Pelephone Awards Nortel Networks US$30 Million Wireless Network Expansion in Israel; Wireless Data Network to Increase Wireless Coverage Across Israel, Enable New Data Services.

Business Editors/High-Tech Writers

ITU TELECOM WORLD 2003

TEL AVIV, Israel--(BUSINESS WIRE)--Oct. 14, 2003

Pelephone, Israel's first 3G wireless network technology operator, has selected Nortel Networks (NYSE:NT)(TSX:NT) to expand its 3G Wireless Data Network in a supply agreement estimated at US$30 million over three years.

Nortel Networks is the primary provider of Pelephone's existing CDMA2000 1X Wireless Data Network, which was launched as Israel's first commercial 3G (third generation) wireless network earlier this year. Pelephone currently serves approximately 1.9 million subscribers in Israel.

This expansion will overlay existing network equipment and will also help Pelephone to drive new revenues by supporting high-speed wireless data and secure Internet services like Java games, downloadable ring tones and screen savers, picture, video and audio messaging, mobile Web browsing, and e-mail access with attachments.

"Nortel Networks has proved its ability to swiftly and economically deliver 3G wireless systems that integrate seamlessly with our current technology and provide advanced new functionality for our subscribers," said Jacob Gelbard, president, Pelephone Communications Ltd. "We are happy to once again turn to Nortel Networks as we enter the next phase of our wireless business strategy."

"Through our CDMA evolution capabilities, we help operators like Pelephone to drive reduced networking costs and increased revenue opportunities," said Pascal Debon, president, Wireless Networks, Nortel Networks. "This is a powerful business case. Operators are turning to Nortel Networks because our strategy meets today's challenging business environment to maximize network investments."

"We look forward to building on and continuing our relationship with Pelephone," said Sorin Lupu, managing director, Nortel Networks Israel. "We are leveraging our global wireless and technical experience and our 20-year position in the Israeli market to help Pelephone drive Israel into the next era of mobile communications."

This continues Nortel Networks success in the emerging Middle East, African and Eastern Europe markets, including recent supply agreements with Multi-Links, Telecom Egypt and Angola Telecom in Africa, and with BaykalWestcom and UralWestcom in Russia. Nortel Networks is also a leading provider to the world's largest CDMA, GSM and UMTS operators, including mm02, Orange, Telefonica, T-Mobile, and Vodafone in Europe; AT&T Wireless, Cingular Wireless, T-Mobile, Sprint PCS, Verizon Wireless and Bell Mobility in North America; BellSouth, SERCOM and Vesper in Latin America; China Unicom and Asia Pacific Broadband Wireless (APBW) in Asia; and Telstra in Australia.

This latest network supply agreement with Pelephone expands an ongoing business relationship between the two companies. Nortel Networks is Pelephone's primary supplier of CDMA2000 1X radio equipment and its sole supplier of core networking (packet and circuit) equipment.

Under this agreement, Nortel Networks will deploy products from its CDMA Metro Cell radio base station (BTS), CDMA Base Station Controller (BSC), and CDMA Packet Data Serving Node (PDSN) portfolios to expand the Pelephone network.

Nortel Networks wireless technology is designed to maximize existing customer investments and help service providers drive down capital and operating costs. Nortel Networks wireless infrastructure is designed to migrate to next generation technologies like CDMA2000 1X, CDMA2000 1xEV-DO, GPRS and EDGE through modular upgrades. This approach re-uses existing base station equipment to reduce or eliminate the need for costly hardware replacements. Nortel Networks is the industry's only end-to-end network supplier of all 3G wireless technologies.

Nortel Networks is demonstrating its solutions for transforming networks to enable Business Without Boundaries at ITU Telecom World 2003 in Geneva the week of October 13, 2003. Media and analysts may obtain up-to-date information on Nortel Networks at ITU Telecom World 2003 at www.nortelnetworks.com/corporate/events/2003c/itutelecomworld2003/pres s.html. (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.)

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 and continued reductions in spending by our customers; 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 integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact on our gross margins and other impacts 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 in the telecommunications industry; the dependence on new product development and our ability to predict market demand for particular products; the uncertainties of the Internet; the impact of the credit risks of our customers and the impact of customer financing and commitments; the impact of a consolidation of our common shares; stock market volatility generally and as a result of acceleration of the settlement date or early settlement of our purchase contracts; the entrance into an increased number of supply and outsourcing contracts which contain delivery and installation 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 outcome of our asset and liability review; the future success of our strategic alliances; risks related to our defined benefit plans; the impact of additional valuation allowances for all or a portion of our deferred tax assets required if market conditions further deteriorate or future results of operations are less than expected; an inability of our subsidiaries to provide funding to the respective parent companies; restrictions on our cash as cash collateral if satisfactory arrangements for alternative support for certain obligations are not in place; and the adverse resolution of litigation and intellectual property disputes. For additional information with respect to certain of these and other factors, see the most recent Form 10-Q and Form 10-K 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.

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