Nortel Provides Status Update

TORONTO -- Nortel Networks(x) Corporation (NYSE/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 $350 million over the $866 million previously announced. The current estimated impacts to 2005, 2004 and 2003 revenues would increase the revenue adjustments by approximately $120 million, $220 million and $100 million, respectively, from those previously announced. The current estimated impact to periods prior to 2003 would decrease the revenue adjustments by approximately $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 $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 $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 $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 $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 May25, 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. $500million of debt securities of NNL (or its subsidiaries) and $1.8billion 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.

Nortel Networks Ltd.