- Q4 revenues up 10 percent year over year to $3.32 billion
- Q4 operating margin(i) of 4.2 percent compared with 1.4 percent in
prior year
- Q4 net loss of $80 million, $0.19 per common share on a diluted
basis

- Full Year 2006 revenues of $11.42 billion, up 9 percent year over
year
- Full year operating margin(i) of 0.0 percent compared with (0.2)
percent in 2005
- Full Year 2006 net earnings of $28 million, $0.06 per common share
on a diluted basis
- Year End 2006 cash balance of $3.49 billion - reflecting strong
positive cash flow from operations of $520 million in Q4 and $237
million for the full year
- Restatement completed

TORONTO, ONTARIO -- (MARKET WIRE) -- 03/16/07 -- Nortel Networks(1)
Corporation's (TSX: NT)(NYSE: NT) continued focus on growth
initiatives and organizational simplification delivered measurable
operational and financial progress as the Company today announced
results for the fourth quarter and audited results for the year 2006.
These results were prepared in accordance with United States
generally accepted accounting principles in U.S. dollars.

"A relentless focus on execution in 2006 delivered solid progress on
our Business Transformation plan and laid the foundations upon which
Nortel will build its future. I am particularly pleased with the
progress made in the fourth quarter as we grew revenues by 10
percent, grew our backlog, and improved operating margin and
operating cash flow performance. In fact, the fourth quarter
operating margin, was the highest in eight quarters and the operating
cash flow performance for 2006 was the best since 1998," said Mike
Zafirovski, Nortel president and CEO. "We are 100% focused on the
future and are taking the necessary steps to reduce costs, grow
revenues faster than the market in key next-generation solutions and
position the Company for profitable growth. There is a significant
amount of work left to be done, but today Nortel is stronger than it
has been in years."

Fourth Quarter 2006 Results

Revenues for the fourth quarter of 2006 were $3.32 billion. Nortel
achieved year over year revenue increases of 10 percent in the
quarter and 14 percent sequentially as it continued to drive its core
strategy and expand its business through growth in our strategic
priority areas of the Transformed Enterprise, Next Generation
Mobility and Convergence, and Services and Solutions.

(i) Operating Margin is a non-GAAP measure defined as Gross Profit
less SG&A and R&D expenses divided by Revenue (see Consolidated
Statements of Operations attached to this press release). The Company
believes that operating margin is a meaningful measurement of
operating performance.

Net loss in the fourth quarter of 2006 was $80 million, or $0.19 per
common share on a diluted basis, included a gain of $164 million on
the sale of assets, a shareholder litigation expense of $234 million
reflecting a mark-to-market adjustment of the share portion of the
global class action settlement and special charges of $29 million for
restructuring. The net loss in the fourth quarter of 2005 was $2,286
million, which included a litigation expense of $2,474 million, a tax
benefit of $134 million and special charges of $24 million. The net
loss in the third quarter of 2006 was $63 million, which included a
benefit of approximately $43 million related to the announced changes
to the North American employee benefit plans, a gain of $15 million
on the sale of assets, a shareholder litigation expense of $38
million and special charges of $22 million.

The fourth quarter of 2006 operating margin was impacted by two
items, higher accruals for commissions and incentive plans, largely
offset by increased profitability of our LG-Nortel joint venture
resulting from the recognition of previously deferred revenue.
Although we expect improved annual performance from the LG-Nortel
joint venture in 2007, the strong performance in the fourth quarter
of 2006 is not expected to be repeated to the same extent in quarters
throughout 2007.

Deferred revenues decreased sequentially by $152 million from third
quarter 2006 and by $187 million since the beginning of 2006. Order
input for the quarter was $3.43 billion, up from $3.38 billion in the
fourth quarter of 2005 and up from the $2.33 billion in the third
quarter of 2006.

Mobility and Converged Core Networks (MCCN) revenues in the fourth
quarter of 2006 were $1,672 million, a decrease of 5 percent compared
with the year-ago quarter and an increase of 10 percent sequentially.
In the fourth quarter, the strong pace of CDMA growth was offset by
declines in the GSM business, primarily due to a contract in Asia not
repeated in 2006 and a decrease in North American GSM revenues.

Recent MCCN highlights include:

- Signed a $2 billion wireless equipment and services deal with
Verizon Wireless;

- Completed sale of certain assets and liabilities related to UMTS
access business to Alcatel-Lucent;

- Introduced mobile WiMAX portfolio to position Nortel for leadership
in the emerging 4G market; signed WiMAX contract with Chunghwa
Telecom in Taiwan; and conducted trials with Golden Telecom in Russia
and with Toshiba Corporation for the Japanese Government.

Enterprise Solutions (ES) revenues in the fourth quarter of 2006 were
$806 million, an increase of 61 percent compared with the year-ago
quarter and an increase of 39 percent sequentially. The year over
year strong growth was driven by the LG-Nortel joint venture (33
points) and robust growth in voice, data and applications revenues
(28 points). We believe that we gained market share for the second
consecutive quarter.

Recent ES highlights include:

- Signed a three-year partnership agreement with BT to drive the
uptake of VoIP, multimedia, instant messaging and mobile
communications by UK enterprises of all sizes;

- The Innovative Communications Alliance (ICA) formed by Nortel and
Microsoft unveiled a roadmap for future development, signed
agreements with dozens of customers, and has developed a pipeline of
hundreds of prospects who want to realize the benefits of unified
communications;

- Contracts signed with the New York Times and the Montreal Canadiens
hockey team;

- Several new wins in the hospitality sector, including the Louisiana
Superdome, Kernzer International Limited and the Intercontinental
Jeddah Hotel in Saudi Arabia;

- A string of new municipal-wireless customer wins, including
Carlsbad, New Mexico; Occoquan Wireless in Occoquan, Virginia; and
Ronco Communications in Niagara County, New York;

- Momentum in the Middle East, with contracts from the American
University in Cairo and the Dubai Silicon Oasis, the region's
innovations hub for high-tech industries;

- Strategic additions to the enterprise portfolio, including two data
products targeted specifically at the small and medium business
market, and enhancements to the municipal wireless and contact center
portfolios.

