MADRID, Spain - Xfera has selected Nortel Networks* [NYSE/TSE: NT] as primary supplier to supply Wireless Internet infrastructure and services for its third generation (3G), UMTS (Universal Mobile Telecommunications System) network in Spain. The selection, estimated to be worth US$935 million over three years, is subject to the execution of definitive agreements.

Under Xfera's plan, high performance Wireless Internet solutions from Nortel Networks will deliver - on a turnkey basis - the IP (Internet Protocol) core network and 50 percent of the radio access, along with a range of other services which will enable initial deployment of its network in Madrid, southern Spain, the Canary Islands, and much of the northeastern portion of Spain. Xfera expects to begin offering service in August of next year. Under the award, Nortel Networks will provide financing to Xfera.

This is the third major UMTS infrastructure award in Europe for Nortel Networks following BT (UK) and Airtel (Spain), giving Nortel Networks one of the leadership positions in the European wireless infrastructure market with estimated awards totaling over US$1.8 billion.
"Nortel Networks is building the high-performance Internet, and positioning wireless operators to capitalize on the service and revenue opportunities of 3G wireless," said Pascal Debon, president, Nortel Networks Europe, Middle East and Africa. "With our unique 'Wings of Light' strategy, we're combining market-leading wireless and optical capabilities which will enable operators like Xfera to offer fast, reliable and scalable Internet access and services virtually 'anytime, anywhere' to business and residential users alike."

Wireless Internet services based on UMTS capabilities are expected to be generally available in many Western European countries by 2002 in a market which industry analysts expect to reach US$70 billion by 2003. UMTS is designed to provide unconstrained access to information, e-mail, eBusiness, real-time video and other Wireless Internet services through a variety of personal, portable devices.

The Nortel Networks UMTS solution includes Nortel Networks e-mobility* Internet Base Stations (iBTS) for wide area radio coverage; packet-based core networks featuring Nortel Networks Passport* multiservice switches; Nortel Networks Preside* network and services management; Nortel Networks Shasta* services management; and transmission equipment.

The Nortel Networks 'Wings of Light' strategy uniquely leverages Optical Internet and Wireless Internet capabilities to deliver a powerful and efficient solution for UMTS and other 3G wireless networks. As part of this strategy, Nortel Networks recently announced the creation of 2,000 Wireless Internet jobs across Europe, and Wireless Centers of Excellence in France, Germany, Italy, Spain and the UK. Nortel Networks recently announced the creation of a Research and Development center for Wireless Internet in Barcelona, Spain.

Xfera, an independent Spanish operator of third generation UMTS mobile telecommunications, was founded in April 2000 after obtaining a licence through public tender. For more information, visit us at www.xfera.com
Nortel Networks is a global Internet and communications leader with capabilities spanning Optical, Wireless, Local Internet and eBusiness. The Company had 1999 U.S. GAAP revenues of US$21.3 billion and serves carrier, service provider and enterprise customers globally. Today, Nortel Networks is creating a high-performance Internet that is more reliable and faster than ever before. It is redefining the economics and quality of networking and the Internet, promising a new era of collaboration, communications and commerce. Visit us at www.nortel.com.

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 impact of price and product competition; the dependence on new product development; the impact of rapid technological and market change; the ability of Nortel Networks to make acquisitions and/or integrate the operations and technologies of acquired businesses in an effective manner; general industry and market conditions and growth rates; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of consolidations in the telecommunications industry, the uncertainties of the Internet; stock market volatility; the ability of Nortel Networks to recruit and retain qualified employees; and the impact of increased provision of customer financing by Nortel Networks. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks with the United States Securities and Exchange Commission. Nortel Networks 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 Networks, the Nortel Networks logo, the Globemark, e-mobility, Passport, Preside and Shasta are trademarks of Nortel Networks.