China Telecom Selects Nortel Networks Multiservice Backbone Solution; High-Performance ATM Networks Expanded Nationwide for Data Services, IP VPNs.

Business Editors & High-Tech Writers

BEIJING--(BUSINESS WIRE)--Oct. 29, 2002

China Telecommunications Corporation (China Telecom), China's largest terrestrial wireline network operator, has awarded Nortel Networks (NYSE:NT)(TSX:NT) a contract to build new multiservice backbone networks in northern China, bringing the power and bandwidth of Nortel Networks high-performance ATM solutions to customers in these areas.

Under terms of the contract, Nortel Networks will build a new network to cover 10 provinces in Northern China, including Beijing, Tianjin, Hebei, Henan, Shandong, Shanxi, Inner Mongolia, Liaoning, Jilin and Heilongjiang. Nortel Networks will also deploy a new metro network in the capital of Beijing. Both networks are scheduled to be in operation by early next year and are expected to extend China Telecom's multiservice backbone capabilities to all of China's 31 provinces.

Nortel Networks has also been selected by China Telecom to build a new ATM-based multiservice backbone in Shaanxi Province and to expand existing networks in Hubei Province and Shanghai municipality.

Since the restructuring of China's telecommunications industry in May 2002, China Telecom operates multiservice backbone networks in 21 provinces in Southern and Western China.

Based on Nortel Networks Passport 15000-VSS and Passport 7000 Multiservice Switch portfolios, the new deployments are expected to position China Telecom to deliver advanced IP VPN (Virtual Private Network), ATM, frame relay, IP (Internet Protocol), circuit emulation and other, end-to-end data services. Nortel Networks multiservice backbone solutions provide an integrated, high-speed platform that offers a seamless migration path to MPLS.

"We are honored to be selected by China Telecom for these significant projects, which further reinforce our networking strengths and our leadership in building high-performance multiservice networks in China," said Yuan-Hao Lin, acting president, Nortel Networks China. "These projects will create a new market framework, allowing business users to adopt new data services and applications on a massive scale."

Nortel Networks Passport 15000 is a high-capacity, carrier-grade switch, supporting IP VPN, ATM, frame relay, MPLS, circuit emulation and voice services. Passport 15000 provides a versatile, reliable and scalable solution to meet the challenges of today's network service providers, enabling them to "grow as they go" in terms of network expansion and deployment of new features.

Nortel Networks Passport 7000 is one of the fastest-growing multi-service switching platforms in the world. In addition to enabling carriers to implement a wide variety of value-added services, customers can increasingly benefit from better quality for frame relay services as traffic from a wide range of services is integrated over higher speed trunks.

Passport 15000 and 7000 are key components of Nortel Networks industry-leading portfolio of multiservice switches, which also includes the new Passport 20000. Nortel Networks is the industry leader in multiservice switches worldwide, ranking #1 in reports from Dell'Oro, Synergy Research Group and Infonetics for the second quarter of 2002. In addition, Nortel Networks has been increasing its market share, growing from 27 percent to 38 percent (second quarter of 2001 compared to second quarter of 2002) according to Synergy. With over 40,000 systems deployed in more than 1500 customer networks globally, Passport has field-proven experience in delivering 'in-service' reliability.

Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global Company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at www.nortelnetworks.com.

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 severity and duration of the industry adjustment; the sufficiency of our restructuring activities, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; fluctuations in operating results and general industry, economic and market conditions and growth rates; the ability to recruit and retain qualified employees; fluctuations in cash flow, the level of outstanding debt and debt ratings; the ability to meet financial covenants contained in our credit agreements; the ability to make acquisitions and/or 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; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization in the telecommunications industry; the dependence on new product development; the uncertainties of the Internet; the impact of the credit risks of our customers and the impact of increased provision of customer financing and commitments; stock market volatility; the entrance into an increased number of supply, turnkey, and outsourcing contracts which contain delivery, installation, and performance provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; the ability to obtain timely, adequate and reasonably priced component parts from suppliers and internal manufacturing capacity; the future success of our strategic alliances; and the adverse resolution of litigation. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks with the United States Securities and Exchange Commission. Unless otherwise required by applicable securities laws, Nortel Networks 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 Networks, the Nortel Networks logo, the Globemark and Passport are trademarks of Nortel Networks.