• Enters into sale agreements for Multi Service Switch business with PSP Holding LLC, a special purpose entity to be fully funded at closing by Marlin Equity Partners and Canadian based Samnite Technologies Inc. for US$39 million in cash
• Agreements include the planned sale of substantially all assets within the Multi Service Switch business globally

TORONTO – Nortel* Networks Corporation announced that it, its principal operating subsidiary Nortel Networks Limited (NNL), and certain of its other subsidiaries, including Nortel Networks Inc. and Nortel Networks UK Limited (in administration), have entered into a “stalking horse” asset sale agreement with PSP Holding LLC (PSP), a special purpose entity to be fully funded at closing by Marlin Equity Partners (Marlin) and Samnite Technologies Inc., a communications technology company based in Ottawa, for the sale of substantially all of the assets of Nortel’s North America, Caribbean and Latin America (CALA) and Asia Multi Service Switch (MSS) business and an asset sale agreement with Marlin for the sale of substantially all of the assets of the Europe, Middle East and Africa (EMEA) portion of its MSS business, for a purchase price of US$39 million in cash.

These agreements include the planned sale of substantially all assets of the MSS business globally including the associated Data Packet Network and Shasta product groups. These agreements also include certain intellectual property related to the MSS business.

Currently, subject to the terms of these agreements as well as any changes that may occur through the stalking horse and sale process, substantially all MSS employees would have the opportunity to continue employment with PSP. This includes the employees assigned to the MSS business in certain EMEA jurisdictions who would transfer to PSP by operation of law.

Commenting on the announcement, John Luszczek, General Manager of Nortel’s MSS business said: “Today’s announcement is welcome news to all MSS customers, suppliers, partners and employees. The proposed transaction represents a clear and positive step forward and is a testament of our continued commitment to innovation and customer support that resulted in the creation of the business value evident by today’s announcement. Throughout this process we will remain focused on providing our customers with the highest level of service, support and responsiveness that they have come to expect.”

In the 1990′s, Nortel built some of the largest carrier and enterprise data networks in the world, leading to the establishment of this market segment category and Nortel MSS becoming recognized as an industry leader.

Details of Sale Process

Nortel will file the stalking horse asset sale agreement with the United States Bankruptcy Court for the District of Delaware along with a motion seeking the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers, as required under Section 363 of the U.S. Bankruptcy Code. A similar motion for the approval of the bidding procedures will be filed with the Ontario Superior Court of Justice. Following completion of the bidding process, final approval of the U.S. and Canadian courts will be required.

In relation to the EMEA entities to which they are appointed, the UK Joint Administrators have the authority, without further court approval, to enter into the EMEA asset sale agreement on behalf of those relevant Nortel entities. In some EMEA jurisdictions, this transaction is subject to information and consultation with employee representatives and/or employees.

In addition to the processes and approvals outlined above, consummation of the transaction is subject to the satisfaction of regulatory and other conditions and the receipt of various approvals. The agreements are also subject to certain working capital and other purchase price adjustments.

As previously announced, Nortel does not expect that the Company’s common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.

visit www.nortel.com/news .