursuant to the procedures for book-entry transfer set forth below and a book-
entry confirmation must be received by the Exchange Agent, in each case prior
to the Expiration Date, or (ii) the guaranteed delivery procedures set forth
below must be complied with.
 
   If less than all of the Outstanding Notes held by a holder are tendered by
such holder, such holder should fill in the amount of Outstanding Notes being
tendered in the appropriate box on the Letter of Transmittal. The entire amount
of Outstanding Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
 
   If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by us, evidence
satisfactory to us, in our sole discretion, of such person's authority to so
act must be submitted.
 
   Any beneficial owner of Outstanding Notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
 
   THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY AND PROPER INSURANCE SHOULD BE OBTAINED. NO
LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
 
                                       34
<PAGE>
 
   Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Outstanding Notes at DTC for purposes of the
Exchange Offer within two business days after the date of this prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the Outstanding Notes by
causing DTC to transfer such Outstanding Notes into the Exchange Agent's
account at DTC in accordance with DTC's procedures for transfers. However,
although delivery of Outstanding Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any
required signature guarantees and any other required documents, must in any
case be delivered to and received by the Exchange Agent at its address set
forth under "--Exchange Agent" prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
 
   DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
                                    AGENT.
 
   Signature Guarantees. Certificates for Outstanding Notes need not be
endorsed and signature guarantees on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are unnecessary unless (a) a certificate for
Outstanding Notes is registered in a name other than that of the person
surrendering the certificate or (b) a registered holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Outstanding Notes must be duly endorsed or accompanied by a properly
executed bond power, with the endorsement or signature on the bond power and
on the Letter of Transmittal or the notice of withdrawal, as the case may be,
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein):
 
     (i)   a bank;
 
     (ii)  a broker, dealer, municipal securities broker or dealer or
           government securities broker or dealer;
 
     (iii) a credit union;
 
     (iv)  a national securities exchange, registered securities association
           or clearing agency; or
 
     (v)   a savings association that is a participant in a Securities Transfer
           Association (each an "Eligible Institution"), unless surrendered on
           behalf of such Eligible Institution.
 
See Instructions 2 and 5 to the Letter of Transmittal.
 
   Guaranteed Delivery. If a holder desires to tender Outstanding Notes
pursuant to the Exchange Offer and the certificates for such Outstanding Notes
are not immediately available or time will not permit all required documents
to reach the Exchange Agent before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Outstanding
Notes may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
 
     (i)   such tenders are made by or through an Eligible Institution;
 
     (ii)  prior to the Expiration Date, the Exchange Agent receives from such
  Eligible Institution a properly completed and duly executed Notice of
  Guaranteed Delivery, substantially in the form accompanying the Letter of
  Transmittal, setting forth the name and address of the holder of
  Outstanding Notes and the amount of Outstanding Notes tendered, stating
  that the tender is being made thereby and guaranteeing that within three
  New York Stock Exchange trading days after the date of execution of the
  Notice of Guaranteed Delivery, the certificates for all physically tendered
  Outstanding Notes, in proper form for transfer, or a book-entry
  confirmation, as the case may be, and any other documents required by the
  Letter of Transmittal will be deposited by the Eligible Institution with
  the Exchange Agent. The Notice of Guaranteed Delivery may be delivered by
  hand, or transmitted by facsimile or mail to the Exchange Agent and must
  include a guarantee by an Eligible Institution in the form set forth in the
  Notice of Guaranteed Delivery; and
 
                                      35
<PAGE>
 
     (iii) the certificates (or book-entry confirmation) representing all
  tendered Outstanding Notes, in proper form for transfer, together with a
  properly completed and duly executed Letter of Transmittal, with any
  required signature guarantees and any other documents required by the
  Letter of Transmittal, are received by the Exchange Agent within three New
  York Stock Exchange trading days after the date of execution of the Notice
  of Guaranteed Delivery.
 
   Determination of Validity. We will make, in our sole discretion, all
determinations regarding the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered
Outstanding Notes. Our determination shall be final and binding on all parties.
We reserve the absolute right, in our sole and absolute discretion, to reject
any and all tenders we determine are not in proper form or the acceptance for
exchange of which may, in the view of our counsel, be unlawful. We also reserve
the absolute right, subject to applicable law, to waive any of the conditions
of the Exchange Offer as set forth under "--Conditions to the Exchange Offer"
or any defect or irregularity in any tender of Outstanding Notes of any
particular holder whether or not similar defects or irregularities are waived
in the case of other holders.
 
   Our interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding on all parties. No tender of Outstanding Notes will be deemed
to have been validly made until all defects or irregularities with respect to
such tender have been cured or waived. Neither we, any of our affiliates or
assigns, the Exchange Agent or any other person shall be under any duty to give
any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
 
Resales of Exchange Notes
 
   Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties unrelated to ITC/\DeltaCom, we believe
that holders of Outstanding Notes (other than any holder that is (i) a broker-
dealer that acquired Outstanding Notes as a result of market-making activities
or other trading activities or (ii) an "affiliate" of ITC/\DeltaCom within the
meaning of Rule 405 under the Securities Act) who exchange their Outstanding
Notes for Exchange Notes pursuant to the Exchange Offer may offer for resale,
resell and otherwise transfer such Exchange Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any person
to participate in a distribution (within the meaning of the Securities Act) of
such Exchange Notes. Any holder who tenders Outstanding Notes in the Exchange
Offer with the intention to participate, or for the purpose of participating,
in a distribution of the Exchange Notes or who is an affiliate of ITC/\DeltaCom
may not rely upon such interpretations by the staff of the Commission and, in
the absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Failure to comply with such requirements in such
instance may result in such holder incurring liabilities under the Securities
Act for which the holder is not indemnified by ITC/\/\DeltaCom. The staff of the
Commission has not considered the Exchange Offer in the context of a no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Outstanding Notes, where such Outstanding Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. We have agreed that, for a period not to exceed 180 days after
the Expiration Date, we will furnish additional copies of this prospectus, as
amended or supplemented, to any broker-dealer that reasonably requests such
documents for use in connection with any such resale. See "Plan of
Distribution."
 
Withdrawal Rights
 
   Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to the Expiration Date.
 
                                       36
<PAGE>
 
   In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" prior to
the Expiration Date. Any such notice of withdrawal must specify the name of the
person who tendered the Outstanding Notes to be withdrawn, the aggregate
principal amount of Outstanding Notes to be withdrawn, and (if certificates for
such Outstanding Notes have been tendered) the name of the registered holder of
the Outstanding Notes as set forth on the Outstanding Notes, if different from
that of the person who tendered such Outstanding Notes. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, the notice of withdrawal must specify the certificate number on the
particular Outstanding Notes to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Outstanding Notes tendered for the account of an Eligible Institution. If
Outstanding Notes have been tendered pursuant to the procedures for book-entry
transfer set forth in "--Procedures for Tendering Outstanding Notes," the
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of Outstanding Notes and must otherwise comply
with the procedures of DTC. Withdrawals of tenders of Outstanding Notes may not
be rescinded. Outstanding Notes properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time prior to the Expiration Date by following any of the procedures
described above under "--Procedures for Tendering Outstanding Notes."
 
   We will make, in our sole discretion, all determinations regarding the
validity, form and eligibility (including time of receipt) of such withdrawal
notices. Our determination shall be final and binding on all parties. Neither
ITC/\DeltaCom, any affiliates of ITC/\DeltaCom, the Exchange Agent or any other
person shall be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any Outstanding Notes which have been tendered
but which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
 
Interest on the Exchange Notes
 
   Interest on the Exchange Notes will accrue at the rate of 9 3/4% per annum
and will be payable in cash semi-annually on May 15 and November 15 of each
year, commencing May 15, 1999.
 
Conditions to the Exchange Offer
 
   Notwithstanding any other provisions of the Exchange Offer or any extension
of the Exchange Offer, we will not be required to accept for exchange, or to
exchange, any Outstanding Notes for any Exchange Notes, and may, at any time
and from time to time, terminate the Exchange Offer or waive any conditions to
or amend the Exchange Offer in any respect (whether or not any Outstanding
Notes have theretofore been accepted for exchange), if we determine, in our
sole and absolute discretion, that the Exchange Offer violates applicable law
or any applicable interpretation of the staff of the Commission.
 
   If such waiver or amendment constitutes a material change to the Exchange
Offer, we will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders of the
Outstanding Notes, and we will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
 
Certain United States Federal Income Tax Consequences
 
   The exchange of the Outstanding Notes for the Exchange Notes will not be a
taxable exchange for federal income tax purposes, and holders of Outstanding
Notes should not recognize any taxable gain or loss or any interest income as a
result of such exchange.
 
                                       37
<PAGE>
 
Exchange Agent
 
   United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
 
      By Facsimile                  By Mail            By Hand Before 4:30 p.m.
                                                              (E.S.T.)         
                               
      (212) 780-0592           United States Trust        United States Trust
   Attention: Customer        Company of New York        Company of New York
         Service                 P.O. Box 843               111 Broadway
  Confirm by telephone:         Cooper Station        New York, New York 10006
     (800) 548-6565        New York, New York 10276    Attention: Lower Level
                             Attention: Corporate      Corporate Trust Window
                                Trust Services
 
           By Overnight Courier and By Hand after 4:30 p.m. (E.S.T.)
 
                    United States Trust Company of New York
                            770 Broadway, 13th Floor
                            New York, New York 10003
 
   DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
 
Fees and Expenses
 
   ITC/\DeltaCom will bear all of the expenses of soliciting tenders. The
principal solicitation is being made by mail. Additional solicitation may be
made personally or by telephone or other means by officers, directors or
employees of ITC/\DeltaCom.
 
   We have not retained any dealer-manager or similar agent in connection with
the Exchange Offer. We will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. We have agreed to pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection with such
services. We will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this prospectus and related documents to the beneficial
owners of the Outstanding Notes, and in handling or tendering for their
customers.
 
   Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that if
Exchange Notes are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Outstanding Notes tendered, or
if a transfer tax is imposed for any reason other than the exchange of
Outstanding Notes in connection with the Exchange Offer, then the amount of any
such transfer tax (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
 
                                       38
<PAGE>
 
                                USE OF PROCEEDS
 
   The Exchange Offer is intended to satisfy certain obligations of
ITC/\DeltaCom under the Registration Rights Agreement. We will not receive any
proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this
prospectus, we will receive, in exchange, an equal number of Outstanding Notes
in like principal amount. The form and terms of the Exchange Notes will be
identical in all material respects to the form and terms of the Outstanding
Notes, except as otherwise described herein under "The Exchange Offer--Terms of
the Exchange Offer."
 
   The net proceeds to ITC/\DeltaCom from the sale of the Outstanding Notes were
approximately $121.6 million, after deducting the estimated underwriting
discounts and commissions and other expenses payable by us in connection with
the offering of the Outstanding Notes. We intend to use the net proceeds from
the offering of the Outstanding Notes as follows:
 
  .  to fund an accelerated market expansion of our telecommunications
     business, including expansion of our fiber optic network, expansion of
     our Internet Service Provider (ISP) local telecommunications services
     and the opening of new sales offices; and
 
  .  for additional working capital and other general corporate purposes.
 
   We currently intend to allocate substantial proceeds to each of the
foregoing uses. The precise allocation of funds among these uses, however, will
depend on future technological, regulatory and other developments in or
affecting our business, the competitive climate in which we operate and the
emergence of future opportunities.
 
   As part of our business strategy, we intend to continue to evaluate
potential acquisitions, joint ventures and strategic alliances in areas such as
wireline and wireless services, network construction and infrastructure and
Internet access. We have no definitive agreement with respect to any
acquisition, although from time to time we have discussions with other
companies and assess opportunities on an on-going basis. A portion of the net
proceeds from the offering of the Outstanding Notes may be used to fund any
such acquisitions, joint ventures and strategic alliances.
 
   Pending the foregoing uses, we have invested the net proceeds of the
offering of the Outstanding Notes in short-term, interest-bearing, investment
grade securities.
 
                                       39
<PAGE>
 
                                 CAPITALIZATION
 
   The following table sets forth, as of September 30, 1998, (i) the actual
consolidated capitalization of ITC/\DeltaCom and (ii) the consolidated
capitalization of ITC/\DeltaCom adjusted for the offering of the Outstanding
Notes as if it had occurred on that date. The data set forth below should be
read in conjunction with "Use of Proceeds," the financial statements and notes
thereto and the other financial data included elsewhere, or incorporated by
reference, in this prospectus.
 
<TABLE>
<CAPTION>
                                                       September 30, 1998
                                                  -----------------------------
                                                   Historical   As Adjusted (a)
                                                  ------------  ---------------
                                                          (Unaudited)
<S>                                               <C>           <C>
Long term debt and capital lease obligations:
  Capital lease obligations, including current
   portion of $752,470........................... $  2,934,544   $  2,934,544
  1997 Senior Notes..............................  130,000,000    130,000,000
  March 1998 Senior Notes........................  159,849,331    159,849,331
  Outstanding Notes..............................          --     125,000,000
  Other, current.................................      333,574        333,574
                                                  ------------   ------------
    Total long-term debt and capital lease
     obligations, including current portion......  293,117,449    418,117,449
                                                  ------------   ------------
Stockholders' equity:
  Preferred stock, $.01 par value, $7.40
   liquidation preference, 5,000,000 shares
   authorized; 1,480,771 shares issued and
   outstanding at September 30, 1998.............       14,808         14,808
  Common Stock, $.01 par value, 90,000,000 shares
   authorized; 51,284,782 shares issued and
   outstanding at
   September 30, 1998 (b)........................      512,848        512,848
  Additional paid-in capital.....................  166,855,588    166,855,588
  Accumulated deficit............................  (39,744,216)   (39,744,216)
                                                  ------------   ------------
    Total stockholders' equity...................  127,639,028    127,639,028
                                                  ------------   ------------
    Total capitalization......................... $420,756,477   $545,756,477
                                                  ============   ============
</TABLE>
- --------
(a) Includes the offering of the Outstanding Notes.
(b) Excludes 9,424,948 shares of Common Stock issuable upon the exercise of
    options outstanding as of September 30, 1998.
 
