China's West-East Gas Pipeline Project Selects Nortel's IP Network Solution; Powering China's Longest Pipeline with Wired, Wireless IP Voice, Data, Multimedia Communications.

BEIJING -- China's landmark West-East Gas Pipeline Project (WEPP) has selected an IP-based converged networking solution from Nortel (NYSE:NT) (TSX:NT) to power high quality voice and multimedia communications, both wired and wireless, along its 4,200-kilometer route.

Operated by PetroChina Company Limited, a subsidiary of the state-owned China National Petroleum Corporation, the pipeline is the longest in China, and one of the longest in the world spanning nine provinces to transport natural gas from the rich Lunnan gas fields of Xinjiang Uygur Autonomous Region all the way to the economic hub of Shanghai and other regions of the Yangtze River Delta.

Currently in operation at WEPP's network control center in Shanghai, the converged network from Nortel will be extended to 57 out of 200 sites along the pipeline's route by early 2006. When complete, the project will be one of the largest IP softswitch-based enterprise networks Nortel has deployed to date in China.

Delivering seamless, real-time voice communications to office personnel and mobile workers at significantly lower costs than traditional fixed-line telephony, the Nortel IP solution also enables SIP-based multimedia and collaborative productivity applications. These applications include virtual interactive meetings with file exchange, Web based collaboration and other advanced capabilities. Nortel's VPN solution will provide secure connectivity across the IP network and the public Internet for mobile staff.

"This is a highly strategic project for China and Nortel is supporting WEPP's success by providing a proven converged communications platform that delivers carrier-grade performance, flexibility and reliability, as well as the scalability to meet future needs," said Stephen Tsui, chief operating officer, Greater China, Nortel. "This contract is a significant milestone for Nortel in China representing the first deployment of our converged networking solution by the country's gas industry."

At the WEPP Shanghai control center, the Nortel solution consists of the Nortel Communication Server (CS) 1000, a full-featured IP PBX providing advanced applications and over 450 world-class telephony features, and the Nortel Multimedia Communication Server (MCS) 5100 to augment existing voice and data infrastructures and increase productivity by enabling multimedia collaboration, worker mobility and development of personalized applications.

In addition, Nortel's CallPilot unified messaging solution has also been deployed, as well as Nortel's VPN router to enable mobile users secure, remote access to voice mail, fax and e-mail services, and to make calls via the internal WEPP converged network through this office anywhere solution.

In addition to the Shanghai control center solution, 30 CS 1000 units and 27 Business Communications Manager (BCM) 50 systems are being installed in 57 of the 200 stations along the WEPP pipeline route during this initial phase of deployment. An all-in-one platform for converged voice and data communications, the BCM 50 provides a cost effective solution for remote sites with advanced capabilities such as IP telephony, messaging, IP networking, Internet access and contact center capabilities with skills-based routing.

Nortel's IP-based communications and multimedia solutions are gathering momentum among China's utilities, with major deployments for regional power utilities in Fujian and Shandong provinces and the Haihe River Water Resources Commission. Nortel has also deployed solutions for the water resource departments of Guangdong, Anhui and Henan provinces and the water resources commissions of the Huai River.

Nortel is a leading provider of communications solutions for utility companies worldwide, leveraging expertise in such new technologies as IP telephony, Optical Ethernet and advanced multiservice switching. In China, Nortel has a long history of providing enterprise information networking across a broad range of industries. In addition to utilities, Nortel supplies communications solutions designed to be secure and reliable to energy, educational, financial and government institutions.

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.

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