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Nortel Networks

Nortel Provides Status Update

Toronto, Canada (ots/PRNewswire)

Nortel Networks(x) Corporation
(NYSE: NT, TSX: NT) and its principal  operating subsidiary, Nortel
Networks Limited ("NNL"), today provided a  status update pursuant to
the alternate information guidelines of the  Ontario Securities
Commission ("OSC"). These guidelines contemplate that  the Company
and NNL will normally provide bi-weekly updates on their  affairs
until such time as they are current with their filing obligations
under Canadian securities laws. All dollar amounts given below are in
U.S.  dollars.
Restatements
As previously announced on April 6, 2006, further revenue
adjustments  to those initially identified in the March 10, 2006
press release were  anticipated primarily as a result of an
accounting policy change with  respect to revenue for contracts with
provisions for multiple deliverables  that was historically accounted
for under the percentage-of-completion  methodology. While expected
restatement impacts are approximate and subject  to change, the
Company currently expects an increase in aggregate revenue
restatement adjustments of approximately US$350 million over the
US$866  million previously announced. The current estimated impacts
to 2005, 2004  and 2003 revenues would increase the revenue
adjustments by approximately  US$120 million, US$220 million and
US$100 million, respectively, from those  previously announced. The
current estimated impact to periods prior to 2003  would decrease the
revenue adjustments by approximately US$90 million from  those
previously announced. These revenue adjustments result in the
deferral to later periods of revenue that was previously recognized
in  prior periods.
The expected restatement impacts set forth in this release are
preliminary and unaudited and reflect known restatement adjustments.
These  impacts are subject to change as a result of any adjustments
arising from  the completion of the restatement process, subsequent
events and the  completion of the audit of the financial statements
by Nortel's independent  auditors.
Timing of Filing of Financial Statements
Nortel has determined, after consultation with the Staff of the
United  States Securities and Exchange Commission (the "SEC"), to
include  additional 2005 and comparative 2004 restated quarterly
information in its  and NNL's 2005 Annual Reports on Form 10-K (the
"2005 Form 10-Ks"). The  additional quarterly information is more
extensive than originally  contemplated for inclusion in the 2005
Form 10-Ks when Nortel first  announced the intention to restate on
March 10, 2006, and necessitates  additional work for preparation of
the 2005 Form 10-Ks.
The Company continues to expect to file the 2005 Form 10-Ks and
the  corresponding filings under Canadian securities laws by April
30, 2006. But  as a result of the incremental work to include the
additional restated  quarterly information in the 2005 Form 10-Ks,
and the continuing work to  finalize the restatement, the Company has
concluded that it and NNL will  need to delay the filing with the SEC
of their Quarterly Reports on Form 10  -Q for the quarter ended March
31, 2006 (the "First Quarter 2006 Form  10-Qs ") and their
corresponding Canadian filings under Canadian securities  laws. The
Company and NNL now expect to file the First Quarter 2006 Form  10-Qs
and corresponding Canadian filings no later than the week of  June 5,
2006.      The Company and NNL will therefore file with the SEC a
Form 12b-25  Notification of Late Filing relating to this delay and
indicating that the  filings will not be made within the 5-day
extension period permitted by the  Form. The Company has notified the
New York Stock Exchange and the Toronto  Stock Exchange of the delay
in filing the First Quarter 2006 Form 10-Qs.  The Company and NNL
will continue to provide bi-weekly updates on their  affairs in
accordance with the alternate information guidelines of the OSC
until they are current with their filing obligations under Canadian
securities laws.
Credit Facility; EDC Support Facility; Debt Securities
As previously announced, an event of default has occurred and is
continuing under Nortel's US$1.3 billion one-year credit facility
(the " 2006 Credit Facility") as a result of the Company's delay in
filing its  2005 Form 10-K and certain other related breaches. Since
the Company will  not be able to file its First Quarter 2006 Form
10-Q by May 15, 2006,  absent a waiver, an additional event of
default will occur under the 2006  Credit Facility. As a result of
these Events of Default, lenders holding  greater than 50% of each
tranche under the 2006 Credit Facility have the  right to accelerate
such tranche, and lenders holding greater than 50% of  all of the
secured loans under the 2006 Credit Facility have the right to
exercise rights against certain collateral. The entire US$1.3 billion
under  the 2006 Credit Facility is currently outstanding.
As previously announced, an event of default has occurred and is
continuing under NNL's US$750 million support facility (the "EDC
Support  Facility") with Export Development Canada ("EDC") as a
result of the  Company's and NNL's delay in filing their 2005 Form
10-Ks and certain other  related breaches. An additional Event of
Default will arise, absent a  waiver, as the Company and NNL will not
be able to file their First Quarter  2006 Form 10-Qs by May 15, 2006.
As a result of these Events of Default,  EDC has the right to refuse
to issue additional support and may terminate  its commitments under
the EDC Support Facility or require that NNL cash  collateralize all
existing support. As at March 8, 2006, there was  approximately
US$161 million of outstanding support under this facility.
Nortel and NNL are currently in discussions with these lenders and
EDC  to negotiate waivers while Nortel completes its filing
obligations.  Although the Company expects that it will reach
