M2 PRESSWIRE
Copyright 2000 M2 Communications, Ltd. All Rights Reserved.

Extending High-Speed internet Access Capabilities DSL Technology to Deliver Next Generation
On-Ramps To The Optical internet

Brampton, Ont. -- Nortel Networks [NYSE/TSE: NT] announced a definitive agreement to acquire Promatory Communications Inc., a leading developer of Digital Subscriber Line (DSL) platforms for high-speed internet access, for up to an estimated US$778 million in Nortel Networks common shares, a portion of which is contingent upon Promatory achieving certain business objectives. This acquisition will give Nortel Networks first-mover advantage in taking DSL technology to next-generation intelligence and performance, making high-speed internet access deployable wherever a home or business has a telephone connection.

Promatory's DSL solutions enable ordinary copper telephone wires to carry internet traffic with quality of service at speeds of up to eight megabits per second, 150 times faster than today's conventional analog modems. Promatory's new custom-designed services for business and residential users dramatically multiply the revenue generation potential of DSL for service providers while reducing costs.

The addition of Promatory's next generation global DSL platform to Nortel Networks Universal Edge (UE) portfolio offers the industry's broadest range of end-to-end first-mile access solutions. Nortel Networks 1-Meg Modem, the leader in easy-to-install DSL solutions, has already won thousands of users for high-speed DSL access. Nortel Networks continues to be a leader in voice-over-cable solutions, cable modems, carrier-class remote access servers, and broadband wireless solutions. Nortel Networks is delivering new, mass-market services that are enabling the high-performance internet. "The industry has been waiting for a true broadband internet access solution over copper, one that delivers high-speed service for the user and a profitable business model for the service provider," said Clarence Chandran, executive vice president and president, Nortel Networks Service Provider and Carrier Group. "The addition of Promatory's next generation DSL platform to Nortel Networks leading first-mile access solutions, combined with the Optical internet, internet telephony, and Nortel Networks services and applications will allow us to make high-speed internet access a reality for homes and businesses everywhere."

Promatory's multiservice broadband access platform, which shipped on January 6, 2000, delivers the first truly business-class DSL services, accommodating all varieties of DSL with direct integration into the Optical internet backbone.

In addition, Promatory's next generation platform enhances Nortel Networks' ability to offer toll-quality voice-over-DSL (VoDSL) service, allowing service providers to offer multiple voice and internet services simultaneously over the same twisted pair of copper wires. The VoDSL market is set to grow dramatically as alternate and established service providers move to packet-based networks.

Analysts forecast that the entire DSL market is set to take off, with projections of seven million DSL lines in service by 2002 compared with fewer than one million today. By 2003, the market is expected to rise to US$4 billion, almost 40 times last year's estimated total of US$103 million.

Based in Fremont, California, Promatory is a venture-backed start-up. It was founded in 1996 and employs about 100 people, including 85 in Fremont and sales offices throughout the U.S. and in the UK and Singapore. Promatory president Roger Dorf will become vice-president of a new Nortel Networks business unit, reporting to Don Richmond, vice president and general manager of Nortel Networks Access Solutions.

"Joining forces with Nortel Networks is the right move for us," Dorf said. "Nortel Networks has the global reach, reputation, and relationships with the world's service providers that will enable Promatory's next generation platforms to accelerate to market leadership."

The transaction, which is expected to close in the first quarter of 2000, is subject to customary regulatory approvals. Of the purchase price, an estimated US$705 million will be paid in Nortel Networks common shares at closing on a fully diluted basis. Up to an additional US$73 million in common shares is payable subject to the fulfillment of certain business performance objectives in 2000. The acquisition is expected to be slightly accretive to Nortel Networks earnings per share in calendar year 2000 (before acquisition-related charges).

The number of common shares of Nortel Networks to be issued on a fully diluted basis at closing will be determined based on the average price of Nortel Networks common shares during a specified period prior to closing and will not be greater than 9.4 million or less than 6.3 million. For example, based on a US$93.53 per common share price of Nortel Networks, the transaction would result in Nortel Networks issuing approximately 7.54 million common shares for the shares of Promatory on a fully diluted basis on closing.

Nortel Networks is a global leader in telephony, data, wireless and wireline solutions for the internet. The Company had 1998 revenues of US$17.6 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 through Unified Networks* that promise a new era of collaboration, communications and commerce. Visit us at www.nortelnetworks.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 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; unanticipated impact of Year 2000 issues; and the impact of consolidations in the telecommunications industry.

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, Unified Networks, and How the world shares ideas are trademarks of Nortel Networks.