LG-Nortel Launches Smart Communications System for Small & Medium Businesses

ARIA SOHO Uses Latest Digital Technologies to Deliver Cost-Effective Communications

AUGUST 30, 2006 - SEOUL – LG-Nortel, the LG Electronics and Nortel* [NYSE/TSX: NT] joint venture, is launching its first new product range – a smart communications system to help small and medium businesses (SMBs) boost employee productivity, streamline business operations, reduce costs and enhance customer service.

The ARIA SOHO digital hybrid PBX is the first product fully developed and built by LG-Nortel since the joint venture was established in late 2005. Designed specifically for the SMB and home office markets, and fully hybrid to support both analog and digital communications, the ARIA SOHO will initially be available from September 2006 in Asia Pacific, Turkey, North Africa and Russia.

“LG-Nortel will focus on growing SMB market share through ongoing development of new products and marketing activities,” said J.R. Lee, chief executive officer, LG-Nortel. “We are confident our continued efforts will establish LG-Nortel as a leading communications provider for SMB customers in many markets around the world.”

The ARIA SOHO is a powerful addition to LG-Nortel’s existing SMB product portfolio. For the past six years, the company’s popular ipLDK digital PBX range – under its earlier LG Electronics branding – has provided more than 1.5 million ports per year to enterprise customers in approximately 50 countries.

The ARIA SOHO offers simplicity and ease of use – in regard to installation, operation and maintenance – and this is expected to be of particular appeal to SMB and home office users. Enabled by its fully hybrid architecture, an easy-to-use ‘plug and play’ facility provides maximum flexibility in selecting types of terminals, whether the user is dealing with single-line analog handsets, digital telephones or faxes.

Since the ARIA SOHO has been developed using the latest digital technology, it offers essential business services such as Caller ID, SMS and voice/fax tone detection at no extra cost. Sophisticated options traditionally provided only by large PBX systems – such as in-built voice mail, auto attendant, conferencing capability, and LAN interface for Ethernet connectivity – are also available. In addition, the ARIA SOHO includes call cost control/monitoring capabilities to keep communications costs low, and is easily and affordably scalable to 48 extensions.

About LG-Nortel

LG-Nortel is a joint venture of LG Electronics and Nortel. Established in 2005, LG-Nortel provides leading edge telecommunications equipment and network solutions, spanning wired and wireless technologies, to service provider and enterprise customers in Korea and around the world. LG-Nortel is also actively developing next generation solutions for global markets, with over 1,000 skilled R&D engineers currently focused on wireless broadband technology evolution and the development of powerful new product lines. For more information on LG-Nortel, visit www.lg-nortel.com.

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.

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 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.

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

*LG-Nortel and the LG-Nortel logo are trademarks of LG-Nortel.

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