agreement with the lenders  and EDC with respect to terms of an
acceptable waiver, there can be no  assurance that Nortel will
receive such waivers.
As previously announced, the Company and NNL are not in compliance
with  their obligations to deliver their SEC filings to the trustees
under their  public debt indentures as a result of the Company's and
NNL's delay in  filing its 2005 Form 10-K. An additional Event of
Default will arise as the  Company and NNL will not be able to file
their First Quarter 2006 Form 10-  Qs by May 25, 2006. These filing
delays will not result in an automatic  default and acceleration of
such long-term debt. Neither the trustee under  any such public debt
indenture nor the holders of at least 25% of the  outstanding
principal amount of any series of debt securities issued under  the
indentures will have the right to accelerate the maturity of such
debt  securities unless the Company or NNL, as the case may be, fails
to file and  deliver its 2005 Form 10- K or First Quarter 2006 Form
10-Q within 90 days  after the above mentioned holders have given
notice of such default to the  Company or NNL. In addition, any
acceleration of the loans under the 2006  Credit Facility would
result in a cross-default under the public debt  indentures that
would give the trustee under any such public debt indenture  or the
holders of at least 25% of the outstanding principal amount of any
series of debt securities issued under the indentures the right to
accelerate such series of debt securities. US$500 million of debt
securities of NNL (or its subsidiaries) and US$1.8 billion of
convertible  debt securities of the Company (guaranteed by NNL) are
currently  outstanding under the indentures.
If an acceleration of the Company's and NNL's obligations were to
occur, the Company and NNL may be unable to meet their respective
payment  obligations with respect to the related indebtedness.
OSC Management Cease Trade Order
On April 10, 2006, the OSC, in accordance with its guidelines,
issued a  final order prohibiting certain directors, officers and
current and former  employees of the Company and NNL from trading in
securities of the Company  and NNL, which finalized the temporary
order issued on March 27, 2006. This  final order will remain in
effect until two business days following the  receipt by the OSC of
all filings required to be made by the Company and  NNL pursuant to
Ontario securities laws.
The Company and NNL reported that there have been no material
developments in the matters reported in the March 10, 2006 press
release  and their status updates of March 23, 2006 and April 6,
2006, other than  the matters described above.
The Company's and NNL's next bi-weekly status update is expected
to  be released during the week of May 1, 2006.
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.  Our next-generation technologies, for both service
providers and  enterprises, span access and core networks, support
multimedia and  business-critical applications, and help eliminate
today's barriers to  efficiency, speed and performance by simplifying
networks and  connecting people with information. 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 statements in this press release may contain words such as
"could", "expects", "may", "anticipates", "believes", "intends",
"estimates",  "plans", "envisions", "seeks" and other similar
language and are  considered forward-looking statements or
information under applicable  securities legislation. These
statements are based on Nortel's current  expectations, estimates,
forecasts and projections about the operating  environment, economies
and markets in which Nortel operates. These  statements are subject
to important assumptions, risks and uncertainties,  which are
difficult to predict and the actual outcome may be materially
different. Although Nortel believes expectations reflected in such
forward- looking statements are reasonable based upon the assumptions
in this press  release, they may prove to be inaccurate and
consequently Nortel's actual  results could differ materially from
its expectations set out in this press  release. Further, actual
results or events could differ materially from  those contemplated in
forward-looking statements as a result of the  following (i) risks
and uncertainties relating to Nortel's restatements and  related
matters including: Nortel's recently announced restatement and two
previous restatements of its financial statements and related events
and  that the previously filed financial statements of Nortel and NNL
and  related audit reports should not be relied upon; the negative
impact on  Nortel and NNL of their announced restatement and delay in
filing their  financial statements and related periodic reports
causing them to breach  their public debt indentures and obligations
under their credit facilities  with the possibility that the holders
of their public debt or NNL's lenders  would seek to accelerate the
maturity of that debt; and causing a breach of  NNL's support
facility with EDC with the possibility that EDC would refuse  to
issue additional support under the facility, terminate its
commitments  under the facility or require NNL to cash collateralize
all existing  support; legal judgments, fines, penalties or
settlements, or any  substantial regulatory fines or other penalties
or sanctions, related to  the ongoing regulatory and criminal
investigations of Nortel in the U.S.  and Canada; any significant
pending civil litigation actions not  encompassed by Nortel's
proposed class action settlement; any substantial  cash payment
and/or significant dilution of Nortel's existing equity  positions
resulting from the finalization and approval of its proposed  class
action settlement, or if such proposed class action settlement is not
finalized, any larger settlements or awards of damages in respect of
such  class actions; any unsuccessful remediation of Nortel's
material weaknesses  in internal control over financial reporting
