NORTEL NETWORKS The New Market Reality Wireless Data Networks Scott Wickware Director, UMTS Product Solutions

1 NORTEL NETWORKS US $17.5B in Revenue in 2001 Customers in over 150 countries US $3.2B in R&D in /3 of employees are engineers, designers & scientists Leadership Categories (HQ in Brampton, Canada) Wireless Networks (Châteaufort, France) Wireline Networks (Richardson, Texas, USA) Optical Networks (Montréal, Québec, Canada) Enterprise Networks (Santa Clara, California, USA) Nortel Networks Industry Leader and Innovator

2 NORTEL NETWORKS Wireless Data Market Drivers North America Wireless Sub & MOU Growth Wireless Revenue Growth Internet Users Flat – 182M Overall Subscribers still growing Voice traffic still growing Wireless Data traffic rising Internet Usage rising (18% annually) Nua Internet Surveys South America Wireless Sub Growth Lowest Cost Service Strong Internet Growth – 33M Europe Wireless Growth Flat Wireless Data Growth Internet Growth 20% M Asia Wireless Sub Growth Wireless Data Growth Internet Growth 20% - 187M

3 NORTEL NETWORKS Network & Traffic Growth Examples Revenues & Subs growing - MOU growing faster 1H02 Revenue $37B 1H02 Subs 134M1H02 MOU 296M Global Internet - # of Hosts >25% annual growth Exceeds 162M globally CTIA ISC US Wireless in 1H 2002

4 NORTEL NETWORKS The New Reality: Access is Wireless Mobile now exceeds Fixed in almost 100 countries Mobile Devices Fixed Devices Source: ITU, 2001

5 NORTEL NETWORKS Traffic & Revenue Don’t Match Source: Nortel & analyst estimates US Backbone Traffic (Exabytes) Millions of Mobile IP Users: Global Total Service Revenue: US Business Case is shifting Traffic is Data Revenues are Voice Volume is growing Low Service Cost is critical

6 NORTEL NETWORKS The End of the Voice ONLY Business Case 3G License Debt Bandwidth Bubble Over Investment Recession Wireline Voice Analog & 2G Wireless Voice Business Case Voice Business Cycle is Ended VoP and Packet Data 2.5G and 3G Wireless Voice & Data Business Case Application Business Cycle is Starting Industry needs to redefine itself

7 NORTEL NETWORKS Fundamentals of the New Business Case Core Networks evolve to low cost Packet Architecture Voice and data treated homogeneously Low cost broadband Wireless access High mobility voice and thin applications Nomadic bandwidth-intensive applications Application Enablers Service Management: making a business of applications Network Applications: building blocks to tap network capabilities Media Gateways: interfaces for multiple networks & traffic types Service Integration: support for third party apps and services Carrier Business Evolution From Traffic management, to Retailing and Marketing

8 NORTEL NETWORKS Universal solution in the Core: Packet Transport & Switching Telecom Synchronous / Circuit Wireline / Wireless Voice Optimized Datacom Asynchronous / Routed Wireline / Optical Data Optimized Nortel Packet Core Carrier-Grade Platforms, Multi-Service Switching & Optical Transport

9 NORTEL NETWORKS Broadband Wireless Access: Two Solution Sets – Mobile & Nomadic Mobile Voice and <2Mbps Data 2.5G / 3G network Real-time voice & data applications Ubiquitous coverage Nomadic Data 2Mbps+ Best-effort data applications Local coverage, Mbps speeds Telecom / Voice Datacom / WLAN Nortel Wireless Access GPRS / EDGE / CDMA2000 / UMTS / WLAN

10 NORTEL NETWORKS Applications Development & Delivery: Ecosystem Tools & Support Network Applications Commercial grade services such as VPN, Firewall, Security, VoP, Authentication, QoS, SIP, etc. Media Gateways Apps built on industry standards such as IMS for voice, data, & video; wireline and wireless Service Management Commercialization services such as billing, metering, SLA support, & ecommerce Service Integration Network integration for third party servers and applications with core network services Applications Developer driven such as MMS, SMS, WAP, xTML, etc.

11 NORTEL NETWORKS Nortel’s Value Proposition: Packet Traffic: End to End Care & Delivery Integrated Optical and Wireline packet transport networks Support for multiple services: IP, ATM, MPLS, etc. 1x CDMA upgrades, UMTS overlays for dense GSM/GPRS PWLAN today, evolving to mesh extensions in future Support the creation, deployment, and billing of IP services Switch, route, repair, manage, secure & prioritize Packets Simple, high performance network elements Common across Optical, Wireline, and Wireless networks Packet Core: low-cost, high performance connectivity Efficient Access: matched to growth & usage Service Enablers: supporting revenue creation & collection Carrier-grade Platforms: Pre-engineered performance

12 NORTEL NETWORKS Market Update: Wireless Data Today Sprint 1x launched Bell Mobility 5k 1x data Subscribers Verizon 35k 1x data Subscribers Vodafone Soft-launch Vodafone live! Hutchison Soft-launch Mobilkom Soft-launch KTF / SKT / LG 7.5M 1x data Subscribers DoCoMo 136k Foma Subscribers KDDI 805k 1x data Subscribers Unicom 1x Pilot 2.5M+ GPRS Subscribers 16.7M+ 1xRTT Subscribers 47 MMS networks launched Stats as of 2Q02 Telesp / Telerj 35k 1x data Subscribers Smartcom 1x launched

13 NORTEL NETWORKS Wireless Investment: E Global Technology Mix EMEA 39% of market CALA 5% of market North America 18% of market Developing Asia 22% of market Developed Asia 15% of market Black represents “other”

14 NORTEL NETWORKS Nortel Networks and Wireless 2002 Contracts China Unicom (4 - China) Microcell (Canada) Ufone (Pakistan) Cingular (USA) Telefonica (Spain) TSTT (Trinidad) ACS (USA) O2 (Pan-Europe) Dutchtone (Netherlands) Pelephone (Israel) T-Mobile (Pan-Europe) Alltel (USA) C&W (CALA) Ratelindo (Indonesia) US Cellular (USA) Triton PCS (USA) Edge Wireless (USA) Bellsouth Int’l (Ecuador) China Mobile (2 - China) Telgua (Guatemala) Dobson (USA) Centertel (Poland) Smartcom PCS (Chile) Aycell (Turkey) Chunghwa (Taiwan) Deutsche Bahn (Germany) Vesper (Brazil) 2002 Q3 YTD Revenue Mix Stable Revenues from Global Diversity Multiple Product lines Services & Support

15 NORTEL NETWORKS Overtaking the Incumbents Top 6 Western Europe Operators Top 6 WE Operators account for >75% of Subscribers Vodafone - mmO2 - DT - Orange (FT) - TIM - Telefonica Source: Nortel Networks Q3/02 Includes Industry Estimated Contract Values 2G Network Presence3G Network Presence Nortel Networks is the only vendor to increase presence as advanced networks are deployed Totals >100% due to multi-vendor networks

16 NORTEL NETWORKS Nortel Networks Wireless Presence AT&T Wireless Telus Sprint PCS Bell Mobility Telstra Cingular VoiceStream China Unicom China Mobile ChungHwa Orange O2 T-Mobile Verizon Vodafone Anticipating gains as Wireless Data Networks continue to roll out Capitalizing on global diversity, and multi-technology portfolio Winning new business with Optical & Multi-service market leadership Demonstrated end-to-end IP expertise Telefonica Nextel Bouygues Telecom

17 NORTEL NETWORKS