                                       40
<PAGE>
 
                      DESCRIPTION OF CERTAIN INDEBTEDNESS
 
Credit Facility
 
   Our wholly owned subsidiary, Interstate FiberNet, Inc. (the "Borrower"), has
a credit agreement with NationsBank and certain other lenders (the "Credit
Agreement"), which provides for a $50.0 million revolving Credit Facility to be
used for working capital and other purposes, including capital expenditures and
permitted acquisitions. To date, no amounts have been borrowed under the Credit
Facility.
 
   Set forth below is a summary of the material provisions of the Credit
Facility. The following summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Credit Agreement.
Certain capitalized terms used in this description of the Credit Facility are
defined at the end of this section.
 
   Amounts drawn under the Credit Facility will bear interest, at the
Borrower's option, at either the Base Rate or the LIBOR Rate, plus an
Applicable Margin. The Applicable Margin will be an annual rate which will
fluctuate based on the Borrower's Total Leverage Ratio and which will be
between 1.125% and 0% for Base Rate borrowings and between 2.125% and 1.0% for
LIBOR Rate borrowings.
 
   The Credit Agreement requires the Borrower to repay indebtedness outstanding
under the Credit Facility with the net cash proceeds from certain sales of
assets by ITC/\DeltaCom, the Borrower or the Borrower's subsidiaries other than
in the ordinary course of business and from certain public or private issuances
of equity securities or debt securities by ITC/\DeltaCom, the Borrower or the
Borrower's subsidiaries. In addition, the amount of credit available to the
Borrower under the Credit Agreement would be permanently reduced by an amount
equal to the amount of each such repayment, as calculated in the manner
required by the Credit Agreement.
 
   The Borrower's obligations under the Credit Facility are guaranteed by
ITC/\DeltaCom and the Borrower's subsidiaries and are secured by a first
priority lien on all current and future assets and properties of the Borrower
and its subsidiaries, except for certain contract rights and interests in real
estate, and by a first priority pledge of the stock of the Borrower and its
subsidiaries.
 
   The Credit Agreement contains negative covenants limiting the ability of the
Borrower, the Borrower's current and future subsidiaries and ITC/\DeltaCom to
incur debt, create liens, pay dividends, make distributions or stock
repurchases, make investments or capital expenditures, change their business,
issue capital stock, engage in transactions with affiliates, sell assets,
engage in mergers and acquisitions and assume or make guaranties. In addition,
the Credit Agreement contains affirmative covenants, including covenants
requiring compliance with laws, maintenance of corporate existence, licenses,
properties and insurance, payment of taxes and performance of other material
obligations and the delivery of financial and other information.
 
   The Credit Agreement restricts the Borrower from declaring and paying
dividends or other distributions to ITC/\DeltaCom. However, the Borrower is
permitted to pay dividends to ITC/\DeltaCom to pay scheduled interest on (i) the
1997 Senior Notes beginning after the sixth scheduled interest payment, (ii)
the March 1998 Senior Notes, and (iii) the Notes, unless at the time of such
dividend or distribution an event of default (other than an event of default
resulting solely from the breach of a representation or warranty) under the
Credit Agreement exists or would be caused by such dividend or distribution;
provided that, with respect to any event of default (other than a payment
default, a bankruptcy event with respect to ITC/\DeltaCom, the Borrower or (with
respect to the March 1998 Senior Notes and the Notes) any Significant
Subsidiary of ITC/\DeltaCom, or an event in which any portion of the assets of
the Borrower and its subsidiaries that has generated more than 5% of the
Operating Cash Flow for the most recently completed twelve-month period shall
not be operating for a period in excess of 30 days), the Borrower will not be
prohibited for more than 180 days from paying dividends to ITC/\Deltacom to pay
scheduled cash interest due and payable on the 1997 Senior Notes, the March
1998 Senior Notes and the Notes.
 
 
                                       41
<PAGE>
 
   The Credit Agreement also requires the Borrower to comply with certain
financial tests and to maintain certain financial ratios on a consolidated
basis. The Borrower must maintain:
 
(i)    a Total Leverage Ratio no greater than 9.5:1.0 through June 30, 1999,
       8.75 to 1.0 from July 1, 1999 to June 30, 2000, 7.5 to 1.0 from July 1,
       2000 to June 30, 2001, 6.0 to 1.0 from July 1, 2001 to June 30, 2002 and
       4.5 to 1.0 from July 1, 2002 and thereafter, provided that compliance
       with this ratio is not required until such time, if any, as the Borrower
       obtains an extension of credit under the Credit Agreement;
 
(ii)   a Senior Leverage Ratio no greater than 2.75:1.0 through June 30, 2000
       and 2.25:1.0 thereafter, provided that compliance with this ratio is not
       required until such time, if any, as the Borrower obtains an extension
       of credit under the Credit Agreement;
 
(iii)  an Interest Coverage Ratio no less than 1.50:1.0 (or, in the event the
       Borrower does not redeem 35% of the 1997 Senior Notes within 60 days
       after the closing date of the Credit Agreement, 1.75:1.0) through June
       30, 2000 and 1.75:1.0 thereafter, provided that compliance with this
       ratio is not required until such time, if any, as the Borrower obtains
       an extension of credit under the Credit Agreement; and
 
(iv)   capital expenditures no greater than $150,000,000 for fiscal year 1998,
       $130,000,000 for fiscal year 1999, $90,000,000 for fiscal year 2000,
       $60,000,000 for fiscal year 2001 and for each fiscal year thereafter;
 
provided, that (A) to the extent that less than such amount is used for any
fiscal year, the limitation on capital expenditures for succeeding fiscal years
may be increased by the amount of such unused amount and (B) the Borrower may
add 50% of the net proceeds from any issuance of equity by ITC/\DeltaCom, the
Borrower, or any of its subsidiaries plus $50,000,000 in the aggregate to the
maximum amounts set forth above, provided that at the time the Borrower elects
to increase the maximum amount by any portion of the foregoing, there exists no
event of default.
 
   Failure to satisfy any of the financial covenants constitutes an event of
default under the Credit Facility, notwithstanding the ability of the Borrower
to meet its debt service obligations. The Credit Agreement also includes other
customary events of default, including, without limitation, a cross-default to
other indebtedness, material undischarged judgments, bankruptcy and a change of
control.
 
   As used in this section:
 
   "Annualized Operating Cash Flow" means Operating Cash Flow for the six-month
period most recently ended, multiplied by two.
 
   "Interest Coverage Ratio" means, for ITC/\DeltaCom on a consolidated basis
for any period, the ratio of Annualized Operating Cash Flow to the aggregate
amount of interest due and payable by ITC/\DeltaCom, the Borrower and the
Borrower's subsidiaries with respect to Total Debt during such period net of
interest on the 1997 Senior Notes funded by pledged securities and Permitted
Subordinated Debt, interest income for such period, interest actually paid-in-
kind, any one-time facility fees paid in connection with the Credit Facility
and in connection with any pre-existing debt of ITC/\DeltaCom, the Borrower or
the Borrower's subsidiaries, up to $9.5 million of accrued interest paid by the
Borrower to ITC Holding prior to September 17, 1997, one-time prepayment
penalties incurred as a result of the extinguishment on the closing date of the
Credit Agreement of interest rate protection agreements of the Borrower in an
amount not in excess of $2,800,000 and any interest expense associated
exclusively with the mark to market on such closing date of interest rate
protection agreements of the Borrower in an amount not in excess of $2,800,000.
 
   "Operating Cash Flow" for any period means the consolidated net income
(loss) of ITC/\DeltaCom, the Borrower and the Borrower's subsidiaries for such
period plus the following amounts for such period, to the extent included in
the determination of such income (loss): depreciation expense, amortization
expense and other non-cash charges reducing income, net interest expense, and
income tax expense.
 
                                       42
<PAGE>
 
   "Permitted Subordinated Debt" means all debt of the Borrower pursuant to
subordinated notes between the Borrower and ITC/\DeltaCom containing certain
specified terms and conditions and otherwise acceptable to the administrative
agent and a majority of the lenders.
 
   "Senior Leverage Ratio" means, for the Borrower on a consolidated basis at
any date, the ratio of Senior Debt (Total Debt minus the aggregate outstanding
principal amount, and accrued and unpaid interest, on the March 1998 Senior
Notes and the 1997 Senior Notes plus aggregate cash balances in excess of
$5,000,000) to Annualized Operating Cash Flow.
 
   "Total Debt" means the aggregate indebtedness of ITC/\DeltaCom for borrowed
money on a consolidated basis.
 
   "Total Leverage Ratio" means at any date, for ITC/\DeltaCom on a consolidated
basis, the ratio of Total Debt (net of cash balances in excess of $5,000,000
plus the balance of pledged securities securing the 1997 Senior Notes plus all
Permitted Subordinated Debt) on such date to Annualized Operating Cash Flow.
 
1997 Senior Notes
 
   On June 3, 1997, we completed the sale of $200.0 million principal amount of
our 11% Senior Notes due 2007. Interest on the 1997 Senior Notes is payable
semiannually in cash, on each June 1 and December 1.
 
   The 1997 Senior Notes are unsubordinated indebtedness of ITC/\DeltaCom,
ranking pari passu in right of payment with all of our existing and future
unsubordinated indebtedness, including the March 1998 Senior Notes and the
Notes. At September 30, 1998, approximately $26.8 million of the net proceeds
from the sale of the 1997 Senior Notes were being held in a pledged account as
security for and to fund the balance of the first six interest payments on the
1997 Senior Notes.
 
   The 1997 Senior Notes will mature on June 1, 2007. The 1997 Senior Notes are
redeemable at our option, in whole or in part, at any time on or after June 1,
2002, initially at 105.5% of their principal amount, declining ratably to 100%
of their principal amount, plus accrued interest, on or after June 1, 2004.
 
   Upon a "Change of Control" of ITC/\DeltaCom (as defined in the 1997 Note
Indenture), we will be required to make an offer to purchase the 1997 Senior
Notes at a purchase price equal to 101% of their principal amount, plus accrued
interest.
 
   The 1997 Note Indenture contains certain covenants that affect, and in
certain cases significantly limit or prohibit, among other things, our ability
to incur indebtedness, pay dividends, prepay subordinated indebtedness,
repurchase capital stock, make investments, engage in transactions with
stockholders and affiliates, create liens, sell assets and engage in mergers
and consolidations. If we fail to comply with these covenants, our obligation
to repay the 1997 Senior Notes may be accelerated. However, these limitations
are subject to a number of important qualifications and exceptions. In
particular, while the 1997 Note Indenture restricts our ability to incur
additional indebtedness by requiring compliance with specified leverage ratios,
it permits us and our subsidiaries to incur an unlimited amount of additional
indebtedness to finance the acquisition of equipment, inventory and network
assets and up to $100.0 million of additional indebtedness.
 
1998 Senior Notes
 
   On March 3, 1998, we completed the sale of $160.0 million principal amount
of its 8 7/8% Senior Notes due 2008. Interest on the March 1998 Senior Notes is
payable semiannually in cash, on each March 1 and September 1.
 
   The March 1998 Senior Notes are unsubordinated indebtedness of ITC/\DeltaCom,
ranking pari passu in right of payment with all of our existing and future
unsubordinated indebtedness, including the 1997 Senior Notes and the Notes.
 
                                       43
<PAGE>
 
   The March 1998 Senior Notes will mature on March 1, 2008. The March 1998
Senior Notes are redeemable at our option, in whole or in part, at any time on
or after March 1, 2003, initially at 104.4375% of their principal amount,
declining ratably to 100% of their principal amount, plus accrued interest, on
or after March 1, 2006.
 
   Upon a "Change of Control" of ITC/\DeltaCom (as defined in the 1998 Note
Indenture), we will be required to make an offer to purchase the March 1998
Senior Notes at a purchase price equal to 101% of their principal amount, plus
accrued interest.
 
   The March 1998 Note Indenture contains certain covenants that affect, and in
certain cases significantly limit or prohibit, among other things, our ability
to incur indebtedness, pay dividends, prepay subordinated indebtedness,
repurchase capital stock, make investments, engage in transactions with
stockholders and affiliates, create liens, sell assets and engage in mergers
and consolidations. If we fail to comply with these covenants, our obligation
to repay the March 1998 Senior Notes may be accelerated. However, these
limitations are subject to a number of important qualifications and exceptions.
In particular, while the March 1998 Note Indenture restricts our ability to
incur additional indebtedness by requiring compliance with specified leverage
ratios, it permits us and our subsidiaries to incur an unlimited amount of
additional indebtedness to finance the acquisition of equipment, inventory and
network assets and up to $150.0 million of additional indebtedness.
 
