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Nortel Networks to Acquire Promatory for up to US$778 Million, Extending High-Speed Internet Access Capabilities


    DSL Technology to Deliver Next Generation On-Ramps To The Optical 
    Internet

    BRAMPTON, Ont., Jan. 6 /CNW/ - Nortel Networks (NYSE/TSE: NT) announced
today 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 is shipping
today, 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.
    Take part in our webcast at www.nortelnetworks.com/pressconf010600
    Or visit Nortel Networks' website at www.nortelnetworks.com and
Promatory's at www.Promatory.com.
    %SEDAR: 00000596EB



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For further information: Business Media: Jeff Ferry, (703) 712-8339, 
jferry@nortelnetworks.com; Trade Media: Todd Cabral, (978) 288-4368, 
tcabral@nortelnetworks.com; Investor Relations: Angela McMonagle, 
(905) 863-6044, mcmona@nortelnetworks.com.
Archived images on this organization are available through CNW E-Pix at 
www.newswire.ca. Images are free to members of The Canadian Press.

SOURCE Bell Glomedia

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