Southern Cross Tackles Growing Bandwidth Demands with Nortel Optical Solution

Employs Broad Range of Nortel Global Services for U.S. West Coast Deployment

AUGUST 09, 2006, TORONTO - Southern Cross Cables is significantly increasing the capability of its U.S. terrestrial optical network with a Nortel* [NYSE/TSE: NT] optical solution. Nortel will supply, deploy and maintain the optical solution on the U.S. mainland’s west coast as part of Southern Cross’ 30,500-kilometer submarine cable network that acts as the major link for broadband services and Internet traffic from Australia, New Zealand, Fiji and Hawaii to the U.S.

The deployment will use Nortel’s adaptive all optical intelligent platforms, the Nortel Common Photonic Layer (CPL) and Nortel Optical Multiservice Edge (OME) 6500, to connect access points located in San Jose and Morro Bay, California, and Hillboro and Nedonna Beach, Oregon. Using Nortel’s Optical Network Manager, the terrestrial network will be fully managed and operated remotely from Southern Cross’ network operations center in Auckland, New Zealand.

“As one of the Pacific Rim’s leading independent bandwidth wholesalers, Southern Cross provides our Australasian and Hawaiian customers with secure and reliable bandwidth for today, tomorrow and the next 15 years,” said Fiona Beck, chief executive officer, Southern Cross Cables Limited. “Nortel’s optical solutions and the experience of their global services business play an important role in helping Southern Cross to meet the current and future needs of our growing customer base.”

“At the heart of Nortel’s success in building high-performance all optical networks is a continued commitment to innovation and making complex deployments simple for our customers,” said Philippe Morin, president, Metro Ethernet Networks, Nortel. “Our intelligent optical platforms help enable service providers like Southern Cross to increase bandwidth capabilities and flexibility, as well as lower the costs associated with operating a world-class optical network.”

Nortel’s Global Services portfolio was a key differentiator over competitive offerings, giving Southern Cross the ability to upgrade its U.S. terrestrial network with minimal impact on existing customers. Nortel will provide Southern Cross with integration services including network staging, engineering, implementation and stability testing. Nortel will also provide maintenance services including a Platinum Support Plan for emergency dispatch and recovery, site maintenance and technical support, and operations and maintenance training.

The Southern Cross U.S. terrestrial network is configured with twenty 10 Gbps channels (200 Gbps) of lit capacity. Using dense wavelength division multiplexing (DWDM) capabilities in the CPL and OME 6500, this network has the potential to increase to 560 Gigabits of capacity when growth requires, and with the addition of new 40 Gbps modules on the CPL future network capacity could be quadrupled to over two terabits per second.

Southern Cross will also use one of Nortel’s key innovations on the OME 6500, electronic dynamically compensating optics (eDCO) that enable fiber spans of up to 2,000 kilometers without the need for costly inline dispersion compensation modules or regeneration equipment.

The Nortel OME 6500 is an optical convergence platform that supports transponding, TDM and Ethernet switching on a single device, allowing service providers a smooth migration to a reliable and scalable Ethernet infrastructure while maintaining minimal infrastructure costs. The OME 6500 has been deployed in over 115 networks globally. The Nortel CPL is a is an intelligent, continuously self-optimizing, modular DWDM transport platform designed for cost-effective metro, regional and long haul networks. The CPL has been deployed in over 35 networks around the world.

Nortel’s Global Services include a full range of integrated services for design, deployment, management and maintenance of end-to-end multi-vendor network solutions, including seamless migration to next generation technologies.

About Southern Cross Cable Network (www.southerncrosscables.com)**

Southern Cross Cable Network provides the fastest, most direct, and most secure international bandwidth from Australia, New Zealand and Hawaii to the heart of the Internet in the USA. With offices in Bermuda, Sydney, Auckland and Wellington, Southern Cross has potential to provide for Australasia’s growing bandwidth requirements for the next five years and is fuelling the broadband revolution. Southern Cross Cable Network is owned by Telecom New Zealand (50%), SingTel Optus (40%) and Verizon (10%).

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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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 finalization and approval of its proposed class action settlement, or if such proposed class action settlement is not finalized, any larger settlements or awards of damages in respect of such class actions; 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 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 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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