                                       44
<PAGE>
 
                       DESCRIPTION OF THE EXCHANGE NOTES
 
   The Outstanding Notes were, and the Exchange Notes will be, issued under the
Indenture, dated as of November 5, 1998 between ITC/\DeltaCom and United States
Trust Company of New York, trustee under the Indenture (the "Trustee"). A copy
of the Indenture is available from us upon request. The following summary
contains a description of certain provisions of the Indenture, but does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms in the Indenture and those terms made a part of the Indenture by
operation of the Trust Indenture Act of 1939, as amended. For definitions of
certain capitalized terms used in the following summary, see "--Certain
Definitions."
 
General
 
   The terms of the Exchange Notes will be identical in all material respects
to the Outstanding Notes, except that (i) the Exchange Notes will have been
registered under the Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the Outstanding Notes and (ii)
Holders of the Exchange Notes will not be entitled to certain rights of Holders
of Outstanding Notes under the Registration Rights Agreement.
 
   The Exchange Notes will be unsecured unsubordinated obligations of
ITC/\DeltaCom, initially limited to $125,000,000 aggregate principal amount, and
will mature on November 15, 2008. Each Exchange Note will bear interest at the
rate of 9 3/4% from the Closing Date or from the most recent Interest Payment
Date to which interest has been paid or provided for, payable semiannually (to
Holders of record at the close of business on the May 1 or November 1
immediately preceding the Interest Payment Date) on May 15 and November 15 of
each year, commencing May 15, 1999.
 
   Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of
ITC/\DeltaCom in the Borough of Manhattan, The City of New York (which initially
will be the corporate trust office of the Trustee at 114 West 47th Street, New
York, New York 10036-1532); provided that, at our option, payment of interest
may be made by check mailed to the Holders at their addresses as they appear in
the Security Register.
 
   The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. See "--Book-Entry; Delivery and Form." No service charge will
be made for any registration of transfer or exchange of Notes, but we may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
 
   Subject to the covenants described below under "Covenants" and applicable
law, we may issue additional Notes under the Indenture. The Exchange Notes
offered hereby and any additional Notes subsequently issued would be treated as
a single class for all purposes under the Indenture.
 
                                       45
<PAGE>
 
Optional Redemption
 
   The Exchange Notes will be redeemable, at our option, in whole or in part,
at any time or from time to time, on or after November 15, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address, as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is prior to the Redemption Date to receive interest due on an Interest
Payment Date), if redeemed during the 12-month period commencing March 1 of the
years set forth below:
 
<TABLE>
<CAPTION>
                                                                      Redemption
   Year                                                                 Price
   ----                                                               ----------
   <S>                                                                <C>
   2003..............................................................  104.875%
   2004..............................................................  103.250
   2005..............................................................  101.625
   2006 and thereafter...............................................  100.000
</TABLE>
 
   In addition, at any time prior to November 15, 2001, we may redeem up to 35%
of the principal amount of the Notes with the proceeds of one or more Public
Equity Offerings, at any time or from time to time in part, at a Redemption
Price (expressed as a percentage of principal amount) of 109.750%, plus accrued
and unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date); provided, that at least
$81.25 million aggregate principal amount of Notes remains outstanding after
each such redemption.
 
   If less than all of the Notes are to be redeemed at any time, the Trustee
will select the Notes, or portions thereof, for redemption in compliance with
the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not listed on a national
securities exchange, on a pro rata basis, by lot or by such other method as the
Trustee in its sole discretion shall deem to be fair and appropriate; provided
that no Note of $1,000 in principal amount or less shall be redeemed in part.
If any Note is to be redeemed in part only, the notice of redemption relating
to such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
 
Exchange Offer; Registration Rights
 
   We entered into the Registration Rights Agreement with the Placement Agents,
for the benefit of the holders of Outstanding Notes. Pursuant to the
Registration Rights Agreement, we agreed to file the Registration Statement (of
which this prospectus is a part) with the Commission. The Registration Rights
Agreement provides that we will, at our cost, use our best efforts to cause the
Registration Statement to be filed with the Commission not later than 60 days
after the Closing Date (as defined in the Purchase Agreement attached as an
exhibit to the Registration Statement of which this prospectus is a part) and
declared effective under the Securities Act. Upon the effectiveness of the
Registration Statement, we will offer the Exchange Notes in exchange for
surrender of the Outstanding Notes. We have agreed to keep the Exchange Offer
open for not less than 20 business days after the date notice of the Exchange
Offer is mailed to the holders of Outstanding Notes. For each Outstanding Note
surrendered to us pursuant to the Exchange Offer, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Under existing Commission
interpretations, the Exchange Notes would be freely transferable by holders
other than affiliates of ITC/\DeltaCom after the Exchange Offer without further
registration under the Securities Act if the holder of the Exchange Notes
represents that it is acquiring the Exchange Notes in the ordinary course of
its business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of ITC/\DeltaCom, as such terms are interpreted by the Commission;
provided that broker-dealers ("Participating Broker-Dealers") receiving
Exchange Notes in the Exchange Offer will have a prospectus delivery
requirement with respect to resales of
 
                                       46
<PAGE>
 
such Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to Exchange Notes with the prospectus contained in the Registration Statement
under certain circumstances. Under the Registration Rights Agreement, we are
required to allow Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements to use this prospectus in connection
with the resale of such Exchange Notes.
 
   A holder of Outstanding Notes who wishes to exchange such Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to represent that,
among other things, any Exchange Notes to be received by it will be acquired in
the ordinary course of its business and that at the time of the commencement of
the Exchange Offer it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of the
Exchange Notes and that it is not an "affiliate" of ITC/\DeltaCom, as defined in
Rule 405 of the Securities Act, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities
Act to the extent applicable.
 
   We have filed the Registration Statement (of which this prospectus is a
part) and will commence the Exchange Offer pursuant to the Registration Rights
Agreement. In the event that applicable interpretations of the staff of the
Commission do not permit us to effect the Exchange Offer, or under certain
other circumstances, we have agreed, at our cost, to use our best efforts to
file and cause to become effective a shelf registration statement (the "Shelf
Registration Statement") with respect to resales of the Outstanding Notes and
to keep the Shelf Registration Statement effective until the expiration of the
time period referred to in Rule 144(k) under the Securities Act or such shorter
period that will terminate when all Outstanding Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. We have agreed, in the event a Shelf Registration Statement is
filed, among other things, to provide to each holder for whom such Shelf
Registration Statement was filed copies of the prospectus which is a part of
the Shelf Registration Statement, to notify each such holder when the Shelf
Registration Statement has become effective and to take certain other actions
as are required to permit unrestricted resales of the Outstanding Notes. A
holder selling such Outstanding Notes pursuant to the Shelf Registration
Statement generally would be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such holder (including
certain indemnification obligations).
 
   In the event the Exchange Offer is not consummated and a Shelf Registration
Statement is not declared effective on or prior to the date that is six months
after the Closing Date, the interest rate on the Outstanding Notes will be
increased by .5% per annum until the Exchange Offer is consummated or the Shelf
Registration is declared effective.
 
   Outstanding Notes not tendered in the Exchange Offer shall accrue interest
at the rate of 9 3/4% per annum and be subject to all of the terms and
conditions specified in the Indenture and to the transfer restrictions
described in "Transfer Restrictions."
 
   This summary of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement, a
copy of which has been filed as an exhibit to the Registration Statement of
which this prospectus is a part.
 
Ranking
 
   The Indebtedness evidenced by the Notes will rank pari passu in right of
payment with all existing and future unsubordinated indebtedness of
ITC/\DeltaCom and senior in right of payment to all existing and future
subordinated indebtedness of ITC/\DeltaCom. At September 30, 1998, as adjusted
to reflect the issuance of the Outstanding Notes as if it had occurred on that
date, ITC/\DeltaCom (on an unconsolidated basis) had $414.8 million of
subordinated indebtedness, and $289.8 million of outstanding indebtedness that
would rank equal in right of payment with the Notes. Under the Indenture, we
are permitted to incur additional indebtedness to
 
                                       47
<PAGE>
 
finance the acquisition of equipment, inventory and other assets and up to $150
million of other indebtedness (which may be increased to $250 million under
certain conditions) and are permitted to secure any such indebtedness. The
Notes will be effectively subordinated to such security interests to the extent
of such security interests. At September 30, 1998, as adjusted to reflect the
issuance of the Outstanding Notes as if it had occurred on that date, neither
we nor our subsidiaries had any outstanding secured indebtedness, including
under the Credit Facility.
 
   ITC/\DeltaCom is a holding company. We conduct substantially all of our
business through subsidiaries. Our subsidiaries will have no direct obligation
to pay amounts due on the Notes and will not guarantee the Notes. As a result,
the Notes will be effectively subordinated to all existing and future
indebtedness and other liabilities (including trade payables) of our
subsidiaries. As of September 30, 1998, our subsidiaries had approximately
$44.9 million of liabilities (excluding intercompany payables), including
approximately $3.3 million of indebtedness (including capital leases). We will
be dependent upon access to the cash flow or assets of our subsidiaries to make
payments on the Notes and our ability to obtain such access may be limited by
law. See "Risk Factors--We are a Holding Company and We are Dependent on Our
Subsidiaries for Cash Flows, Including to Pay Interest and Principal on the
Notes; The Notes are Subordinated to Debt of Our Subsidiaries."
 
Certain Definitions
 
   Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. You should refer to the
Indenture for the definition of any other capitalized term used herein for
which no definition is provided.
 
   "Acquired Assets" means (i) the Capital Stock of any Person that becomes a
Restricted Subsidiary after the Closing Date and (ii) the real or personal
property (including tangible and intangible assets) of any Person that becomes
a Restricted Subsidiary after the Closing Date.
 
   "Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary; provided that Indebtedness of
such Person which is redeemed, defeased, retired or otherwise repaid at the
time of or immediately upon consummation of the transactions by which such
Person becomes a Restricted Subsidiary or such Asset Acquisition shall not be
Acquired Indebtedness.
 
   "Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of ITC/\DeltaCom and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person (other than a
Restricted Subsidiary) in which any Person (other than ITC/\DeltaCom or any of
its Restricted Subsidiaries) has a joint interest and the net income (or loss)
of any Unrestricted Subsidiary, except (x) with respect to net income, to the
extent of the amount of dividends or other distributions actually paid to
ITC/\DeltaCom or any of its Restricted Subsidiaries by such other Person or such
Unrestricted Subsidiary during such period and (y) with respect to net losses,
to the extent of the amount of cash contributed by ITC/\DeltaCom or any
Restricted Subsidiary to such Person during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with ITC/\DeltaCom or any of its Restricted
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by ITC/\DeltaCom or any of its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such net income is not at the time permitted by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the
 
                                       48
<PAGE>
 
first paragraph of the "Limitation on Restricted Payments" covenant described
below, any amount paid or accrued as dividends on Preferred Stock (other than
accrued dividends which, pursuant to the terms of the Preferred Stock, will not
be payable prior to the first anniversary after the Stated Maturity of the
Notes) of ITC/\DeltaCom or any Restricted Subsidiary owned by Persons other than
ITC/\DeltaCom and any of its Restricted Subsidiaries; and (vi) all extraordinary
gains and extraordinary losses.
 
   "Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of ITC/\DeltaCom and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of ITC/\DeltaCom and its Restricted Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly or annual consolidated balance sheet of
ITC/\DeltaCom and its Restricted Subsidiaries, prepared in conformity with GAAP
and filed with the Commission or provided to the Trustee pursuant to the
"Commission Reports and Reports to Holders" covenant described below.
 
   "Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
 
   "Asset Acquisition" means (i) an investment by ITC/\DeltaCom or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with
ITC/\DeltaCom or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of
ITC/\DeltaCom and its Restricted Subsidiaries on the date of such investment or
(ii) an acquisition by ITC/\DeltaCom or any of its Restricted Subsidiaries of
the property and assets of any Person other than ITC/\DeltaCom or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of ITC/\DeltaCom and its
Restricted Subsidiaries on the date of such acquisition.
 
   "Asset Disposition" means the sale or other disposition by ITC/\DeltaCom or
any of its Restricted Subsidiaries (other than to ITC/\DeltaCom or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of ITC/\DeltaCom or any of its
Restricted Subsidiaries.
 
   "Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by ITC/\DeltaCom or any of its Restricted
Subsidiaries to any Person other than ITC/\DeltaCom or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of ITC/\DeltaCom or any of its Restricted
Subsidiaries or (iii) any other property and assets (other than the Capital
Stock or other Investment in an Unrestricted Subsidiary) of ITC/\DeltaCom or any
of its Restricted Subsidiaries outside the ordinary course of business of
ITC/\DeltaCom or such Restricted Subsidiary and, in each case, that is not
governed by the provisions of the Indenture applicable to mergers,
consolidations and sales of all or substantially all of the assets of
ITC/\DeltaCom; provided that "Asset Sale" shall not include (a) sales, transfers
or other dispositions of inventory, receivables and other current assets, (b)
sales, transfers or other dispositions of assets with a fair market value (as
certified in an Officers' Certificate) not in excess of $500,000 in any
transaction or series of related transactions or (c) sales, transfers or other
dispositions of assets for consideration at least equal to the fair market
value of the assets sold, transferred or otherwise disposed of to the extent
the consideration received would satisfy clause (B) of
 
                                       49
<PAGE>
 
the "Limitation on Assets Sales" covenant described below, provided that after
giving pro forma effect to such exchange, the Consolidated Leverage Ratio shall
be no greater than the Consolidated Leverage Ratio immediately prior to such
exchange.
 
