Nortel Introduces Secure Telephone Solution for Government Markets; Enhanced Meridian Telephone Meets Strict U.S. Government Requirements for Security and Reliability.

WASHINGTON -- Nortel (NYSE:NT) (TSX:NT) today introduced enhancements to the Meridian telephone series that meet strict U.S. federal government security requirements for protecting highly sensitive information from intrusion and tampering.

The new Secure Telephone, part of Nortel's industry-leading portfolio of Meridian telephony solutions, complies with U.S. Telephone Security Group (TSG) guidelines for government use. The Secure Telephone offers a wide range of security features that prevent outside intrusion into government networks and safeguard against equipment tampering.

"Today more than ever it is critical that the U.S. government has highly-reliable and secure communications systems to analyze and use the information needed to protect the country and its citizens," said Chuck Saffell, chief executive officer, Nortel PEC Solutions. "With its Secure Telephone, Nortel continues to deliver networking technologies specifically designed to help governments protect mission-critical information."

The Secure Telephone M2016S builds on the proven reliability of Nortel's Meridian telephone series to provide a Type-accepted Class 2 telephone. It ensures security to prevent the telephone from being used as a passive listening device when the handset is in the on-hook position, as well as the following security features:

--Positive disconnect - provides on-hook audio security, immediately disconnecting the telephone from the network when not in use.

--Off-hook visual indicator - indicates that the security features are off when the phone is off hook. Acts as an alert so the user knows the security features are disabled.

--Unique serial number - appears in three places inside and outside the phone for quick verification during security sweeps. Mismatched serial numbers could indicate unauthorized repair or tampering.

--Tamper-evident labeling - a hologram sticker on the outside of the phone must be removed or broken to get inside, making it evident that somebody has tampered with the phone.

--No handsfree microphone - a requirement for government standards. This reduces the risk of sensitive information being overheard.

Nortel is the industry's first and only major infrastructure vendor to offer TSG-approved telephones. The M2016S complies with the U.S. government's directive 'DCID 6/9 Annex G,' which specifies requirements for government telecommunications equipment installed in Sensitive Compartmented Information Facilities (SCIFs). The M2016S has been tested and is in compliance with the specifications of TSG Standards and is registered as an approved device by the U.S. National Telecommunications Security Working Group (NTSWG)(a).

With more than two decades of delivering technological innovation, expertise, and business value to customers worldwide, Nortel PEC Solutions (formerly PEC Solutions, Inc.) is in a position to provide the U.S. Federal Government with secure, end-to-end, carrier-grade networks supporting mission-critical applications and communications. Nortel is a leading enterprise networking vendor with the proven expertise to design and implement interoperable and secure solutions across telephony, data and optical technologies for enterprises and service providers.

About Nortel PEC Solutions

With more than two decades of experience, Nortel PEC Solutions (formerly PEC Solutions, Inc.) is a trusted partner for governments to support the livelihood, security, and well-being of its citizens. It delivers a comprehensive portfolio of technology and high-end services capable of meeting the demands of the most complex and important systems in the world. Headquartered in Fairfax, Va., Nortel PEC Solutions engineers, deploys and manages mission-critical solutions for government, including homeland security, criminal justice and intelligence, defense and civilian agencies within the U.S. Federal Government and at state and local levels. Please visit www.nortelpec.com for additional information.

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; any undetected product defects, errors or failures; 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, the Globemark and Meridian are trademarks of Nortel. PEC and PEC Solutions are trademarks of Nortel PEC Solutions, Inc., d/b/a Nortel PEC Solutions.

(a) The National Telecommunications Security Working Group (NTSWG), formerly known as the Telephone Security Group (TSG), is a standing committee of the Security Policy Board of the U.S. Government. It provides security policy, procedures, and countermeasures direction for telephone and telecommunications systems employed within all sensitive information processing areas within the U.S. Government.

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