Nortel, SECI to Establish Southeast Europe Joint Venture
JV Nortel SE will Address Regional Carrier Growth
NOVEMBER 30, 2006 - BELGRADE, Serbia - Nortel* [NYSE/TSX: NT] and Southeast European Communications and Investments Inc. (SECI) today announced their intent to establish a joint venture in southeast Europe. The creation of the joint venture with SECI - a company that is actively involved with providing advisory services in telecommunications, energy and various infrastructure projects in southeast Europe - will allow Nortel to reach this rapidly growing regional market.
The proposed joint venture will bring the expertise of SECIís existing broad network of representatives and contacts in southeastern Europe to drive sales of Nortelís next-generation Carrier Ethernet, optical, converged multimedia and mobility solutions to carriers in the region. The parties have been in discussion for some time and have now summarized their intentions in a Memorandum of Understanding (MOU). The non-binding MOU is expected to result in a definitive agreement in early 2007.
The new company formed through the joint venture will operate under the name Nortel SE and will initially have offices in Bulgaria, Macedonia and Serbia. Nortel SE will be responsible for driving Nortel sales in Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Serbia and Slovenia. Initial plans are for Nortel SE to have a sales and marketing staff of approximately 30 people.
ďSoutheastern Europe is a rapidly growing region of opportunity for Nortel which is why we are increasing our presence here,Ē said Sorin Lupu, leader Eastern European Markets, Nortel. ďCarriers and enterprises in southeast Europe are transforming themselves in order to meet the growing need for anywhere, anytime communications. With a move towards 4G happening, and with WiMAX licenses to be granted or implemented in almost all countries in southeast Europe, this new JV will help Nortel address new market opportunities and deliver improved support for existing customers.Ē
ďSECI management has been focusing exclusively on the southeast Europe region for many years. We have established relationships throughout the region and have worked in an advisory capacity on several privatizations and telecommunications restructuring projects,Ē said Constantine Aloupis, CEO, SECI. ďThe opportunity for us to combine local knowledge and industry expertise with Nortelís technical innovation and global understanding of carrier needs will be a catalyst for advancing telecommunications in southeast Europe.Ē
The proposed joint venture is subject to execution of definitive agreements and required regulatory approvals.
Southeast European Communications and Investments Inc.ís (SECIís) team of regional telecommunications experts has provided advisory services for investments and projects in the Southeast European region in the energy and telecommunications fields, and has been very active recently in the development of broadband strategies with a number of operators in the region. SECIís entire management team is very familiar with Southeast Europe, having spent a number of years with large multinational companies in that region. For more information, visit SECI on the Web at http://seci.us/ **
Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the worldís 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 todayís 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.
Certain statements in this press release may contain words such as ďcouldĒ, ďexpectsĒ, ďmayĒ, ďanticipatesĒ, ďbelievesĒ, ďintendsĒ, ďestimatesĒ, ďtargetsĒ, ďenvisionsĒ, ďseeksĒ and other similar language and are considered forward-looking statements or information under applicable securities legislation. These statements are based on Nortelís current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different. Nortel has made various assumptions in the preparation of its financial outlook in this press release, including the following company specific assumptions: no further negative impact to Nortelís results of operations, financial condition and liquidity arising from Nortelís restatements of its financial results; Nortelís prices increasing at or above the rate of price increases for similar products in geographic regions in which Nortel sells its products; increase in sales to Nortelís enterprise customers and wireless service provider customers in the Asia Pacific region as a result of Nortelís joint venture with LG Electronics Inc.; anticipated growth in sales to enterprise customers, including the full year impact to Nortelís revenues from its acquisition of PEC Solutions, Inc., (now Nortel Government Solutions Incorporated); improvement in Nortelís product costs due to favorable supplier pricing substantially offset by higher costs associated with initial customer deployments in emerging markets; cost reductions resulting from the completion of Nortelís significant financial restatements and 2004 restructuring plan; a moderate increase in costs over 2005 related to investments in the finance organization and remedial measures related to Nortelís material weaknesses in internal controls; increased employee costs relative to expected cost of living adjustments and employee bonuses offset by a significant reduction in executive recruitment and severance costs incurred in 2005; and the effective execution of Nortelís strategy. Nortel has also made certain macroeconomic and general industry assumptions in the preparation of its financial guidance including: a modest growth rate in the gross domestic product of global economies in the range of 3.9% which is higher than the growth rate in 2005; global service provider capital expenditures in 2006 reflecting mid to high single digit growth as compared to low double digit growth in 2005; a general increase in demand for broadband access, data traffic and wireless infrastructure and services in emerging markets with the rate of growth in developed markets beginning to slow; and a moderate impact as a result of expected industry consolidation among service providers in various geographic regions, particularly in North America and EMEA. The above assumptions, although considered reasonable by Nortel at the date of this press release, may prove to be inaccurate and consequently Nortelís actual results could differ materially from its expectations set out in this press release.
Further, actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following (i) risks and uncertainties relating to Nortelís restatements and related matters including: Nortelís most recent restatement and two previous restatements of its financial statements and related events; the negative impact on Nortel and NNL of their most recent restatement and delay in filing their financial statements and related periodic reports; legal judgments, fines, penalties or settlements, or any substantial regulatory fines or other penalties or sanctions, related to the ongoing regulatory and criminal investigations of Nortel in the U.S. and Canada; any significant pending civil litigation actions not encompassed by Nortelís proposed class action settlement; any substantial cash payment and/or significant dilution of Nortelís existing equity positions resulting from the approval of its proposed class action settlement; any unsuccessful remediation of Nortelís material weaknesses in internal control over financial reporting resulting in an inability to report Nortelís results of operations and financial condition accurately and in a timely manner; the time required to implement Nortelís remedial measures; Nortelís inability to access, in its current form, its shelf registration filed with the United States Securities and Exchange Commission (SEC), and Nortelís below investment grade credit rating and any further adverse effect on its credit rating due to Nortelís restatements of its financial statements; any adverse affect on Nortelís business and market price of its publicly traded securities arising from continuing negative publicity related to Nortelís restatements; Nortelís potential inability to attract or retain the personnel necessary to achieve its business objectives; any breach by Nortel of the continued listing requirements of the NYSE or TSX causing the NYSE and/or the TSX to commence suspension or delisting procedures; (ii) risks and uncertainties relating to Nortelís business including: yearly and quarterly fluctuations of Nortelís 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; the sufficiency of recently announced restructuring actions, including the potential for higher actual costs to be incurred in connection with these restructuring actions compared to the estimated costs of such actions and the ability to achieve the targeted cost savings and reductions of Nortelís unfunded pension liability deficit; any material and adverse affects on Nortelís 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 Nortelís 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 Nortelís 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 Nortelís current or planned products; any negative impact to Nortel of its failure to achieve its business transformation objectives, including completion of the sale of its UMTS access business to Alcatel; additional valuation allowances for all or a portion of its deferred tax assets; Nortelís 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; Nortelís failure to successfully operate or integrate its strategic acquisitions, or failure to consummate or succeed with its strategic alliances; any negative effect of Nortelís 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 Nortelís liquidity, financing arrangements and capital including: the impact of Nortelís 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 support facility covenants, or on obtaining additional secured debt pursuant to the provisions of indentures governing certain of Nortelís public debt issues and the provisions of its support facility; 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 Nortelís 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 Nortelís 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 Nortelís publicly traded securities, or the planned share consolidation resulting in a lower total market capitalization or adverse effect on the liquidity of Nortelís common shares. For additional information with respect to certain of these and other factors, see Nortelís Annual Report on Form10-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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