Nortel Wins Role in BT’s 21 Century Network

Paves Way for Wide-Scale Adoption of Breakthrough Nortel Metro Ethernet Solution

JANUARY 15, 2007 - LONDON - BT has selected Nortel* [NYSE/TSX: NT] to play an important role in its 21st Century Network (21CN) programme. Nortel will be one of two suppliers of a carrier-scale Ethernet solution for 21CN that exploits Ethernet in a fundamentally new way and is expected to drive a radical change in the economics of carrier networks.

BT aims to use the new Ethernet solution to transport high-bandwidth services - from mission critical business applications to full-streaming video - with new levels of simplicity, quality and cost-savings.

“Today’s announcement marks a significant industry turning point,” said Mike Zafirovski, president and chief executive officer, Nortel. “BT is using Ethernet technology in a completely new way to provide an answer to the challenge of simplifying network management, redefining service quality and reducing costs,” Zafirovski said.

“We have been anticipating the widespread deployment of Ethernet in our 21CN architecture for a while but have been waiting for development to help make the technology viable for deployment in carrier grade networks,” said Matt Beal, director core convergence, BT Wholesale. “The implementation of Ethernet also complements fully BT’s well established MPLS strategy within 21CN.”

PBB-TE (Provider Backbone Bridging Traffic Engineering) is an emerging IEEE standard that incorporates a set of enhancements to Ethernet known as Provider Backbone Transport (PBT) that allows the use of Ethernet for a carrier class transport network.

“As one of the early pioneers of PBT we have already witnessed significant movement in the market for metro transport networks as it splits between an evolution of a router-based approach and a movement towards Ethernet,” said Philippe Morin, president, Metro Ethernet Networks, Nortel.

“Nortel believes that BT’s thought leadership and the pre-eminence of its 21CN strategy will speed wider-scale adoption of Ethernet-based solutions. It will also help continue the momentum to standardize the technology through the recognized standards bodies,” added Morin.

BT has selected Nortel’s Metro Ethernet Routing Switch 8600 and Metro Ethernet Services Unit 1850 for the Ethernet component of its 21CN. PBB-TE promises to bring control to data paths within very large carrier networks, enabling true quality of service, meaningful service level agreements and the ability to set aside specific paths for communications, increasing network performance while providing carrier-grade resiliency.

PBB-TE is currently progressing through industry standardization within the IEEE (Institute of Electrical and Electronic Engineers) 802.1 Working Group.

A number of service providers including The Chinese Academy of Sciences, COLT Telecom, MTC Kuwait, Pride, Shanghai Telecom, SURFNet and Versatel have already adopted various elements of Nortel’s Metro Ethernet Networking solutions including the Metro Ethernet Routing Switch 8600, the Optical Multiservice Edge 6500 and Provider Backbone Bridges - which enable millions of services to be provisioned via the network, versus the thousands available in competing solutions.

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.

Certain statements in this press release may contain words such as “could”, “expects”, “may”, “anticipates”, “believes”, “intends”, “estimates”, “targets”, “envisions”, “seeks” and other similar language and are considered forward-looking statements or information under applicable securities legislation. These statements are based on Nortel’s 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. 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 Nortel’s restatements and related matters including: Nortel’s 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 Nortel’s proposed class action settlement; any substantial cash payment and/or significant dilution of Nortel’s existing equity positions resulting from the approval of its proposed class action settlement; any unsuccessful remediation of Nortel’s material weaknesses in internal control over financial reporting resulting in an inability to report Nortel’s results of operations and financial condition accurately and in a timely manner; the time required to implement Nortel’s remedial measures; Nortel’s inability to access, in its current form, its shelf registration filed with the United States Securities and Exchange Commission (SEC), and Nortel’s below investment grade credit rating and any further adverse effect on its credit rating due to Nortel’s restatements of its financial statements; any adverse affect on Nortel’s business and market price of its publicly traded securities arising from continuing negative publicity related to Nortel’s restatements; Nortel’s 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 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; 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 Nortel’s unfunded pension liability deficit; 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 support 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 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 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 the 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 Form10-K/A, Quarterly Reports 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.

*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

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