   "Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
 
   "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
 
   "Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.
 
   "Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
 
   "Change of Control" means such time as (i) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
of more than 35% of the total voting power of the Voting Stock of ITC/\DeltaCom
on a fully diluted basis and such ownership represents a greater percentage of
the total voting power of the Voting Stock of ITC/\DeltaCom, on a fully diluted
basis, than is held by the Existing Stockholders on such date; or (ii)
individuals who on the Closing Date constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination by the Board of Directors for election by ITC/\DeltaCom's
stockholders was approved by a vote of at least two-thirds of the members of
the Board of Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors then in office.
 
   "Closing Date" means the date on which the Notes are originally issued under
the Indenture.
 
   "Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation, all series and classes of such common stock.
 
   "Consolidated EBITDA" means, for any period, the sum of the amounts for such
period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest
Expense to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and non-
recurring gains or losses or sales of assets), (iv) depreciation expense, to
the extent such amount was deducted in calculating Adjusted Consolidated Net
Income, (v) amortization expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, and (vi) all other non-cash items
reducing Adjusted Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is required by GAAP to
be, made), less all non-cash items increasing Adjusted Consolidated Net Income,
all as determined on a consolidated basis for ITC/\DeltaCom and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net
 
                                       50
<PAGE>
 
Income attributable to such Restricted Subsidiary multiplied by (B) the
quotient of (1) the number of shares of outstanding Common Stock of such
Restricted Subsidiary not owned on the last day of such period by ITC/\DeltaCom
or any of its Restricted Subsidiaries divided by (2) the total number of shares
of outstanding Common Stock of such Restricted Subsidiary on the last day of
such period.
 
   "Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by ITC/\DeltaCom or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by ITC/\DeltaCom and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in
connection with the offering of the Notes and the Reorganization, all as
determined on a consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP.
 
   "Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of ITC/\DeltaCom and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the Four Quarter Period;
provided that, in making the foregoing calculation, (A) pro forma effect shall
be given to any Indebtedness to be Incurred or repaid on the Transaction Date;
(B) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any Asset Disposition) that occur during the Reference Period, as if they
had occurred and such proceeds had been applied on the first day of such
Reference Period; (C) pro forma effect shall be given to asset dispositions and
asset acquisitions (including giving pro forma effect to the application of
proceeds of any asset disposition) that have been made by any Person that has
become a Restricted Subsidiary or has been merged with or into ITC/\DeltaCom or
any Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business
of the Person, that is acquired or disposed of for which financial information
is available; and (D) the aggregate amount of Indebtedness outstanding as of
the end of such Reference Period will be deemed to include the total amount of
funds outstanding and/or available on the Transaction Date under any revolving
credit or similar facilities of ITC/\DeltaCom or its Restricted Subsidiaries.
 
   "Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of ITC/\DeltaCom and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Redeemable Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of ITC/\DeltaCom or any of its Restricted Subsidiaries, each
item to be determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
 
                                       51
<PAGE>
 
   "Consolidated Secured Indebtedness Leverage Ratio" means, on any Transaction
Date, the ratio of (i) the aggregate amount of Secured Indebtedness of
ITC/\DeltaCom and its Restricted Subsidiaries on a consolidated basis
outstanding on such Transaction Date to (ii) the aggregate amount of
Consolidated EBITDA for the Four Quarter Period; provided that, in making the
foregoing calculation, (A) pro forma effect shall be given to any Secured
Indebtedness to be Incurred or repaid on the Transaction Date; (B) pro forma
effect shall be given to Asset Dispositions and Asset Acquisitions (including
giving pro forma effect to the application of proceeds of any Asset
Disposition) that occur during the Reference Period, as if they had occurred
and such proceeds had been applied on the first day of such Reference Period;
(C) pro forma effect shall be given to asset dispositions and asset
acquisitions (including giving pro forma effect to the application of proceeds
of any asset disposition) that have been made by any Person that has become a
Restricted Subsidiary or has been merged with or into ITC/\DeltaCom or any
Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business
of the Person, that is acquired or disposed of for which financial information
is available; and (D) the aggregate amount of Secured Indebtedness outstanding
as of the end of such Reference Period will be deemed to include the total
amount of funds outstanding and/or available on the Transaction Date under any
revolving credit or similar facilities of ITC/\DeltaCom or its Restricted
Subsidiaries to the extent that borrowings under such facilities would
constitute Secured Indebtedness.
 
   "Credit Agreement" means the First Amended and Restated Credit Agreement
among Interstate FiberNet, Inc., NationsBank of Texas, N.A., as administrative
lender, and the lenders party thereto, as amended by that certain First
Amendment to the First Amended and Restated Credit Agreement dated as of
November 2, 1998 and by that certain Second Amendment to the First Amended and
Restated Credit Agreement dated as of February 10, 1999 and as such agreement
may be further amended, supplemented or modified from time to time.
 
   "Credit Facilities" means revolving credit or working capital facilities or
similar facilities made available from time to time to ITC/\DeltaCom and its
Restricted Subsidiaries.
 
   "Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
 
   "Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
 
   "Existing Stockholders" means Campbell B. Lanier, III and SCANA Corporation
and their Affiliates, and Campbell B. Lanier, III's spouse and any one or more
of his lineal descendants and their spouses; provided however, that any such
person other than Campbell B. Lanier, III shall only be deemed to be an
"Existing Stockholder" to the extent such person's Capital Stock of
ITC/\DeltaCom was received, directly or indirectly, from Campbell B. Lanier,
III.
 
   "Fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive
if evidenced by a Board Resolution; provided that for purposes of clause (viii)
of the second paragraph of the "Limitation on Indebtedness" covenant, (x) the
fair market value of any security registered under the Exchange Act shall be
the average of the closing prices, regular way, of such security for the 20
consecutive trading days immediately preceding the capital contribution or sale
of Capital Stock and (y) in the event the aggregate fair market value of any
other property (other than cash or cash equivalents) received by ITC/\DeltaCom
exceeds $10 million, the fair market value of such property shall be determined
by a nationally recognized investment banking firm and set forth in their
written opinion which shall be delivered to the Trustee.
 
                                       52
<PAGE>
 
   "Four Quarter Period" means, with respect to any Transaction Date, the then
most recent four fiscal quarter period for which financial statements of
ITC/\DeltaCom have been filed with the Commission or provided to the Trustee
pursuant to the "Commission Reports and Reports to Holders" covenant described
below.
 
   "GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that computations made for purposes of determining compliance
with the terms of the covenants and with other provisions of the Indenture
shall be made without giving effect to (i) the amortization of any expenses
incurred in connection with the offering of the Notes or the Reorganization and
(ii) except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
 
   "Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length and are entered into in
the ordinary course of business), to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
 
   "Holder" means the registered holder of any Note.
 
   "Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an Incurrence of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
 
   "Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all Capitalized Lease Obligations of
such Person, (vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of
(A) the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such
Person and (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date (or, in the case of a revolving credit or other similar facility, the
total amount of funds outstanding and/or available on the date of
determination) of all unconditional obligations as described above and, with
respect to contingent obligations, the maximum liability upon the occurrence of
the contingency giving rise to the obligation, provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at the time of its issuance
as
 
                                       53
<PAGE>
 
determined in conformity with GAAP, (B) that money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of the interest on such Indebtedness shall not be deemed to be "Indebtedness"
and (C) that Indebtedness shall not include any liability for federal, state,
local or other taxes.
 
   "Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
 
   "Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee
or similar arrangement; but excluding advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of ITC/\DeltaCom or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the fair market value of the Capital Stock (or any other
Investment), held by ITC/\DeltaCom or any of its Restricted Subsidiaries, of (or
in) any Person that has ceased to be a Restricted Subsidiary, including,
without limitation, by reason of any transaction permitted by clause (iii) of
the "Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant described below. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant
described below, (i) "Investment" shall include the fair market value of the
assets (net of liabilities (other than liabilities to ITC/\DeltaCom or any of
its Subsidiaries)) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair
market value of the assets (net of liabilities (other than liabilities to
ITC/\DeltaCom or any of its Subsidiaries)) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
shall be considered a reduction in outstanding Investments and (iii) any
property transferred to or from any Person shall be valued at its fair market
value at the time of such transfer.
 
   "Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof or any agreement
to give any security interest).
 
   "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to ITC/\DeltaCom or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of ITC/\DeltaCom and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or
any other obligation outstanding at the time of such Asset Sale that either (A)
is secured by a Lien on the property or assets sold or (B) is required to be
paid as a result of such sale and (iv) appropriate amounts to be provided by
ITC/\DeltaCom or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP, and (b) with
respect to any capital contribution or issuance or sale of Capital Stock,
options, warrants or other rights to acquire Capital Stock or Indebtedness, the
proceeds of such capital contribution or issuance or sale in the form of cash
or cash equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash or cash equivalents
(except to the extent such obligations are financed or sold with recourse to
ITC/\DeltaCom or any Restricted
 
                                       54
<PAGE>
 
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes or payable as a result thereof.
 
   "Offer to Purchase" means an offer by ITC/\DeltaCom to purchase Notes from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless ITC/\DeltaCom defaults
in the payment of the purchase price, any Note accepted for payment pursuant to
the Offer to Purchase shall cease to accrue interest on and after the Payment
Date; (v) that Holders electing to have a Note purchased pursuant to the Offer
to Purchase will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
Payment Date; (vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a facsimile transmission
or letter setting forth the name of such Holder, the principal amount of Notes
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Notes purchased; and (vii) that Holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. On the Payment Date, ITC/\DeltaCom shall (i) accept
for payment on a pro rata basis Notes or portions thereof tendered pursuant to
an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Notes or portions thereof
so accepted together with an Officers' Certificate specifying the Notes or
portions thereof accepted for payment by ITC/\DeltaCom. The Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new Note equal in principal amount to any unpurchased portion of
the Note surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples thereof.
ITC/\DeltaCom will publicly announce the results of an Offer to Purchase as soon
as practicable after the Payment Date. The Trustee shall act as the Paying
Agent for an Offer to Purchase. ITC/\DeltaCom will comply with Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable, in the event that
ITC/\DeltaCom is required to repurchase Notes pursuant to an Offer to Purchase.
 
   "Permitted Investment" means (i) an Investment in ITC/\DeltaCom or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, ITC/\DeltaCom
or a Restricted Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of ITC/\DeltaCom and its
Restricted Subsidiaries on the date of such Investment; (ii) a Temporary Cash
Investment; (iii) commission, payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses in accordance with GAAP; (iv) stock, obligations or securities
received in satisfaction of judgments; (v) Investments in prepaid expenses,
negotiable instruments held for collection, and lease, utility and workers'
compensation, performance and other similar deposits; and (vi) Interest Rate
Agreements and Currency Agreements to the extent permitted under clause (iv) of
the "Limitation on Indebtedness" covenant described below.
 
   "Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory and common law Liens
of landlords and carriers, warehousemen, mechanics,
 
                                       55
<PAGE>
 
suppliers, materialmen, repairmen or other similar Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or
regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of ITC/\DeltaCom or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property (including, without limitation, tangible and
intangible assets and Acquired Assets) acquired after the Closing Date;
provided that (a) such Lien is created solely for the purpose of securing
Indebtedness Incurred, in accordance with the "Limitation on Indebtedness"
covenant described below, to finance the cost (including, without limitation,
the cost of design, development, construction, acquisition, installation,
improvement, transportation or integration) of the real or personal property
(including tangible and intangible assets) subject thereto and such Lien is
created prior to, at the time of or within six months after the latest of the
acquisition, the completion of construction or the commencement of full
operation of such real or personal property; provided that in the case of
Acquired Assets, the Lien secures the Indebtedness Incurred to purchase the
Capital Stock of the Person to make such Person a Restricted Subsidiary, (b)
the principal amount of the Indebtedness secured by such Lien does not exceed
100% of such cost and (c) any such Lien shall not extend to or cover any real
or personal property other than such real or personal property and any
improvements on such real or personal property and any proceeds thereof; (vii)
leases or subleases granted to others that do not materially interfere with the
ordinary course of business of ITC/\DeltaCom and its Restricted Subsidiaries,
taken as a whole; (viii) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of
ITC/\DeltaCom or its Restricted Subsidiaries relating to such property or
assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at
the time such Person becomes, or becomes a part of, any Restricted Subsidiary;
provided that such Liens do not extend to or cover any property or assets of
ITC/\DeltaCom or any Restricted Subsidiary other than the property or assets
acquired and any proceeds thereof; (xii) Liens in favor of ITC/\DeltaCom or any
Restricted Subsidiary; (xiii) Liens arising from the rendering of a final
judgment or order against ITC/\DeltaCom or any Restricted Subsidiary that does
not give rise to an Event of Default; (xiv) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (xvi) Liens encumbering customary initial deposits and
margin deposits, and other Liens that are either within the general parameters
customary in the industry and incurred in the ordinary course of business, in
each case securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, future contracts, futures options or
similar agreements or arrangements designed solely to protect ITC/\DeltaCom or
any of its Restricted Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (xvii) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of
goods entered into by ITC/\DeltaCom or any of its Restricted Subsidiaries in the
ordinary course of business in accordance with the past practices of
ITC/\DeltaCom and its Restricted Subsidiaries prior to the Closing Date; (xviii)
Liens on or sales of receivables, including related intangible assets and
proceeds thereof; and (xix) Liens that secure Indebtedness with an aggregate
principal amount not to exceed $5 million at any time outstanding.
 