Metro Ethernet Networks (MEN) revenues in the fourth quarter of 2006
were $473 million, an increase of 18 percent compared with the
year-ago quarter and an increase of 9 percent sequentially. A strong
performance in the optical networking business was partially offset
by declines in the data networking and security space.

Recent MEN highlights include:

- MEN began 2007 with a groundbreaking win with BT, positioning
Nortel as an important vendor for that company's 21st Century project
and validating our Provider Backbone Transport (PBT) technology;

- Signed contract with MTC, a leading mobile operator in the Middle
East and Africa, to deliver high-speed mobile services such as mobile
video, multimedia messaging and web browsing in Kuwait;

- Win with Iraq Telecommunications & Post Corporation, Iraq's sole
fixed-line operator, to build a nationwide optical backbone;

- Other contracts around the globe included Ntl Telewest, the UK's
largest cable operator; the Chinese Academy of Sciences; Joint
University Computer Center in Hong Kong; and Easynet Belgium.

Global Services (GS) revenues in the fourth quarter of 2006 were $313
million, an increase of 2 percent compared with the year-ago quarter
with growth across all service groups and a decrease of 5 percent
sequentially.

Recent GS highlights include:

- Signed a three-year contract extension with Eastman Kodak Company
for management of Kodak's U.S. voice network;

- Opened a new customer network management center in New Delhi,
India, to deliver services & solutions to enterprises, service
providers and cable operators worldwide;

- Introduced a new network managed service - the industry's first
real-time, end-to-end support for IP telephony voice quality - to
help enterprises speed their transition to VoIP;

- Enhanced an already broad channel partner Assurance Services
portfolio for Europe, Middle East and Africa with the addition of a
program for small and medium business.

Gross margin

Gross margin was 40 percent of revenue in the fourth quarter of 2006,
reflecting a strong contribution from the LG-Nortel joint venture and
CDMA solutions. This compares to gross margin of 39 percent for the
fourth quarter of 2005 and 38 percent for the third quarter of 2006.
Compared to the fourth quarter of 2005, there were significant
improvements in MCCN gross margins due to the negative impact of
certain contracts in the fourth quarter of 2005 not repeated in the
fourth quarter of 2006, partially offset by a significant decline in
MEN margins due to product mix and lower margins in ES and GS.

Selling, general and administrative (SG&A)

SG&A expenses were $694 million in the fourth quarter of 2006,
compared to $683 million for the fourth quarter of 2005, and $585
million for the third quarter of 2006. Compared to the fourth quarter
of 2005, SG&A was impacted by the consolidation of the LG-Nortel
joint venture, higher accruals for commission and bonus payments, and
higher costs related to our business transformation initiatives,
partially offset by lower restatement related and employee benefit
plan costs.

Research and development (R&D)

R&D expenses were $488 million in the fourth quarter of 2006,
compared to $457 million for the fourth quarter of 2005 and $474
million for the third quarter of 2006. Compared to the fourth quarter
of 2005, R&D was impacted by increased investment in targeted product
areas, higher accruals for bonus payments and the impact of the
consolidation of the LG-Nortel joint venture, partially offset by
lower employee benefit plan costs.

Other

Special charges in the fourth quarter of 2006 of $29 million included
$13 million related to our prior restructuring plans and $17 million
for the restructuring program announced June 27, 2006. As discussed
in our February 7, 2007 press release, the business transformation
programs to reduce operating costs and improve operating margins will
result in additional restructuring costs, as the program is
implemented.

Other income (expense) - net was $34 million of income for the fourth
quarter of 2006, which primarily included interest and dividend
income of $47 million.

Minority interest expense was $58 million in the fourth quarter of
2006, compared to $2 million for the fourth quarter of 2005 and $11
million for the third quarter of 2006. Compared to the fourth quarter
of 2005, minority interest expenses were primarily driven by the
profitability of the LG-Nortel joint venture in the fourth quarter of
2006 resulting from the recognition of previously deferred revenue.

Interest expense on long term debt was $84 million in the fourth
quarter of 2006, compared to $54 million for the fourth quarter of
2005 and $85 million for the third quarter of 2006. Compared to the
fourth quarter of 2005, interest expense on long term debt was up due
to the increase in interest costs associated with the $2 billion
aggregate principal amount of senior notes issued in July 2006.

Cash
Cash balance at the end of the fourth quarter of 2006 was $3.49
billion, up from $2.60 billion at the end of the third quarter of
2006. This increase was primarily driven by positive cash from
operations of $520 million as well as $306 million in cash received
upon the closing of the sale of certain assets and liabilities
related to the UMTS Access business.

Full Year 2006 Results
For the year 2006, revenues were $11.42 billion compared to $10.51
billion for the year 2005. The Company reported net earnings for the
year 2006 of $28 million, or $0.06 per common share on a diluted
basis, compared to a net loss of $2,610 million, or $6.02 per common
share on a diluted basis, for the year 2005.

Net earnings for the year 2006 included a shareholder litigation
recovery of $219 million reflecting mark-to-market adjustments of the
share portion of the global class action settlement, special charges
of $105 million primarily related to restructuring activities, a
benefit of approximately $43 million related to the announced changes
to the North American employee benefit plans and a benefit of $206
million related to the sale of assets. The year 2005 results included
a litigation expense of $2,474 million, special charges of $169
million and $47 million of costs related to the sale of businesses
and assets.