resulting in an inability to  report Nortel's results of operations
and financial condition accurately  and in a timely manner; the time
required to implement Nortel's remedial  measures; Nortel's inability
to access, in its current form, its shelf  registration filed with
the United States Securities and Exchange  Commission (SEC), and
Nortel's below investment grade credit rating and any  further
adverse effect on its credit rating due to Nortel's restatement of
its financial statements; any adverse effect on Nortel's business and
market price of its publicly traded securities arising from
continuing  negative publicity related to Nortel's restatements;
Nortel's potential  inability to attract or retain the personnel
necessary to achieve its  business objectives; any breach by Nortel
of the continued listing  requirements of the NYSE or TSX causing the
NYSE and/or the TSX to commence  suspension or delisting procedures;
any default in Nortel's filing  obligations extending beyond May 9,
2006 for the 2005 Form 10-Ks, and July  15, 2006 for the First
Quarter 2006 Form 10-Qs, causing any Canadian  securities regulatory
authority to impose an order to cease all trading in  Nortel's
securities within the applicable jurisdiction or to impose such an
order sooner if Nortel fails to comply with the alternate information
guidelines of such regulatory authorities; (ii) risks and
uncertainties  relating to Nortel's business including: yearly and
quarterly fluctuations  of Nortel's operating results; reduced demand
and pricing pressures for its  products due to global economic
conditions, significant competition,  competitive pricing practice,
cautious capital spending by customers,  increased industry
consolidation, rapidly changing technologies, evolving  industry
standards, frequent new product introductions and short product  life
cycles, and other trends and industry characteristics affecting the
telecommunications industry; any material and adverse effects on
Nortel's  performance if its expectations regarding market demand for
particular  products prove to be wrong or because of certain barriers
in its efforts to  expand internationally; any reduction in Nortel's
operating results and any  related volatility in its market price of
its publicly traded securities  arising from any decline in its gross
margin, or fluctuations in foreign  currency exchange rates; any
negative developments associated with Nortel's  supply contract and
contract manufacturing agreements including as a result  of using a
sole supplier for key optical networking solutions components,  and
any defects or errors in Nortel's current or planned products; any
negative impact to Nortel of its failure to achieve its business
transformation objectives; restrictions on how Nortel and its
president and  chief executive officer conduct its business arising
from a settlement with  Motorola Inc.; additional valuation
allowances for all or a portion of its  deferred tax assets; Nortel's
failure to protect its intellectual property  rights, or any adverse
judgments or settlements arising out of disputes  regarding
intellectual property; changes in regulation of the Internet  and/or
other aspects of the industry; Nortel's failure to successfully
operate or integrate its strategic acquisitions, or failure to
consummate or  succeed with its strategic alliances; any negative
effect of Nortel's  failure to evolve adequately its financial and
managerial control and  reporting systems and processes, manage and
grow its business, or create an  effective risk management strategy;
and (iii) risks and uncertainties  relating to Nortel's liquidity,
financing arrangements and capital  including: the impact of Nortel's
recently announced restatement and two  previous restatements of its
financial statements; any acceleration under  their public debt
indentures and credit facilities, which may result in  Nortel and NNL
being unable to meet their respective payment obligations;  any
inability of Nortel to manage cash flow fluctuations to fund working
capital requirements or achieve its business objectives in a timely
manner  or obtain additional sources of funding; high levels of debt,
limitations  on Nortel capitalizing on business opportunities because
of credit facility  covenants, or on obtaining additional secured
debt pursuant to the  provisions of indentures governing certain of
Nortel's public debt issues  and the provisions of its credit
facilities; any increase of restricted  cash requirements for Nortel
if it is unable to secure alternative support  for obligations
arising from certain normal course business activities, or  any
inability of Nortel's subsidiaries to provide it with sufficient
funding; any negative effect to Nortel of the need to make larger
defined  benefit plans contributions in the future or exposure to
customer credit  risks or inability of customers to fulfill payment
obligations under  customer financing arrangements; any negative
impact on Nortel's ability to  make future acquisitions, raise
capital, issue debt and retain employees  arising from stock price
volatility and further declines in Nortel's market  price of its
publicly traded securities, or any future share consolidation
resulting in a lower total market capitalization or adverse effect on
the  liquidity of Nortel's common shares. For additional information
with  respect to certain of these and other factors, see Nortel's
securities  filings with the SEC, which have not been updated to
reflect each of these  risks and uncertainties and which include
financial information that Nortel  announced on March 10, 2006 cannot
be relied upon. 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.
(x) Nortel, the Nortel logo and the Globemark are trademarks of
Nortel Networks.

Contact:

For further information: Media: Patricia Vernon, +1-905-863-1035,
patricve@nortel.com; Investors: +1-888-901-7286, +1-905-863-6049,
investor@nortel.com

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