Infoforum Honors Nortel for Technology Integration Efforts in Russia

Localized VPN Router First to Comply to Russian Crypto Standards

AUGUST 17, 2006 - MOSCOW - Nortel* [NYSE/TSX:NT] Russia was recently honored by Infoforum, the Russian Forum for Information Security, for adapting Nortel solutions for local use in information security applications. The award was granted specifically for the development of the Nortel IP VPN router - the first and to date the only router offered by a major international vendor with built-in Russian crypto algorithms. This technology ensures secure connectivity across managed IP networks and the Internet and is enabling the creation of secure, scalable, resilient, high-performance virtual private networks (VPNs) across Russia.

“The Russian Federation is a major growth market of strategic importance to Nortel and this award is a well-deserved tribute to Nortel employees who are working hard to ensure that Nortel-enabled communications make a positive difference in Russia,” said Sorin Lupu, president Eastern Europe, Nortel.

The award certificate was presented in summer 2006 to Vladimir Smirnov, general manager Enterprise Sales, Channels and Marketing for Russia, CIS and Baltics, by Victor Gorbachev, chief of the Communications Security Centre of the Federal Security Service. Gorbachev is one of the key officials in charge of security in Russia’s IT and telecommunications sector.

“We have put a lot of effort into localizing our solutions and establishing Nortel as trustworthy partner for Russian Government and business,” said Smirnov. “The Infoforum award is an important milestone for Nortel in Russia and I am proud of the effort displayed by Nortel’s Moscow team to make this happen.”

A second Infoforum award was granted to Nortel for providing assistance in arranging some of the key events for information security in the Russian Federation. This award was presented to Nortel’s Maxim Kiselev, leader Enterprise Marketing for Russia, CIS and Baltics, by Alexander Korsak the head of the Economic Security Department of Moscow City Government.

“Infoforum was established to bring together efforts of business and authorities. I am glad that this formula is working for and helping to develop IT in Russia and improve information security,” said Alexander Zhukov, executive secretary, Infoforum. “Nortel is an active participant in this process, and these awards recognize this. I congratulate Nortel and its managers.”

Infoforum runs a series of events throughout the Russian Federation on information security topics for government and businesses. Infoforum is organized by Russian governmental bodies, such as the State Duma Committee for Security, Security Council of Russian Federation, Federal Agency for Information Technologies of the Russian Federation, and the Moscow City Government. Infoforum is supported by a number of government agencies and trade associations committed to the development of Russia’s IT and telecommunications sector.

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; 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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