Forstmann, Telmex to Pay XO to End Bid

XO Communications Inc. said Forstmann Little & Co. and Telefonos de Mexico aborted an agreement to invest $800 million, clearing the way for Carl Icahn to gain control of the telephone service provider.

Forstmann Little and Telmex each will pay XO $12.5 million, and the three companies will forgo any legal claims related to the abandoned investment agreement. The accord ends a struggle for control of XO between Icahn and Theodore J. Forstmann, head of the New York buyout firm, which already has written off a $1.5-billion investment in the company.

XO intends to seek Bankruptcy Court approval for the deal in mid-November.