   "Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference
 
                                       56
<PAGE>
 
equity, whether outstanding on the Closing Date or issued thereafter,
including, without limitation, all series and classes of such preferred or
preference stock.
 
   "Public Equity Offering" means an underwritten primary offering of Common
Stock of ITC/\DeltaCom pursuant to an effective registration statement under
the Securities Act.
 
   "Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise is (i) required to be redeemed prior to the
Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Notes shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable in any
material respect to the holders of such Capital Stock than the provisions
contained in "Limitation on Asset Sales" and "Repurchase of Notes upon a
Change of Control" covenants described below are to the holders of the Notes
and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to
ITC/\DeltaCom's repurchase of such Notes as are required to be repurchased
pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes upon a
Change of Control" covenants described below.
 
   "Reference Period" means, with respect to any Transaction Date, the period
from the beginning of the Four Quarter Period with respect to such Transaction
Date through such Transaction Date.
 
   "Reorganization" means the transactions in which ITC Holding Company, Inc.,
a Delaware corporation, contributed to ITC/\DeltaCom its investments in the
Reorganization Subsidiaries (or their successors-in-interest).
 
   "Reorganization Subsidiaries" means, collectively, (i) DeltaCom, Inc., an
Alabama corporation; (ii) Eastern Telecom, Inc., a Georgia corporation; (iii)
Gulf States Transmission Systems, Inc., a Delaware corporation; (iv) ITC
Transmission Systems, Inc., a Delaware corporation; (v) ITC Transmission
Systems II, Inc., a Delaware corporation; and (vi) Interstate FiberNet, a
Georgia general partnership.
 
   "Restricted Subsidiary" means any Subsidiary of ITC/\DeltaCom other than an
Unrestricted Subsidiary.
 
   "Secured Indebtedness" means Indebtedness of ITC/\DeltaCom or any of its
Restricted Subsidiaries that is secured by Liens on the property or assets of
ITC/\DeltaCom or any of its Restricted Subsidiaries.
 
   "Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of ITC/\DeltaCom, accounted for more than 10% of the
consolidated revenues of ITC/\DeltaCom and its Restricted Subsidiaries or (ii)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of ITC/\DeltaCom and its Restricted Subsidiaries, all as
set forth on the most recently available consolidated financial statements of
ITC/\DeltaCom for such fiscal year.
 
   "Stated Maturity" means (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal of or interest on any
debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
 
   "Strategic Subordinated Indebtedness" means Indebtedness of ITC/\DeltaCom
Incurred to finance the acquisition of a Person engaged in the
Telecommunications Business that by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is Incurred, (i)
is expressly made subordinate in right of payment to the Notes and (ii)
provides that no payment of principal, premium or interest on, or any
 
                                      57
<PAGE>
 
other payment with respect to, such Indebtedness may be made prior to the
payment in full of all of ITC/\DeltaCom's obligations under the Notes; provided
that such Indebtedness may provide for and be repaid at any time from the
proceeds of the sale of Capital Stock (other than Redeemable Stock) of
ITC/\DeltaCom after the Incurrence of such Indebtedness.
 
   "Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
 
   "Telecommunications Business" means the development, ownership or operation
of one or more telephone, telecommunications or information systems or the
provision of telephony, telecommunications or information services (including,
without limitation, any voice, video transmission, data or Internet services)
and any related, ancillary or complementary business.
 
   "Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of $50
million (or the foreign currency equivalent thereof) and has outstanding debt
which is rated "A" (or such similar equivalent rating) or higher by at least
one nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) commercial paper, maturing
not more than one year after the date of acquisition, issued by a corporation
(other than an Affiliate of ITC/\DeltaCom) organized and in existence under the
laws of the United States of America, any state thereof or any foreign country
recognized by the United States of America with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard & Poor's
Ratings Service, and (v) securities with maturities of six months or less from
the date of acquisition issued or fully and unconditionally guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Service or Moody's Investors Service, Inc.
 
   "Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
 
   "Transaction Date" means, with respect to the Incurrence of any Indebtedness
by ITC/\DeltaCom or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
 
   "Unrestricted Subsidiary" means (i) any Subsidiary of ITC/\DeltaCom that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of
ITC/\DeltaCom) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, ITC/\DeltaCom or
any Restricted Subsidiary; provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
"Limitation on Restricted Payments" covenant described below. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that
 
                                       58
<PAGE>
 
(i) no Default or Event of Default shall have occurred and be continuing at the
time of or after giving effect to such designation and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be Incurred
for all purposes of the Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
 
   "Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
 
   "Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
 
Covenants
 
   The Indenture will contain, among others, the following covenants:
 
 Limitation on Indebtedness
 
   (a) ITC/\DeltaCom will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on the Closing Date); provided that ITC/\DeltaCom may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds thereof, the Consolidated Leverage
Ratio would be less than or equal to 7 to 1, for Indebtedness Incurred on or
prior to June 30, 1998, or less than or equal to 5 to 1, for Indebtedness
Incurred thereafter.
 
   Notwithstanding the foregoing, ITC/\DeltaCom, and (except as specified below)
any Restricted Subsidiary, may Incur each and all of the following: (i)
Indebtedness in an aggregate principal amount outstanding or available at any
time not to exceed the sum of (A) $150 million, plus (B) $100 million, if after
giving effect to the Incurrence of such Indebtedness and application of the
proceeds thereof the Consolidated Secured Indebtedness Leverage Ratio would be
less than or equal to 2.25 to 1, less (C) any amount of such Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales" covenant
described below; (ii) Indebtedness owed (A) to ITC/\DeltaCom and evidenced by an
unsubordinated promissory note or (B) to any Restricted Subsidiaries; provided
that any event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness (other
than to ITC/\DeltaCom or another Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by this
clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness (other
than Indebtedness Incurred under clause (i), (ii), (iv), (vi) or (ix) of this
paragraph) and any refinancings of such new Indebtedness in an amount not to
exceed the amount so refinanced or refunded (plus premiums, accrued interest,
fees and expenses); provided that Indebtedness the proceeds of which are used
to refinance or refund the Notes or Indebtedness that is pari passu in right of
payment with, or subordinated in right of payment to, the Notes shall only be
permitted under this clause (iii) if (A) in case the Notes are refinanced in
part or the Indebtedness to be refinanced is pari passu in right of payment
with the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is outstanding,
is expressly made pari passu in right of payment with, or subordinate in right
of payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is subordinated to the Notes and
(C) such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
 
                                       59
<PAGE>
 
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; and provided further that in no event may Indebtedness
of ITC/\DeltaCom be refinanced by means of any Indebtedness of any Restricted
Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of
performance, surety or appeal bonds provided in the ordinary course of
business, (B) under Currency Agreements and Interest Rate Agreements; provided
that such agreements (a) are designed solely to protect ITC/\DeltaCom or its
Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (b) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder or (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of ITC/\DeltaCom or any of its Restricted Subsidiaries pursuant to
such agreements, in each case Incurred in connection with the disposition of
any business, assets or Restricted Subsidiary (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds actually
received by ITC/\DeltaCom or any Restricted Subsidiary in connection with such
disposition; (v) Indebtedness of ITC/\DeltaCom, to the extent the net proceeds
thereof are promptly (A) used to purchase Notes tendered in an Offer to
Purchase made as a result of a Change of Control or (B) deposited to defease
all of the Notes as described below under "Defeasance"; (vi) Guarantees of the
Notes and Guarantees of Indebtedness of ITC/\DeltaCom by any Restricted
Subsidiary, provided the Guarantee of such Indebtedness is permitted by and
made in accordance with the "Limitation on Issuance of Guarantees by Restricted
Subsidiaries" covenant described below; (vii) Indebtedness (including Acquired
Indebtedness) Incurred to finance the cost (including the cost of design,
development, acquisition, construction, installation, improvement,
transportation or integration) for ITC/\DeltaCom or a Restricted Subsidiary to
acquire equipment, inventory or other assets (tangible or intangible) used or
useful in a Telecommunications Business after the Closing Date; (viii)
Indebtedness of ITC/\DeltaCom not to exceed, at any one time outstanding, two
times (A) the Net Cash Proceeds received by ITC/\DeltaCom after the Closing Date
as a capital contribution or from the issuance and sale of its Capital Stock
(other than Redeemable Stock) to a Person that is not a Subsidiary of
ITC/\DeltaCom, to the extent such Net Cash Proceeds have not been used pursuant
to clause (C)(2) of the first paragraph or clause (iii), (iv) or (vi) of the
second paragraph of the "Limitation on Restricted Payments" covenant described
below to make a Restricted Payment and (B) 80% of the fair market value of
property (other than cash and cash equivalents) received by ITC/\DeltaCom after
the Closing Date from a contribution of capital or the sale of its Capital
Stock (other than Redeemable Stock) to a Person that is not a Subsidiary of
ITC/\DeltaCom, to the extent such capital contribution or sale of Capital Stock
has not been used pursuant to clause (iii), (iv) or (ix) of the second
paragraph of the "Limitation on Restricted Payments" covenant described below
to make a Restricted Payment; provided that such Indebtedness does not mature
prior to the Stated Maturity of the Notes and has an Average Life longer than
the Notes; and (ix) Strategic Subordinated Indebtedness.
 
   (b) Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, the maximum amount of Indebtedness that ITC/\DeltaCom or a Restricted
Subsidiary may Incur pursuant to this "Limitation on Indebtedness" covenant
shall not be deemed to be exceeded due solely to the result of fluctuations in
the exchange rates of currencies.
 
   (c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included
and (2) any Liens granted pursuant to the equal and ratable provisions referred
to in the "Limitation on Liens" covenant described below shall not be treated
as Indebtedness. For purposes of determining compliance with this "Limitation
on Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, ITC/\DeltaCom, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
 
 
                                       60
<PAGE>
 
 Limitation on Restricted Payments
 
   ITC/\DeltaCom will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on or with respect to its Capital Stock (other than (x) dividends
or distributions payable solely in shares of its Capital Stock (other than
Redeemable Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro rata
share of such Restricted Subsidiaries' net income from the first day of the
fiscal quarter beginning immediately following the Closing Date) held by
Persons other than ITC/\DeltaCom or any of its Restricted Subsidiaries, (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of (A) ITC/\DeltaCom or an Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Person or (B) a Restricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Affiliate of
ITC/\DeltaCom (other than a Wholly Owned Restricted Subsidiary) or any holder
(or any Affiliate of such holder) of 5% or more of the Capital Stock of
ITC/\DeltaCom, (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other acquisition
or retirement for value, of Indebtedness of ITC/\DeltaCom that is subordinated
in right of payment to the Notes (other than, in each case, the purchase,
repurchase or acquisition of Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in any case
due within one year after the date of such purchase, repurchase or acquisition)
or (iv) make any Investment, other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (i) through (iv) above
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment: (A) a Default or Event of Default
shall have occurred and be continuing, (B) ITC/\DeltaCom could not Incur at
least $1.00 of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant or (C) the aggregate amount of all Restricted Payments
(the amount, if other than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of (1) 50% of the
aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of the amount of such loss)
(excluding, for purposes of such computation, income resulting from transfers
of assets by ITC/\DeltaCom or a Restricted Subsidiary to an Unrestricted
Subsidiary) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the fiscal quarter immediately
following the Closing Date and ending on the last day of the last fiscal
quarter preceding the Transaction Date for which reports have been filed with
the Commission or provided to the Trustee pursuant to the "Commission Reports
and Reports to Holders" covenant plus (2) the aggregate Net Cash Proceeds
received by ITC/\DeltaCom after the Closing Date from a capital contribution or
the issuance and sale permitted by the Indenture to a Person who is not a
Subsidiary of ITC/\DeltaCom of (a) its Capital Stock (other than Redeemable
Stock), (b) any options, warrants or other rights to acquire Capital Stock of
ITC/\DeltaCom (in each case, exclusive of any Redeemable Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or
are required to be redeemed, prior to the Stated Maturity of the Notes) and (c)
Indebtedness of ITC/\DeltaCom that has been exchanged for or converted into
Capital Stock of ITC/\DeltaCom (other than Redeemable Stock), in each case
except to the extent such Net Cash Proceeds are used to Incur Indebtedness
pursuant to clause (viii) of the second paragraph under the "Limitation on
Indebtedness" covenant, plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments and reductions in
Investments made pursuant to clause (vi) of the second paragraph of this
"Limitation on Restricted Payments" covenant) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to ITC/\DeltaCom or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or proceeds is
included in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed, in
each case, the amount of Investments previously made by ITC/\DeltaCom or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.
 
