BT, Nortel to Develop UK National Defence Communications Network; New Network Development Lab Opens to Support BT Contract.

LONDON -- BT is partnering with Nortel (NYSE: NT)(TSX: NT) as its main supplier to deploy a nationwide communications network that will be used to provide secure managed voice and data services to the UK Ministry of Defence (MOD) and British Armed Forces.

The deployment is part of a five-year extension of the Defence Fixed Telecommunications Service (DFTS) contract with BT - worth up to GBP 1.5 billion to BT - to build and manage the UK MOD's mission critical telecommunications infrastructure.

Using Nortel multiservice switching and voice over IP (VoIP) solutions valued at US$42 million, the new network will be built out over the next two years. It is expected to provide improved security and responsiveness for the UK military and greater operational and end user efficiencies, resulting in an estimated savings of GBP 15 million per year to the UK MOD.

The infrastructure will provide stable wide area network services in over 2,000 locations, including voice services to over 200,000 subscribers and common Ethernet-based connectivity to 150,000 terminals.

"We are working closely with Nortel to improve the effectiveness of the UK's defence communications network and the services it provides," said John Anderson, director, BT Government. "Today's announcement extends BT's successful management of the DFTS network since 1997 with a roll-out of consistent improvements and developments."

To ensure the smooth migration of current services and applications across the new multiservice network, BT and Nortel have jointly developed a dedicated testing facility for the MOD network. At a cost of over GBP 3 million in technology alone, the Network Development Lab (NDL) is a captive replica of the MOD's telecommunications network. Officially opened today, the lab includes all existing equipment currently deployed in the UK MOD network, along with all new equipment being procured as part of the network evolution.

"The joint BT-Nortel lab will enable new technologies and services to be fully proven prior to delivery to the MOD, ensuring optimum service performance and quality," Anderson said.

"The communications technology decisions made by the MOD help determine the UK military's ability to operate efficiently, effectively and securely," said Chuck Saffell, president, Federal Solutions, Nortel. "Nortel worked closely with BT and the MOD to custom-design a solution to support mission-critical communications while reducing operational costs and increasing the efficient use of existing infrastructure."

BT and the Defence Communications Services Administration (DCSA), the operator of the DFTS, also plan to use the lab as an opportunity to showcase DFTS services that could be provided to third-party organisations, such as those in the defence industry or other government agencies that require an MOD-grade secure network.

Nortel provides robust networking solutions to defence, civil and intelligence agencies through its Nortel Federal Solutions organization. Supported by a world-class research and development organization, Nortel Federal Solutions is focused on delivering converged solutions that provide the highest levels of reliability, security and quality of service for government agencies such as the UK MOD and the United States Department of Defense (DOD). The US DOD is using Nortel multiservice solutions for its voice network, and relies on Nortel solutions in all 50 states and more than two dozen countries across the globe.

About the UK Ministry of Defence

The Ministry of Defence is responsible for defending the United Kingdom, its overseas territories, people and interests as well as strengthening international peace and security. It employs more than 270,000 people and has an annual budget of GBP 30 billion. The four main sectors within the MOD are the Royal Navy, Army, Royal Air Force and the ministry itself.

About BT

BT is one of the world's leading providers of communications solutions serving customers in Europe, the Americas and Asia Pacific. Its principal activities include networked IT services, local, national and international telecommunications services, and higher-value broadband and internet products and services.

BT consists principally of three lines of business:

--BT Retail, providing a comprehensive range of communications and related services to more than 20m UK consumers and businesses.

--BT Wholesale, providing network services and solutions within the UK to more than 600 fixed and mobile operators and service providers including the provision of broadband and private circuits.

--BT Global Services, providing networked IT services to meet the needs of multi-site organisations globally. BT Global Services operates in more than 130 countries and also offers international carrier services.

In the year ended 31 March 2005, BT Group's turnover was GBP 18,623 million with profit before goodwill amortisation, exceptional items and taxation of GBP 2,085 million.

BT Group plc is listed on stock exchanges in London and New York. British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group and encompasses virtually all businesses and assets of the BT Group.

For more information, visit www.bt.com/aboutbt.

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 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); ongoing SEC reviews, which may result in changes to Nortel's and NNL's public filings; 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; stock market volatility generally and as a result of acceleration of the settlement date of Nortel's forward purchase contracts; 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; and the future success of Nortel's strategic alliances.

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.

Use of the terms "partner" and "partnership" does not imply a legal partnership between Nortel and any other party.