U.S. Department of Defense Secures Voice Network Using Nortel Solution; Reduces Network Costs, Prepares for Circuit-to-Packet Migration.

WASHINGTON -- The United States Department of Defense (DoD) has chosen a Nortel (NYSE:NT)(TSX:NT) solution to enhance its communications network, support introduction of new applications, and improve control and responsiveness in times of crisis -- all at reduced operational cost to the government and taxpayers.

Nortel and DoD's Defense Information Systems Agency (DISA) -- with help from systems integrators General Dynamics and CSC -- have designed a network solution that will leverage existing communications equipment. By upgrading hardware and adding new software, the entire DoD managed voice network will be transformed into a private network under complete DoD control.

This solution also puts DISA in a position to easily move from circuit to packet applications on its own timetable, enabling cost reductions and addition of new applications.

DISA spent several years creating an implementation plan to provide increased security and to remedy some of the shortcomings of the current Defense Switched Network (DSN).

"Today more than ever, the networking technology decisions made by the Department of Defense will help shape this country's ability to serve its citizens' needs, respond to threats, and analyze and use information to protect citizens, property and infrastructure," said Chuck Saffell, president, Federal Solutions, Nortel. "Nortel worked closely with DoD to custom-design a solution that would support mission-critical communications while reducing operational costs and increasing the efficient use of the existing infrastructure."

"The DSN is a large, sophisticated global network that is well designed and operated, but it also has relied on a managed service from private sector telecommunications service providers for a portion of its infrastructure," Saffell said. "That means that the ability of the DSN to respond to any given crisis could be restricted because it is not under direct governmental control."

The new hardware and software will create a multifunction switch for the Department of Defense designed to cost-effectively provide full tandem and end office capability. It will support a full range of military-specific requirements including Multi-level Precedence and Preemption (MLPP) service, which ensures that calls are put through in order of priority in times of crisis.

In addition to enhancing security, the network solution will also enable DISA to reduce operational costs by making more efficient use of U.S. Air Force-owned resources. This has been achieved through a collaborative effort between DISA and the U.S. Air Force Communications Agency (AFCA).

After rigorous testing, the solution successfully completed Joint Interoperability Test Command (JITC) certification, which ensures that products are secure, operate optimally in a multi-vendor environment, deliver exacting levels of performance under duress, and offer other unique features and functionality required for national security.

The Department of Defense relies on Nortel solutions in all 50 states and more than two dozen countries across the globe.

Nortel Federal Solutions is an organization dedicated to providing robust networking solutions to defense, civil and intelligence agencies. Supported by a world-class R&D organization, Nortel Federal Solutions is focused on delivering converged solutions that provide the highest levels of reliability, security and quality of service.

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; 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 controls over financial reporting; the impact of Nortel's and NNL's failure to timely file their financial statements and related periodic reports, including breach of its support facility and public debt obligations and 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 our public filings; the potential delisting or suspension of Nortel's and NNL's publicly traded securities; 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, 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; 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 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 or early settlement, which is currently not available, of Nortel's forward purchase contracts; 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; 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 and the Globemark are trademarks of Nortel Networks.