 
                                       61
<PAGE>
 
   The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at
such date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment
to the Notes, including premium, if any, and accrued and unpaid interest, with
the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii)
of the second paragraph of part (a) of the "Limitation on Indebtedness"
covenant; (iii) the repurchase, redemption or other acquisition of Capital
Stock of ITC/\DeltaCom (or options, warrants or other rights to acquire such
Capital Stock) in exchange for, or out of the proceeds of a substantially
concurrent offering of, shares of Capital Stock (other than Redeemable Stock)
of ITC/\DeltaCom (or options, warrants or other rights to acquire such Capital
Stock); (iv) the making of any principal payment or the repurchase, redemption,
retirement, defeasance or other acquisition for value of Indebtedness of
ITC/\DeltaCom which is subordinated in right of payment to the Notes in exchange
for, or out of the proceeds of, a substantially concurrent offering of shares
of the Capital Stock (other than Redeemable Stock) of ITC/\DeltaCom (or options,
warrants or other rights to acquire such Capital Stock); (v) payments or
distributions to dissenting stockholders pursuant to applicable law in
connection with a consolidation, merger or transfer of assets that complies
with the provisions of the Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the property and assets of
ITC/\DeltaCom; (vi) Investments in any Person the primary business of which is
related, ancillary or complementary to the business of ITC/\DeltaCom and its
Restricted Subsidiaries on the date of such Investments; provided that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (x) $25 million plus (y) the amount of Net Cash Proceeds
received by ITC/\DeltaCom after the Closing Date as a capital contribution or
from the sale of its Capital Stock (other than Redeemable Stock) to a Person
who is not a Subsidiary of ITC/\DeltaCom, except to the extent such Net Cash
Proceeds are used to Incur Indebtedness pursuant to clause (viii) under the
"Limitation on Indebtedness" covenant or to make Restricted Payments pursuant
to clause (C)(2) of the first paragraph, or clauses (iii) or (iv) of this
paragraph, of this "Limitation on Restricted Payments" covenant, plus (z) the
net reduction in Investments made pursuant to this clause (vi) resulting from
distributions on or repayments of such Investments or from the Net Cash
Proceeds from the sale of any such Investment (except in each case to the
extent any such payment or proceeds is included in the calculation of Adjusted
Consolidated Net Income) or from such Person becoming a Restricted Subsidiary
(valued in each case as provided in the definition of "Investments"), provided
that the net reduction in any Investment shall not exceed the amount of such
Investment; (vii) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of ITC/\DeltaCom to the extent
necessary, in the judgment of the Board of Directors, to prevent the loss or
secure the renewal or reinstatement of any license or franchise held by
ITC/\DeltaCom or any Restricted Subsidiary from any governmental agency; (viii)
the purchase, redemption, retirement or other acquisition for value of shares
of Capital Stock of ITC/\DeltaCom, or options to purchase such shares, held by
directors, employees, or former directors or employees of ITC/\DeltaCom or any
Restricted Subsidiary (or their estates or beneficiaries under their estates)
upon their death, disability, retirement, termination of employment or pursuant
to the terms of any agreement under which such shares of Capital Stock or
options were issued; provided that the aggregate consideration paid for such
purchase, redemption, retirement or other acquisition for value of such shares
of Capital Stock or options after the Closing Date does not exceed $2 million
in any calendar year, or $5 million in the aggregate; or (ix) Investments
acquired as a capital contribution to ITC/\DeltaCom or in exchange for Capital
Stock (other than Redeemable Stock) of ITC/\DeltaCom; provided that, except in
the case of clauses (i), (iii) and (iv), no Default or Event of Default shall
have occurred and be continuing, or occur as a consequence of the actions or
payments set forth therein.
 
   Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof, an exchange of
Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or
(iv) thereof and an Investment referred to in clause (ix) thereof), and the Net
Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii),
(iv) and (vi) thereof, shall be included in calculating whether the conditions
of clause (C) of the first paragraph of this "Limitation on Restricted
Payments" covenant have been met with respect to any subsequent Restricted
Payments. In the event the proceeds of an issuance of Capital Stock of
ITC/\DeltaCom are used for the redemption, repurchase or other acquisition of
the
 
                                       62
<PAGE>
 
Notes, or Indebtedness that is pari passu in right of payment with the Notes,
then the Net Cash Proceeds of such issuance shall be included in clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant only
to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of Indebtedness.
 
   Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
 
   ITC/\DeltaCom will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by
ITC/\DeltaCom or any other Restricted Subsidiary, (ii) pay any Indebtedness owed
to ITC/\DeltaCom or any other Restricted Subsidiary, (iii) make loans or
advances to ITC/\DeltaCom or any other Restricted Subsidiary or (iv) transfer
any of its property or assets to ITC/\DeltaCom or any other Restricted
Subsidiary.
 
   The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Person or the property or
assets of such Person acquired by ITC/\DeltaCom or any Restricted Subsidiary and
existing at the time of such acquisition and not incurred in contemplation
thereof, which encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or the property or
assets of such Person so acquired; (iv) in the case of clause (iv) of the first
paragraph of this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is
a lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of ITC/\DeltaCom or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of ITC/\DeltaCom or any Restricted Subsidiary in
any manner material to ITC/\DeltaCom or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that
has been entered into for the sale or disposition of all or substantially all
of the Capital Stock of, or property and assets of, such Restricted Subsidiary;
or (vi) contained in the terms of any Indebtedness or any agreement pursuant to
which such Indebtedness was issued if (A) the encumbrance or restriction
applies only in the event of a payment default or a default with respect to a
financial covenant contained in such Indebtedness or agreement; provided that
in the case of the Credit Agreement the encumbrance or restriction may apply if
an event of default (other than an event of default resulting solely from the
breach of a representation or warranty) occurs and is continuing under the
Credit Agreement; provided that, with respect to any event of default (other
than a payment default, a bankruptcy event with respect to ITC/\DeltaCom,
Interstate FiberNet, Inc. or any Significant Subsidiary or the loss of a
material license or fiber network) under the Credit Agreement, such encumbrance
or restriction may not prohibit dividends to ITC/\DeltaCom to pay scheduled
interest on the Notes for more than 180 days in any consecutive 360-day period,
(B) the encumbrance or restriction is not materially more disadvantageous to
the Holders of the Notes than is customary in comparable financings (as
determined by ITC/\DeltaCom) and (C) ITC/\DeltaCom determines that any such
encumbrance or restriction will not materially affect ITC/\DeltaCom's ability to
make principal or interest payments on the Notes.
 
   Nothing contained in this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent
ITC/\DeltaCom or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in the "Limitation
on Liens" covenant described
 
                                       63
<PAGE>
 
below or (2) restricting the sale or other disposition of property or assets of
ITC/\DeltaCom or any of its Restricted Subsidiaries that secure Indebtedness of
ITC/\DeltaCom or any of its Restricted Subsidiaries.
 
 Limitation on the Issuance and Sale of Capital Stock of Restricted
 Subsidiaries
 
   ITC/\DeltaCom will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to ITC/\DeltaCom or a Wholly Owned
Restricted Subsidiary, (ii) issuances of director's qualifying shares, or sales
to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law, (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been
permitted to be made under the "Limitation on Restricted Payments" covenant if
made on the date of such issuance or sale or (iv) issuances or sales of Common
Stock of a Restricted Subsidiary, provided that ITC/\DeltaCom or such Restricted
Subsidiary applies the Net Cash Proceeds, if any, of any such sale in
accordance with clause (A) or (B) of the "Limitation on Asset Sales" covenant
described below.
 
 Limitation on Issuances of Guarantees by Restricted Subsidiaries
 
   ITC/\DeltaCom will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of ITC/\DeltaCom which is pari passu
in right of payment with, or subordinate in right of payment to, the Notes
("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Notes by
such Restricted Subsidiary and (ii) such Restricted Subsidiary waives, and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
ITC/\DeltaCom or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Subsidiary Guarantee; provided that this
paragraph shall not be applicable to (x) any Guarantee of any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or (y) any Guarantee of any Restricted
Subsidiary of Indebtedness Incurred (I) under Credit Facilities pursuant to
clause (i) of the second paragraph of the "Limitation on Indebtedness" covenant
or (II) pursuant to clause (vii) of the second paragraph of the "Limitation on
Indebtedness" covenant. If the Guaranteed Indebtedness is (A) pari passu in
right of payment with the Notes, then the Guarantee of such Guaranteed
Indebtedness shall be pari passu in right of payment with, or subordinated in
right of payment to, the Subsidiary Guarantee or (B) subordinated in right of
payment to the Notes, then the Guarantee of such Guaranteed Indebtedness shall
be subordinated in right of payment to the Subsidiary Guarantee at least to the
extent that the Guaranteed Indebtedness is subordinated in right of payment to
the Notes.
 
   Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of ITC/\DeltaCom, of all of
ITC/\DeltaCom's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Subsidiary
Guarantee, except a discharge or release by or as a result of payment under
such Guarantee.
 
 Limitation on Transactions with Stockholders and Affiliates
 
   ITC/\DeltaCom will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with any holder (or any Affiliate of
such holder) of 5% or more of any class of Capital Stock of ITC/\DeltaCom or
with any Affiliate of ITC/\DeltaCom or any Restricted
 
                                       64
<PAGE>
 
Subsidiary, except upon fair and reasonable terms no less favorable in any
material respect to ITC/\DeltaCom or such Restricted Subsidiary than could be
obtained, at the time of such transaction or, if such transaction is pursuant
to a written agreement, at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
 
   The foregoing limitation does not limit, and shall not apply to: (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which ITC/\DeltaCom or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to ITC/\DeltaCom or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between ITC/\DeltaCom and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of ITC/\DeltaCom who are not
employees of ITC/\DeltaCom; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between ITC/\DeltaCom and any other Person with which
ITC/\DeltaCom files a consolidated tax return or with which ITC/\DeltaCom is
part of a consolidated group for tax purposes; or (v) any Restricted Payments
not prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the first paragraph
of this "Limitation on Transactions with Stockholders and Affiliates" covenant
and not covered by clauses (ii) through (v) of this paragraph, the aggregate
amount of which exceeds $5 million in value, must be approved or determined to
be fair in the manner provided for in clause (i)(A) or (B) above.
 
 Limitation on Liens
 
   ITC/\DeltaCom will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Notes, prior to) the
obligation or liability secured by such Lien.
 
   The foregoing limitation does not apply to: (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of ITC/\DeltaCom or its Restricted Subsidiaries created in favor
of the Holders; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to ITC/\DeltaCom or a Wholly
Owned Restricted Subsidiary to secure Indebtedness owing to ITC/\DeltaCom or
such other Restricted Subsidiary; (iv) Liens securing Indebtedness which is
Incurred to refinance secured Indebtedness which is permitted to be Incurred
under clause (iii) of the second paragraph of the "Limitation on Indebtedness"
covenant; provided that such Liens do not extend to or cover any property or
assets of ITC/\DeltaCom or any Restricted Subsidiary other than the property or
assets securing the Indebtedness being refinanced; (v) Liens securing
obligations under Credit Facilities Incurred under clause (i) of the second
paragraph of the "Limitation on Indebtedness" covenant; or (vi) Permitted
Liens.
 
 Limitation on Sale-Leaseback Transactions
 
   ITC/\DeltaCom will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby ITC/\DeltaCom or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which ITC/\DeltaCom or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
 
   The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between ITC/\DeltaCom
and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned
Restricted Subsidiaries; or (iv) ITC/\DeltaCom or such
 
                                       65
<PAGE>
 
Restricted Subsidiary, within 12 months after the sale or transfer of any
assets or properties is completed, applies an amount not less than the net
proceeds received from such sale in accordance with clause (A) or (B) of the
first paragraph of the "Limitation on Asset Sales" covenant described below.
 
 Limitation on Asset Sales
 
   ITC/\DeltaCom will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by
ITC/\DeltaCom or such Restricted Subsidiary is at least equal to the fair market
value of the assets sold or disposed of and (ii) at least 75% of the
consideration received consists of cash or Temporary Cash Investments. In the
event and to the extent that the Net Cash Proceeds received by ITC/\DeltaCom or
any of its Restricted Subsidiaries from one or more Asset Sales occurring on or
after the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date closest to
the commencement of such 12-month period for which a consolidated balance sheet
of ITC/\DeltaCom and its Subsidiaries has been filed with the Commission or
provided to the Trustee pursuant to the "Commission Reports and Reports to
Holders" covenant), then ITC/\DeltaCom shall or shall cause the relevant
Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds
so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply
an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of ITC/\DeltaCom or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to the "Limitation on Issuances of
Guarantees by Restricted Subsidiaries" covenant described above or Indebtedness
of any other Restricted Subsidiary, in each case owing to a Person other than
ITC/\DeltaCom or any of its Subsidiaries, or (B) invest an amount equal to such
excess Net Cash Proceeds, or the amount of such Net Cash Proceeds not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement), in capital
assets of a nature or type or that are used in a business (or in a Person
having capital assets of a nature or type, or engaged in a business) similar or
related to the nature or type of the property and assets of, or the business
of, ITC/\DeltaCom and its Restricted Subsidiaries existing on the date of such
investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and (ii)
apply (no later than the end of the 12-month period referred to in clause (i))
such excess Net Cash Proceeds (to the extent not applied pursuant to clause
(i)) as provided in the following paragraph of this "Limitation on Asset Sales"
covenant. The amount of such excess Net Cash Proceeds required to be applied
(or to be committed to be applied) during such 12-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
 
   If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to
this "Limitation on Asset Sales" covenant totals at least $5 million,
ITC/\DeltaCom must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata basis
an aggregate principal amount of Notes equal to the Excess Proceeds on such
date, at a purchase price equal to 100% of the principal amount of the Notes
plus, in each case, accrued interest to the Payment Date.
 
