Nortel Networks

Nortel Advances Business Strategy With Proposed Sale of UMTS Access Business to Alcatel

    Toronto (ots/PRNewswire) -

    - Refines Focus on Next-Generation Mobility

    Nortel(x) (NYSE: NT; TSX: NT) today announced that it has signed a non- binding Memorandum of Understanding for the sale of its UMTS access  business to Alcatel for US $320 million, a move that will enable Nortel to  simplify its business and strategically focus its investments for  leadership in key markets while ensuring its customers' UMTS access  requirements will continue to be met.

    As part of its business strategy, Nortel is executing on plans to increase investment in key areas, partner in others, and divest where there  is no path for it to lead or realize attractive returns.

    "Nortel is sharpening its focus on the markets in which we intend to  lead. Our UMTS access business lacks the scale and momentum needed to  become profitable," said Mike Zafirovski, president and chief executive  officer, Nortel.

    There are three core elements of Nortel's strategic focus - next- generation mobility, enterprise transformation, and services and applications. Much like its partnership with Microsoft announced in July,  this is another key step in changing the trajectory of Nortel's business.

    "With next-generation mobility, we see an opportunity to change the  game by applying our networking expertise and technology innovation to  significantly alter the economic paradigm of mobility solutions in the  future," said Zafirovski.

    "We are absolutely committed to mobility and plan to lead the 4G evolution and play a key role in the mass market adoption of mobile video  and multimedia services." said Richard Lowe, president, Mobility and  Converged Core Networks, Nortel. "With a strong position in GSM and CDMA,  an established service provider customer base, and technology leadership in  key areas like OFDM-MIMO, we have a solid foundation for success going  forward."

    As part of its ongoing mobility business, Nortel will continue to develop and support solutions for the evolution of GSM access and core, GSM- R, GPRS and EDGE technologies as well as CDMA access and core and UMTS core.

    The proposed sale includes Nortel's UMTS access product portfolio made up of the Radio Network Controller and Node B products and OAM solutions, related services and associated assets. It is anticipated that  the significant majority of employees of Nortel's UMTS access business will  transfer to Alcatel. Completion of the transaction is subject to, among  other things, the negotiation and execution of a definitive agreement  between Nortel and Alcatel, completion of consultations with work councils  and other employee representatives, and customary closing conditions  including regulatory approvals. The parties are targeting completion of the  transaction in the fourth quarter of 2006.

    "This deal is good for our UMTS access customers. They will benefit  from Alcatel's resulting scale in this market. We will work closely with  Alcatel to make the hand-over as smooth as possible for our customers, with  whom we plan to have strong, on-going relationships," said Lowe.

    "The expertise of Nortel's UMTS team is well-known, and I am confident  that our combined forces will pave the way for further success in the  wireless market," said Marc Rouanne, president of Alcatel's mobile  communications activities. "We are committed to support and evolve our  extended customer base."

    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 For the latest Nortel news, visit

    Nortel will host a teleconference/audio webcast to discuss this announcement.

    TIME: 9:00 am (ET), Friday, September 1, 2006

    To participate, please call the following at least 15 minutes prior to  the start of the event.

        North America:        1-888-211-4395
        International:        1-416-620-2417
        (Available one hour after the conference call)
        North America:        1-800-383-0935
        International:        1-402-530-5545
        Passcode:                21302444 followed by the number sign

    Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates ", "targets", "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. 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 most recent restatement and two  previous restatements of its financial statements and related events; the  negative impact on Nortel and NNL of their most recent restatement and  delay in filing their financial statements and related periodic reports;  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 restatements of its financial  statements; any adverse affect 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; (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; the  sufficiency of recently announced restructuring actions, including the  potential for higher actual costs to be incurred in connection with these  restructuring actions compared to the estimated costs of such actions and  the ability to achieve the targeted cost savings and reductions of Nortel's  unfunded pension liability deficit; any material and adverse affects 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; a ny reduction in Nortel's operating  results and any related volatility in the 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; 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 most recent restatement and two previous restatements of its  financial statements; 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 the market price of Nortel's 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 Annual Report on Form 10-K/A, Quarterly  Report on Form 10-Q and other securities filings 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.

@@start.t1@@        (x) Nortel, the Nortel logo and the Globemark are trademarks of Nortel

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For further information: Ben Roome, Nortel, +44-1628-43-3113,; Jay Barta, Nortel, +1-(972)-685-2381,; Investors, +1-(905)-863-6049, +1-(888)-901-7286,

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