One of the world’s largest Multimedia Converged IP Networks for King Abdulaziz Endowment Project in Mecca

JANUARY 24, 2006, MECCA, Saudi Arabia - Future Entertainment Works (FEW) is building one of the world’s largest and most advanced IP converged networks for the King Abdulaziz Endowment Project (KAEP) in the Holy City of Mecca, Saudi Arabia, based on Nortel* [NYSE/TSX: NT] technology.

Located adjacent to the Grand Mosque, KAEP is a very large urban development project that consists of six residential and commercial towers and a five-star hotel, built on a multi-story podium. KAEP’s state-of-the-art, fully IP-based network will provide its guests and businesses with a host of more than 16 innovative IP services such as IPTV, video-on-demand, retail, consumer information and advertising.

FEW selected Nortel following a rigorous evaluation to ensure that the new network meets the highest standards of security and reliability with flexibility to expand to additional services in the future.

“We chose Nortel because we believe that Nortel has not only the right products for us, but also a clear vision for and commitment to the development of IP networks,” said Amr Taher, president of BT Applied Technologies and the senior consultants for the project. “This network will provide the most advanced capabilities and facilities for the people it will be serving, not only today but also far into the future.”

“A development of this scale and scope is a strong endorsement of Nortel’s Enterprise IP technology and underlines Nortel’s flexibility and ability to understand the customer’s needs,” said Ramin Attari, general manager Middle East, Nortel EMEA.

“This is an important project, not only because it signals Nortel’s capability to manage projects of this scale in the Middle East market but because it is an impressive vote of confidence in the strength of Nortel’s products, innovation and people when evaluated against stringent and demanding criteria,” Attari added.

KAEP’s network will consist of 65,000 ports for all manner of communications equipment including TV, Phones, Computers, and virtually any IP-based device. At its heart is the Nortel Communication Server 1000 IP Telephony solution with an initial deployment of around 18,000 IP phones, ultimately expected to grow to 26,000 IP phones. The network solution incorporates 400 switches from the Ethernet Routing Switch 8600 and 8300 portfolio and will support the needs not only of residential users, but also underpin the success of hospitality, commercial and other entertainment and lifestyle outlets being constructed as part of the huge 800,000 square metre multi-purpose development.

The KAEP development, which started construction in 2003, is set for completion in 2007. The actual implementation of the Nortel infrastructure has commenced and is scheduled to be completed in early 2006, with two additional phases to the implementation before the project’s completion.

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. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world’s greatest challenges. 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 information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the outcome of regulatory and criminal investigations and civil litigation actions related to Nortel’s restatements and the impact any resulting legal judgments, settlements, penalties and expenses could have on Nortel’s results of operations, financial condition and liquidity, and any related potential dilution of Nortel’s common shares; the findings of Nortel’s independent review and implementation of recommended remedial measures; the outcome of the ongoing independent review with respect to revenues for specific identified transactions, which review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues; the restatement or revisions of Nortel’s previously announced or filed financial results and resulting negative publicity; the existence of material weaknesses in Nortel’s internal control over financial reporting and the conclusion of Nortel’s management and independent auditor that Nortel’s internal control over financial reporting is ineffective, which could continue to impact Nortel’s ability to report its results of operations and financial condition accurately and in a timely manner; the impact of Nortel’s and NNL’s failure to timely file their financial statements and related periodic reports, including Nortel’s inability to access its shelf registration statement filed with the United States Securities and Exchange Commission (SEC); the impact of management changes, including the termination for cause of Nortel’s former CEO, CFO and Controller in April 2004; the sufficiency of Nortel’s restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004 and December 14, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; cautious or reduced spending by Nortel’s customers; increased consolidation among Nortel’s customers and the loss of customers in certain markets; fluctuations in Nortel’s operating results and general industry, economic and market conditions and growth rates; fluctuations in Nortel’s cash flow, level of outstanding debt and current debt ratings; Nortel’s monitoring of the capital markets for opportunities to improve its capital structure and financial flexibility; Nortel’s ability to recruit and retain qualified employees; the use of cash collateral to support Nortel’s normal course business activities; the dependence on Nortel’s subsidiaries for funding; the impact of Nortel’s defined benefit plans and deferred tax assets on results of operations and Nortel’s cash flow; the adverse resolution of class actions, litigation in the ordinary course of business, intellectual property disputes and similar matters; Nortel’s dependence on new product development and its ability to predict market demand for particular products; Nortel’s ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization and consolidation in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel’s customers and the impact of customer financing and commitments; general stock market volatility; negative developments associated with Nortel’s supply contracts and contract manufacturing agreements, including as a result of using a sole supplier for a key component of certain optical networks solutions; the impact of Nortel’s supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; any undetected product defects, errors or failures; the future success of Nortel’s strategic alliances; and certain restrictions on how Nortel and its president and chief executive officer conduct business. For additional information with respect to certain of these and other factors, see the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by Nortel 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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Pat Cooper

Nortel

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