 Commission Reports and Reports to Holders
 
   ITC/\DeltaCom shall file with the Commission the annual, quarterly and other
reports and other information required by Section 13(a) or 15(d) of the
Exchange Act, regardless of whether such sections of the Exchange Act are
applicable to ITC/\DeltaCom (unless the Commission will not accept such a
filing). ITC/\DeltaCom shall mail or cause to be mailed copies of such reports
and information to Holders and the Trustee within 15 days after the date it
files such reports and information with the Commission or after the date it
would have been required to file such reports and information with the
Commission had it been subject to such sections of the Exchange Act; provided,
however, that the copies of such reports and information mailed to Holders may
omit exhibits, which ITC/\DeltaCom will supply to any Holder at such Holder's
request.
 
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<PAGE>
 
Repurchase of Notes Upon a Change of Control
 
   ITC/\DeltaCom shall commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest to the Payment Date.
 
   There can be no assurance that ITC/\DeltaCom will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of ITC/\DeltaCom which might be outstanding
at the time). The foregoing covenant requiring ITC/\DeltaCom to repurchase the
Notes will, unless consents are obtained, require ITC/\DeltaCom to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, either prior to or concurrently with such Note repurchase.
 
Events of Default
 
   The following events will be defined as "Events of Default" in the
Indenture: (a) defaults in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) defaults in the payment of interest on any Note
when the same becomes due and payable, which defaults continue for a period of
30 days; (c) defaults in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of ITC/\DeltaCom, or the failure to make or
consummate an Offer to Purchase in accordance with the "Limitation on Asset
Sales" or the "Repurchase of Notes upon a Change of Control" covenant described
above; (d) defaults in the performance or breach of any covenant or agreement
of ITC/\DeltaCom in the Indenture or under the Notes (other than a default
specified in clause (a), (b) or (c) above), which default or breach continues
for a period of 30 consecutive days after written notice by the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding; (e) there occurs with respect to any issue or issues of
Indebtedness of ITC/\DeltaCom or any Significant Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for all
such issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $5 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against ITC/\DeltaCom or any Significant
Subsidiary and shall not be paid or discharged, and there shall be any period
of 30 consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders outstanding
and not paid or discharged against all such Persons to exceed $5 million during
which a stay of enforcement of such final judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; (g) a court having
jurisdiction in the premises enters a decree or order for (A) relief in respect
of ITC/\DeltaCom or any Significant Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of ITC/\DeltaCom or any Significant
Subsidiary or for all or substantially all of the property and assets of
ITC/\DeltaCom or any Significant Subsidiary or (C) the winding up or liquidation
of the affairs of ITC/\DeltaCom or any Significant Subsidiary and, in each case,
such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (h) ITC/\DeltaCom or any Significant Subsidiary (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order
for relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of ITC/\DeltaCom or any
Significant Subsidiary or for all or substantially all of the property and
assets of ITC/\DeltaCom or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors.
 
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<PAGE>
 
   If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to ITC/\DeltaCom) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
ITC/\DeltaCom (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by
ITC/\DeltaCom or the relevant Significant Subsidiary or waived by the holders of
the relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clause (g) or (h)
above occurs with respect to ITC/\DeltaCom, the principal of, premium, if any,
and accrued interest on the Notes then outstanding shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes, by written notice to ITC/\DeltaCom and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on the
Notes that have become due solely by such declaration of acceleration, have
been cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. For information as to
the waiver of defaults, see "--Modification and Waiver."
 
   The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of Notes. A
Holder may not pursue any remedy with respect to the Indenture or the Notes
unless: (i) the Holder gives the Trustee written notice of a continuing Event
of Default; (ii) the Holders of at least 25% in aggregate principal amount of
outstanding Notes make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity satisfactory to the
Trustee against any costs, liability or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the outstanding Notes do not give the
Trustee a direction that is inconsistent with the request. However, such
limitations do not apply to the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after the due date
expressed in the Notes, which right shall not be impaired or affected without
the consent of the Holder.
 
   The Indenture will require certain officers of ITC/\DeltaCom to certify, on
or before a date not more than 90 days after the end of each fiscal year, that
a review has been conducted of the activities of ITC/\DeltaCom and its
Restricted Subsidiaries and the performance of ITC/\DeltaCom and its Restricted
Subsidiaries under the Indenture and that ITC/\DeltaCom has fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof. ITC/\DeltaCom will also be obligated to notify the Trustee of any
default or defaults in the performance of any covenants or agreements under the
Indenture.
 
Consolidation, Merger and Sale of Assets
 
   ITC/\DeltaCom shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into
 
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<PAGE>
 
ITC/\DeltaCom unless: (i) ITC/\DeltaCom shall be the continuing Person, or the
Person (if other than ITC/\DeltaCom) formed by such consolidation or into which
ITC/\DeltaCom is merged or that acquired or leased such property and assets of
ITC/\DeltaCom shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof, and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of ITC/\DeltaCom on all of the Notes and under
the Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction on a pro forma basis,
ITC/\DeltaCom or any Person becoming the successor obligor of the Notes shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of ITC/\DeltaCom immediately prior to such transaction; (iv) immediately
after giving effect to such transaction on a pro forma basis, ITC/\DeltaCom, or
any Person becoming the successor obligor of the Notes, as the case may be,
could Incur at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant described above; provided, however, that
this clause (iv) shall not apply to a consolidation or merger with or into a
Wholly Owned Restricted Subsidiary with a positive net worth, provided that in
connection with any such merger or consolidation, no consideration (except
Capital Stock (other than Redeemable Stock) in the surviving Person or
ITC/\DeltaCom (or a Person that owns directly or indirectly all of the Capital
Stock of the surviving Person or ITC/\DeltaCom immediately following such
transaction)) shall be issued or distributed to the stockholders of
ITC/\DeltaCom; and (v) ITC/\DeltaCom delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv) above) and an Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such supplemental
indenture comply with this provision and that all conditions precedent provided
for herein relating to such transaction have been complied with; provided,
however, that clauses (iii) and (iv) above do not apply if, in the good faith
determination of the Board of Directors of ITC/\DeltaCom, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of ITC/\DeltaCom and any
such transaction shall not have as one of its purposes the evasion of the
foregoing limitations.
 
Defeasance
 
   Defeasance and Discharge. The Indenture will provide that ITC/\DeltaCom will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the deposit referred to below, and
the provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) ITC/\DeltaCom has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance
with the terms of the Indenture and the Notes, (B) ITC/\DeltaCom has delivered
to the Trustee (i) either (x) an Opinion of Counsel to the effect that Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of ITC/\DeltaCom's exercise of its option under this "Defeasance"
provision and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred, which Opinion of Counsel
must be based upon (and accompanied by a copy of) a ruling of the Internal
Revenue Service to the same effect unless there has been a change in applicable
federal income tax law after the Closing Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect as the aforementioned Opinion of Counsel and
(ii) an Opinion of Counsel to the effect that the creation of the defeasance
trust does not violate the Investment Company Act of 1940 and after the passage
of 123 days following the deposit, the trust fund will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section 15 of the
New York Debtor and Creditor Law, (C) immediately after giving effect to such
deposit on a pro forma basis, no Event of Default, or event that after the
giving of notice or lapse of time or both would become an Event of Default,
shall have occurred and be continuing on the date of such deposit or during the
period ending on the
 
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<PAGE>
 
123rd day after the date of such deposit, and such deposit shall not result in
a breach or violation of, or constitute a default under, any other agreement or
instrument to which ITC/\DeltaCom or any of its Subsidiaries is a party or by
which ITC/\DeltaCom or any of its Subsidiaries is bound, and (D) if at such time
the Notes are listed on a national securities exchange, ITC/\DeltaCom has
delivered to the Trustee an Opinion of Counsel to the effect that the Notes
will not be delisted as a result of such deposit, defeasance and discharge.
 
   Defeasance of Certain Covenants and Certain Events of Default. The Indenture
further will provide that the provisions of the Indenture will no longer be in
effect with respect to clauses (iii) and (iv) under "Consolidation, Merger and
Sale of Assets" and all the covenants described herein under "Covenants,"
clause (d) under "Events of Default" with respect to such covenants and clauses
(iii) and (iv) under "Consolidation, Merger and Sale of Assets," and that
clauses (e) and (f) under "Events of Default" shall be deemed not to be Events
of Default, upon, among other things, the deposit with the Trustee, in trust,
of money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes, the satisfaction of
the provisions described in clauses (B)(ii), (C) and (D) of the preceding
paragraph and the delivery by ITC/\DeltaCom to the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and defeasance of certain covenants and Events of Default and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred.
 
   Defeasance and Certain Other Events of Default. In the event ITC/\DeltaCom
exercises its option to omit compliance with certain covenants and provisions
of the Indenture with respect to the Notes as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes at the time of the
acceleration resulting from such Event of Default. However, ITC/\DeltaCom will
remain liable for such payments.
 
Modification and Waiver
 
   Modifications and amendments of the Indenture may be made by ITC/\DeltaCom
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the principal of, or premium, if any, or
interest on, any Note, (iii) change the place or currency of payment of
principal of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the Redemption
Date) of any Note, (v) reduce the above-stated percentage of outstanding Notes
the consent of whose Holders is necessary to modify or amend the Indenture,
(vi) waive a default in the payment of principal of, premium, if any, or
interest on the Notes or (vii) reduce the percentage or aggregate principal
amount of outstanding Notes the consent of whose Holders is necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
 
Book-entry; Delivery and Form
 
   The certificates representing the Exchange Notes will initially be
represented by one or more permanent global Notes in definitive, fully
registered form without interest coupons (each a "Global Note") and will be
deposited with the Trustee as custodian for, and registered in the name of, a
nominee of DTC. Except in the limited circumstances described below under
"Certified Notes," owners of beneficial interests in a Global Note will not be
entitled to receive physical delivery of Certificated Notes (as defined below).
 
   Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a
 
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<PAGE>
 
Global Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants).
 
   So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner of
an interest in a Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
 
   Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner thereof.
Neither ITC^DeltaCom, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
 
   ITC^DeltaCom expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records
of DTC or its nominee. ITC^DeltaCom also expects that payments by participants
to owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
 
   Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
 
   ITC^DeltaCom expects that DTC will take any action permitted to be taken by
a holder of Exchange Notes (including the presentation of Exchange Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in a Global Note is credited and only in
respect of such portion of the aggregate principal amount of Exchange Notes as
to which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Exchange Notes, DTC will
exchange the applicable Global Note for Certificated Exchange Notes, which it
will distribute to its participants.
 
   ITC^DeltaCom understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a clearing corporation within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates and certain other organizations. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
 
   Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC,
it is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither ITC^DeltaCom nor
the Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of their respective obligation
under the rules and procedures governing their operations.
 
 
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<PAGE>
 
Certificated Notes
 
   If DTC is at any time unwilling or unable to continue as depositary, and a
successor depositary is not appointed by ITC^DeltaCom within 90 days or, if an
Event of Default under the Indenture has occurred and is continuing,
ITC^DeltaCom will issue Certificated Notes in exchange for the Global Notes
representing such Notes. Holders of an interest in a Global Note may receive
Certificated Notes in accordance with the DTC's rules and procedures in
addition to those provided for under the Indenture.
 
No Personal Liability of Incorporators, Stockholders, Officers, Directors or
Employees
 
   The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of ITC^DeltaCom in the Indenture, or in any of the Notes
or because of the creation of any Indebtedness represented thereby, shall be
had against any incorporator, stockholder, officer, director, employee or
controlling person of ITC^DeltaCom or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
 
Concerning the Trustee
 
   The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in
its exercise of the rights and powers vested in it under the Indenture as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
 
   The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of ITC^DeltaCom, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
 
   The Trustee, United States Trust Company of New York, also serves as trustee
under the 1997 Senior Notes Indenture and the March 1998 Senior Notes
Indenture.
 
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<PAGE>
 
                              PLAN OF DISTRIBUTION
 
   Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period not
to exceed 180 days after the Expiration Date, we will furnish additional copies
of this prospectus, as amended or supplemented, to any broker-dealer that
reasonably requests such documents for use in connection with any such resale.
 
   We will not receive any proceeds from any sale of Exchange Notes by broker-
dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit of any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
 
   The Exchange Notes will constitute a new issue of securities with no
established trading market. We do not intend to list the Exchange Notes on any
national securities exchange or to seek approval for quotation through any
automated quotation system. We have been advised by the Placement Agents that,
following completion of the Exchange Offer, the Placement Agents intend to make
a market in the Exchange Notes. However, the Placement Agents are not obligated
to do so and any market-making activities with respect to the Exchange Notes
may be discontinued at any time without notice. Accordingly, no assurance can
be given that an active public or other market will develop for the Exchange
Notes or as to the liquidity of or the trading market for the Exchange Notes.
If a trading market does not develop or is not maintained, holders of the
Exchange Notes may experience difficulty in reselling the Exchange Notes or may
be unable to sell them at all. If a market for the Exchange Notes develops, any
such market may cease at any time. If a public trading market develops for the
Exchange Notes, future trading prices of the Exchange Notes will depend on many
factors, including, among other things, prevailing interest rates, the market
for similar securities, our financial conditions and results of operations and
other factors beyond our control, including general economic conditions.
Notwithstanding the registration of the Exchange Notes in the Exchange Offer,
holders who are "affiliates" of ITC^DeltaCom (within the meaning of Rule 405
under the Securities Act) may publicly offer for sale or resell the Exchange
Notes only in compliance with the provisions of Rule 144 under the Securities
Act or any other available exemptions under the Securities Act.
 
