LG-Nortel to Develop IP Desktop Phones Built on Microsoft’s Unified Communications Platform

Cooperative Efforts Support Strategy to Simplify Business Communications

JUNE 26, 2006, SEOUL, Korea – LG-Nortel, a joint venture of LG Electronics and Nortel* [NYSE/TSX: NT], will develop and market with Microsoft Corp., a business enabled IP desktop phone built on Microsoft’s unified communications platform to provide powerful communications for medium-to-large enterprises and government departments.

Based on Microsoft Office Communicator phone experience and designed for intelligent communication across business applications, networks and devices, the new IP desktop phones will work with Microsoft Office Communications Server 2007 presence-awareness, powerful IP call management features and enhanced instant messaging capabilities. Users will be able to locate and communicate with customers, colleagues and business partners within a more highly integrated and secure environment that works seamlessly with Microsoft Office Communicator 2007 and a range of other communications options that support more flexible and effective communications.

“Microsoft’s strategy for unified communications supports the development of innovative devices that enable a more intuitive and effective unified communications voice experience,” said Zig Serafin, general manager of the Unified Communications Group at Microsoft. “We look forward to continuing to work with LG-Nortel on IP desktop phone innovations to create new levels of business value for our enterprise customers.”

“We envision this winning combination of the LG-Nortel IP business desktop phone with Microsoft’s unified communications platform to have a strong impact on the market as it helps end-users communicate, collaborate and make informed decisions more quickly and efficiently,” said Jong Dae An, head of LG-Nortel’s international enterprise sales division. “Working together, we are committed to developing advanced devices and solutions that simplify business by facilitating more effective communication.”

The initial target market for the LG-Nortel business enabled IP desktop phone is small to medium sized companies and government departments in selective markets across North America, Europe and Asia, including Korea, from 2007. Both Microsoft and LG-Nortel will market the new IP desktop phone to Microsoft customers worldwide as well as through LG-Nortel’s global distribution network of operators and channel partners.

LG-Nortel previously announced a strategic relationship with Microsoft in May 2006 when the two companies signed a Memorandum of Understanding (MoU) for broad range collaboration in VoIP, including the joint development and marketing of Windows CE-based IP terminals and the new Windows CE 6 videophone.

About LG-Nortel

LG-Nortel is a joint venture between LG Electronics and Nortel, officially launched in November 2005. LG-Nortel offers advanced telecommunications and network solutions in wired and wireless telecommunications, optical and enterprise areas for Korean and global customers. Its main divisions are Carrier Networks and Enterprise Networks businesses. Prior to the establishment of the joint venture, LG Electronics and Nortel had a close collaboration and were selected as network suppliers for KTF and SK Telecom’s HSDPA/WCDMA networks. The company’s sales and marketing departments are in the company’s GS Tower building inKangnam-gu, Seoul and its R&D center in Anyang, Geonggi province. For more information on LG-Nortel, visit www.LG-NORTEL.com.

About Nortel

Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information. Our next-generation technologies, for both service providers and enterprises, span access and core networks, support multimedia and business-critical applications, and help eliminate today’s barriers to efficiency, speed and performance by simplifying networks and connecting people with information. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.

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(ii) risks and uncertainties relating to Nortel’s business including: yearly and quarterly fluctuations of Nortel’s operating results; reduced demand and pricing pressures for its products due to global economic conditions, significant competition, competitive pricing practice, cautious capital spending by customers, increased industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material and adverse affects on Nortel’s performance if its expectations regarding market demand for particular products prove to be wrong or because of certain barriers in its efforts to expand internationally; any reduction in Nortel’s operating results and any related volatility in the market price of its publicly traded securities arising from any decline in its gross margin, or fluctuations in foreign currency exchange rates; any negative developments associated with Nortel’s supply contract and contract manufacturing agreements including as a result of using a sole supplier for key optical networking solutions components, and any defects or errors in Nortel’s current or planned products; any negative impact to Nortel of its failure to achieve its business transformation objectives; additional valuation allowances for all or a portion of its deferred tax assets; Nortel’s failure to protect its intellectual property rights, or any adverse judgments or settlements arising out of disputes regarding intellectual property; changes in regulation of the Internet and/or other aspects of the industry; Nortel’s failure to successfully operate or integrate its strategic acquisitions, or failure to consummate or succeed with its strategic alliances; any negative effect of Nortel’s failure to evolve adequately its financial and managerial control and reporting systems and processes, manage and grow its business, or create an effective risk management strategy; and (iii) risks and uncertainties relating to Nortel’s liquidity, financing arrangements and capital including: the impact of Nortel’s most recent restatement and two previous restatements of its financial statements; any inability of Nortel to manage cash flow fluctuations to fund working capital requirements or achieve its business objectives in a timely manner or obtain additional sources of funding; high levels of debt, limitations on Nortel capitalizing on business opportunities because of credit facility covenants, or on obtaining additional secured debt pursuant to the provisions of indentures governing certain of Nortel’s public debt issues and the provisions of its credit facilities; any increase of restricted cash requirements for Nortel if it is unable to secure alternative support for obligations arising from certain normal course business activities, or any inability of Nortel’s subsidiaries to provide it with sufficient funding; any negative effect to Nortel of the need to make larger defined benefit plans contributions in the future or exposure to customer credit risks or inability of customers to fulfill payment obligations under customer financing arrangements; any negative impact on Nortel’s ability to make future acquisitions, raise capital, issue debt and retain employees arising from stock price volatility and further declines in the market price of Nortel’s publicly traded securities, or any future share consolidation resulting in a lower total market capitalization or adverse effect on the liquidity of Nortel’s common shares. For additional information with respect to certain of these and other factors, see Nortel’s Annual Report on Form 10-K/A, Quarterly Report on Form 10-Q and other securities filings with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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