Nortel Networks - Acquisition Agreement

RNS Number:5721C
Nortel Networks Corp
15 December 1999


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            NORTEL NETWORKS TO ACQUIRE QTERA FOR UP TO US$3.25 BILLION,
       EXTENDS OPTICAL INTERNET LEADERSHIP WITH ULTRA-LONG-REACH CAPABILITIES


       Disruptive Technology to Bring Six-Fold Increase in Distance Light
       Travels in Optical Networks, and Deliver Improved Internet Performance
       And Economics

Brampton, Ont.- Nortel Networks* (NYSE/TSE: NT) announced today a definitive
agreement to acquire Qtera Corporation, a privately-held company that produces
ultra-long-reach optical networking systems, for up to US$3.25 billion in Nortel
Networks common shares, a portion of which is contingent upon Qtera achieving
certain business objectives. The acquisition of this leading edge start-up gives
Nortel Networks first mover advantage through breakthrough optical technology
that delivers improved Internet performance and economics.

Qtera has developed technology that enables optical signals to be sent as far as
4000 kilometers or 2500 miles in purely optical form, providing advantages in
cost reliability, and scalability to long-range networks. Qtera's solutions
operate at 10 Gigabits per second (Gbps), the line rate used by leading-edge
high-performance Internet back-bone networks.

"The surge in Internet usage and eBusiness makes the delivery of the
high-performance, all-optical Internet essential," said John Roth, president and
chief executive officer, Nortel Networks. The addition of Qtera's capabilities
enhances Nortel Networks ability to deliver to customers the greatest capacity,
the highest speed and, now, the longest reach Optical Internet solutions in the
market."

"The combination of Nortel Networks' global reach and market leadership in the
Optical Internet and our expertise in ultra-long-reach optical networking
creates a truly formidable leader in the all-optical Internet space," said
Fahri Diner, president and chief executive officer, Qtera. "Our common
commitment to a high-performance Internet will create tremendous value for our
customers, partners and employees."

On today's Internet, distance is not a restriction. Internet users trigger
information flow with a simple click of a mouse between computers thousands of
miles apart. Transmitting this flow of information as light, Qtera's technology
makes this process much more efficient and cost-effective, eliminating up to 75
percent of optical-electrical-optical conversions. Data sent in the form of
light through optical networks fade over distance, requiring periodic
conversions to electrical form to boost the signal before reconversion to light.
Frequent optical-electrical-optical conversions introduce significant additional
costs to today's networks, in terms of capital, space, reliability, and
performance.

Combined with Nortel Networks leading Optical Internet solutions, Qtera's
technology positions Nortel Networks to offer the industry's most powerful
optical solutions in reach, bandwidth, speed, and manageability, while
continuing to reduce costs for our customers. The Qtera technology brings Nortel
Networks solutions closer than ever to the all-optical Internet.

Qtera's solutions were successfully trialed by Qwest Communications, which is
also a customer of Nortel Networks.

Qtera has its headquarters and about 140 employees in Boca Raton, Florida, and
about 30 employees in Richardson, Texas. Upon completion of the acquisition,
Qtera will become a wholly-owned subsidiary of Nortel Networks, with its
operations remaining in those locations. Qtera president and chief executive
officer Fahri Diner will continue to lead this business as president, reporting
to Mike Unger, president, Optical Networks, Nortel Networks.

The transaction, which is expected to close in the first quarter of 2000, is
subject to customary regulatory approvals and the approval of the Qtera
shareholders, and is expected to be neutral to Nortel Networks earnings per
share in calendar year 2000 and accretive in calendar year 2001 (excluding
acquisition-related charges).

The number of common shares of Nortel Networks to be issued shall be determined
based on the average price of Nortel Networks common shares during a specified
period prior to closing and shall not be greater than 48 million or less than 30
million. For example, based on a US$88 price per Nortel Networks common share,
the transaction would result in Nortel Networks issuing approximately 37 million
common shares for all the shares of Qtera on a fully diluted basis.

Nortel Networks is the world leader in the Optical Internet. More than 75
percent of North American Internet back-bone traffic travels across Nortel
Networks systems. In 1999, Nortel Networks set the standards for speed with its
80 Gbps line rate: OPTera technology, and in bandwidth with the OPTera 160OG,
which transmits 160 colors of light across a 10 Gbps systems, for total capacity
of 1.6 terabits per second (Tbps).

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

Qtera Corporation, headquartered in Boca Raton, Fla., is a privately held
company dedicated to the development of photonic networking solutions for
telecommunications service providers. Qtera's solutions provide a greatly
simplified, purely photonic backbone for the Optical Internet - free of
bandwidth restrictions and spatial boundaries. Qtera's scalable architecture
enables unparalleled performance, rapid wavelength provisioning and restoration,
and most importantly, lowest cost survivable bandwidth. Founded in 1998, Qtera
is backed by such leading venture firms as Battery Ventures, Mayfield Fund and
Oak Investment Partners. In addition to its headquarters in the heart of Photon
Beach, South Florida's growing community of high-tech companies, Qtera has
offices in the Telecom Corridor of Richardson, Texas. At present, the company
has more than 170 employees. For more information on how Qtera is building the
Backbone of the Optical Internet, please visit the company's website at
www.qtera.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 dcpendence
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 statements, whether as a result of new information, future
events or otherwise.

Qtera, 'Backbone of the Optical Internet" and Photon Beach are trademarks of
Qtera Corp.

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



Take part in our web cast at www.nortelnetworks.com/pressconfl2l599

Or visit Nortel Networks' website at www.nortelnetworks.com and Qtera's
website at www.Qtera.com.

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