   We have agreed to pay all expenses incident to the Exchange Offer other than
commissions or concessions of any brokers or dealers, and will indemnify the
holders of the Outstanding Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
 
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<PAGE>
 
                CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
 
   The following summary describes certain United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes,
subject to the limitations stated herein. The summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions as of the date hereof, all of which may be repealed, revoked
or modified so as to result in federal income tax consequences different from
those described below. Such changes could be applied retroactively in a manner
that could adversely affect holders of the Notes. It is therefore possible that
the consequences of the acquisition, ownership and disposition of the Notes may
differ from the treatment described below.
 
   The tax treatment of a holder of the Notes may vary depending upon the
particular situation of the holder. This summary is limited to investors who
will hold the Notes as capital assets within the meaning of Section 1221 of the
Code and does not deal with holders that may be subject to special tax rules
(including, but not limited to, insurance companies, tax-exempt organizations,
financial institutions, dealers in securities or currencies, holders whose
functional currency is not the U.S. dollar or holders who will hold the Notes
as a hedge against currency risks or as part of a straddle, synthetic security,
conversion transaction or other integrated investment comprised of the Notes
and one or more other investments). The summary is applicable only to
purchasers of the Outstanding Notes in the November 1998 offering thereof and
does not address other purchasers.
 
   This summary is for general information only and does not address all
aspects of federal income taxation that may be relevant to holders of the Notes
in light of their particular circumstances, and it does not address any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction. Prospective holders are urged to consult their own tax advisors
as to the particular tax consequences to them of acquiring, holding or
disposing of the Notes.
 
Stated Interest on Notes
 
   Except as set forth below, interest on a Note will generally be taxable to a
United States Holder as ordinary income from domestic sources at the time it is
paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes. As used herein, a "United States Holder" of a Note
means (i) an individual that is a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if (a) a U.S. court is able
to exercise primary supervision over the administration of the trust and (b)
one or more U.S. persons have the authority to control all substantial
decisions of the trust. A "Non-United States Holder" is a holder that is not a
United States Holder.
 
   If we fail to consummate the Exchange Offer or to file or cause to be
declared effective the Shelf Registration Statement as described in this
prospectus under the caption "Description of the Notes--Registration Rights,"
then additional interest will accrue on the Notes in the manner described under
that caption. According to U.S. Treasury regulations, the possibility of a
change in the interest rate will not affect the amount of interest income
recognized by a United States Holder (or the timing of such recognition) if the
likelihood of the change, as of the date the Notes are issued, is remote. We
believe that the likelihood of a change in the interest rate on the Notes is
remote. Therefore, we do not intend to treat the possibility of a change in the
interest rate as affecting the yield to maturity of any Note. In the unlikely
event that the interest rate on the Notes is increased, then such increased
interest may be treated as original issue discount, includable by a United
States Holder in income as such interest accrues, in advance of receipt of any
cash payment thereof. If, as anticipated, the issue price of the Notes will
equal their stated principal amount, and based on our belief that the
likelihood of a change in the interest rate is remote, the Notes will not be
issued with original issue discount.
 
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<PAGE>
 
Market Discount
 
   If a United States Holder purchases a Note for an amount that is less than
its principal amount, the amount of the difference will be treated as "market
discount" for U.S. federal income tax purposes, unless such difference is less
than a specified de minimis amount. Under the market discount rules, a United
States Holder will be required to treat any partial principal payment on, or
any gain on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. In addition, the United States Holder may
be required to defer, until the maturity of the Note or its earlier disposition
in a taxable transaction, the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Note.
 
   Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the
United States Holder elects to accrue on a constant interest method. A United
States Holder may elect to include market discount in income currently as it
accrues (on either the ratable or constant interest method), in which case the
rules described above regarding (i) ordinary income recognition resulting from
a partial principal payment or a sale or other disposition and (ii) deferral of
interest deductions will not apply. This election to include market discount in
income currently, once made, applies to all market discount obligations
acquired on or after the first taxable year to which the election applies and
may not be revoked without the consent of the Internal Revenue Service (the
"IRS").
 
Amortizable Bond Premium
 
   A United States Holder that purchases a Note for an amount in excess of the
principal amount will be considered to have purchased the Note at a "premium."
A United States Holder generally may elect to amortize the premium over the
remaining term of the Note on a constant yield method. However, if the Note is
purchased at a time when the Note may be optionally redeemed for an amount that
is in excess of the principal amount, special rules would apply that could
result in a deferral of the amortization of bond premium until later in the
term of the Note. The amount amortized in any year will be treated as a
reduction of the United States Holder's interest income from the Note. Bond
premium on a Note held by a United States Holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Note. The election to amortize premium on a constant yield
method, once made, applies to all debt obligations held or subsequently
acquired by the electing United States Holder on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS.
 
Sale, Exchange and Retirement of Notes
 
   Upon the sale, exchange, redemption, retirement or other disposition of a
Note, a United States Holder generally will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, redemption,
retirement or other disposition and such holder's adjusted tax basis of the
Note. A United States Holder's adjusted tax basis in a Note will, in general,
be the United States Holder's cost therefor, increased by market discount
previously included in income by the United States Holder and reduced by any
principal payments received by the United States Holder and any amortized
premium previously deducted from income by the United States Holder. Except as
described above with respect to market discount or except to the extent the
gain or loss is attributable to accrued but unpaid stated interest, such gain
or loss will be capital gain or loss. For certain noncorporate taxpayers
(including individuals), the rate of taxation of capital gains will depend upon
(i) the taxpayer's holding period in the capital asset (with a preferential
rate available for capital assets held more than 12 months) and (ii) the
taxpayer's marginal tax rate for ordinary income. The deductibility of capital
losses is subject to limitations.
 
   The exchange of an Outstanding Note by a United States Holder for an
Exchange Note should not constitute a taxable exchange. A United States Holder
will have the same tax basis and holding period in the Exchange Note as it did
in the Outstanding Note.
 
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<PAGE>
 
Non-United States Holders
 
   Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
 
     (a) no United States federal withholding tax will be imposed with
  respect to the payment by us or our paying agent of principal, premium, if
  any, or interest on a Note owned by a Non-United States Holder (the
  "Portfolio Interest Exception"), provided (i) that such Non-United States
  Holder does not actually or constructively own 10% or more of the total
  combined voting power of all classes of ITC^DeltaCom stock entitled to vote
  within the meaning of section 871(h)(3) of the Code and the regulations
  thereunder, (ii) such Non-United States Holder is not a controlled foreign
  corporation that is related, directly or indirectly, to the Company through
  stock ownership, (iii) such Non-United States Holder is not a bank whose
  receipt of interest on a Note is described in section 881(c)(3)(A) of the
  Code and (iv) such Non-United States Holder satisfies the statement
  requirement (described generally below) set forth in section 871(h) and
  section 881(c) of the Code and the regulations thereunder;
 
     (b) no United States federal withholding tax will be imposed generally
  with respect to any gain or income realized by a Non-United States Holder
  upon the sale, exchange, redemption, retirement or other disposition of a
  Note; and
 
     (c) a Note beneficially owned by an individual who at the time of death
  is a Non-United States Holder will not be subject to United States federal
  estate tax as a result of such individual's death, provided that such
  individual does not actually or constructively own 10% or more of the total
  combined voting power of all classes of ITC^DeltaCom stock entitled to vote
  within the meaning of section 871(h)(3) of the Code and provided that the
  interest payments with respect to such Note would not have been, if
  received at the time of such individual's death, effectively connected with
  the conduct of a United States trade or business by such individual.
 
   To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of ITC^DeltaCom with a statement to the effect that the beneficial owner
is not a United States Holder. Pursuant to current temporary U.S. Treasury
regulations, these requirements will be met if (1) the beneficial owner
provides his name and address, and certifies, under penalties of perjury, that
he is not a United States Holder (which certification may be made on an IRS
Form W-8 (or substitute form)) or (2) a financial institution holding the Note
on behalf of the beneficial owner certifies, under penalties of perjury, that
such statement has been received by it and furnishes a paying agent with a copy
thereof.
 
   If a Non-United States Holder cannot satisfy the requirements of the
Portfolio Interest Exception described in (a) above, payments on a Note made to
such Non-United States Holder will be subject to a 30% withholding tax unless
the beneficial owner of the Note provides us or our paying agent, as the case
may be, with a properly executed (1) IRS Form 1001 (or substitute form)
claiming an exemption from or reduction of withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or substitute form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
 
   Treasury regulations generally effective for payments made after December
31, 1999, modify certain of the certification requirements described above. It
is possible that we and other withholding agents may request new withholding
exemption forms from holders in order to qualify for continued exemption from
withholding under the Treasury regulations when they become effective.
 
   If a Non-United States Holder is engaged in a trade or business in the
United States and payment on a Note is effectively connected with the conduct
of such trade or business, the Non-United States Holder, although exempt from
United States federal withholding tax as discussed above, will be subject to
United States federal income tax on such payment on a net income basis in the
same manner as if it were a United States Holder. In addition, if such Holder
is a foreign corporation, it may be subject to a branch profits tax
 
                                       76
<PAGE>
 
equal to 30% of its effectively connected earnings and profits for the taxable
year, subject to adjustments. For this purpose, such payment on a Note will be
included in such foreign corporation's earnings and profits.
 
   Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the United States of the Non-United States Holder or (ii) in the
case of a Non-United States Holder who is an individual, (y) such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met or (z) such individual is a former citizen or former long-term resident
of the United States meeting certain qualifications.
 
Information Reporting and Backup Withholding
 
   In general, information reporting requirements will apply to payments on a
Note and to the proceeds of the sale of a Note made to United States Holders
other than certain exempt recipients (such as corporations). A 31% backup
withholding tax will apply to such payments if the United States Holder fails
to provide a taxpayer identification number or certification of other exempt
status or fails to report in full dividend and interest income.
 
   No information reporting or backup withholding will be required with respect
to payments made by ITC^DeltaCom or any paying agent to Non-United States
Holders if a statement described in (a)(iv) under "--Non-United States Holders"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States person.
 
   In addition, backup withholding and information reporting will not apply if
payments on a Note are paid or collected by a foreign office of a custodian,
nominee or other foreign agent on behalf of the beneficial owner of such Note,
or if a foreign office of a broker (as defined in applicable U.S. Treasury
regulations) pays the proceeds of the sale of a Note to the owner thereof. If,
however, such nominee, custodian, agent or broker is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation,
a foreign person that derives 50% or more of its gross income for a specified
three-year period from the conduct of a trade or business in the United States
or (in the case of payments made after December 31, 1999) a foreign partnership
with certain connections to the United States, such payments will be subject to
information reporting (but not backup withholding), unless (1) such custodian,
nominee, agent or broker has documentary evidence in its records that the
beneficial owner is not a United States person and certain other conditions are
met or (2) the beneficial owner otherwise establishes an exemption.
 
   Payments on a Note paid to the beneficial owner of a Note that is a Non-
United States Holder by a United States office of a custodian, nominee or
agent, or the payment to a Non-United States Holder by the United States office
of a broker of the proceeds of sale of a Note, will be subject to both backup
withholding and information reporting unless the beneficial owner provides the
statement referred to in (a)(iv) above under "--Non-United States Holders" and
the payor does not have actual knowledge that the beneficial owner is a United
States person or otherwise establishes an exemption.
 
   Treasury regulations, generally effective for payments made after December
31, 1999, modify certain of the certification requirements for backup
withholding. It is possible that ITC^DeltaCom and other withholding agents may
request a new withholding exemption form from holders in order to qualify for
continued exemption from backup withholding under Treasury regulations when
they become effective.
 
   Any amounts withheld under the backup withholding rules will be credited
toward such Holder's United States federal income tax liability, if any. To the
extent that the amounts withheld exceed the Holder's tax liability, the excess
may be refunded to the Holder provided the required information is furnished to
the IRS. In addition to providing the necessary information, the Holder must
file a United States tax return in order to obtain a refund of the excess
withholding.
 
                                       77
<PAGE>
 
   THE FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. PROSPECTIVE UNITED STATES HOLDERS AND NON-UNITED STATES HOLDERS OF
THE NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE EFFECTS OF CHANGES IN SUCH LAWS.
 
                                 LEGAL MATTERS
 
   Certain legal matters in connection with the Exchange Notes offered hereby
are being passed upon for ITC^DeltaCom by Hogan & Hartson L.L.P., Washington,
D.C., special counsel for ITC^DeltaCom. Hogan & Hartson L.L.P. also provides
legal services to affiliated companies and Campbell B. Lanier, III. Anthony S.
Harrington, a partner of the firm, beneficially owns 159,744 shares of Common
Stock of ITC^DeltaCom.
 
                                    EXPERTS
 
   The consolidated balance sheets of ITC^DeltaCom, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997 and the related schedule incorporated by
reference in this Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
 
                                       78
<PAGE>
 
   No dealer, salesperson or other person is authorized to give any information
or to make any representation which is not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell or a solicitation of an offer to buy only the
notes offered hereby, but only under circumstances and in jurisdictions where
it is lawful to do so. The information contained in this prospectus is current
only as of its date.
 
                                ---------------
 
 
 
 
$125,000,000
 
 
 
9 3/4% Senior Notes Due 2008
 
 
 
 
 
Prospectus
 
Dated February 11, 1999


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