Nortel PEC Solutions Selected for Army Applications Development; Tasks Valued at Approximately US$5.2 Million Over One Year.

FAIRFAX, Va. -- Nortel PEC Solutions, a Nortel (NYSE:NT)(TSX:NT) subsidiary focused on professional technology services and high-end e-Government solutions, has been awarded a task order from the U.S. Army Defense Contracting Command, Washington D.C. in support of the Information Management Support Center (IMCEN).

The task order, issued under a contract with Nortel PEC Solutions' subsidiary AC Technologies, Inc., is valued at approximately US$5.2 million over a one-year period.

IMCEN supports all information management services delivered to the Headquarters Department of the Army (HQDA) and its assigned agencies. It is designed to ensure the timely, effective, and efficient delivery of information, mission critical support and information technology services to the Secretary of the Army, Chief of Staff and more than 80 supporting agencies. It also serves as an interface to the Department of Defense. Today, IMCEN provides support services for more than 10,000 personnel, including military, U.S. Department of the Army civilians, and contractor personnel.

Nortel PEC Solutions, in collaboration with Serco, Inc., will provide business applications development and management services as well as Independent Verification and Validation (IV&V) testing services for IMCEN.

Serco Inc. is a key supplier of human resource solutions, information technology services, economic cost analysis and supply chain management for the U.S. Department of Defense, air traffic control for the Federal Aviation Administration, fleet management, and local government services.

Nortel PEC Solutions will be responsible for building, modifying, and supporting a variety of small-, medium-, and large-sized applications to manage agency requirements, as well as providing web and database application hosting services.

"We are honored to have been selected to support IMCEN with business application development and management support," said Robert Veschi, president of Nortel PEC Solutions' Defense Sector operations. "We look forward to assisting IMCEN with meeting their mission to provide information technology and information management support to IMCEN's customers, including the senior management of the Department of the Army."

About Serco, Inc.

Serco is one of the world's leading service companies. By successfully managing organizational design and change, Serco helps national and local governments around the world to improve services across all aspects of their activities. Where appropriate, Serco applies this capability to help commercial clients to achieve their strategic goals. For more information, visit www.serco.com.

About Nortel PEC Solutions

Nortel PEC Solutions is a trusted partner for governments in supporting the livelihood, security, and well-being of their citizens. Nortel PEC Solutions 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, Virginia, 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; 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; 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.

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