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

NORTEL NETWORKS

The New Market RealityWireless Data Networks

Scott WickwareDirector, UMTS Product Solutions

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• US $17.5B in Revenue in 2001

• Customers in over 150 countries

• US $3.2B in R&D in 2001

• 1/3 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 NetworksIndustry Leader and Innovator

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Wireless Data Market Drivers

North AmericaWireless Sub & MOU Growth

Wireless Revenue GrowthInternet Users Flat – 182M

OverallSubscribers still growingVoice traffic still growing

Wireless Data traffic risingInternet Usage rising (18% annually)

Nua Internet SurveysNua Internet Surveys

South AmericaWireless Sub GrowthLowest Cost Service

Strong Internet Growth – 33M

EuropeWireless Growth FlatWireless Data Growth

Internet Growth 20%+ - 190M

AsiaWireless Sub GrowthWireless Data Growth

Internet Growth 20% - 187M

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Network & Traffic Growth Examples

Revenues & Subs growing - MOU growing faster

0%

50%

100%

150%

1H 01 2H 01 1H 02

1H02 Revenue $37B

0%

50%

100%

150%

1H 01 2H 01 1H 02

1H02 Subs 134M

0%

50%

100%

150%

1H 01 2H 01 1H 02

1H02 MOU 296M

0%

50%

100%

150%

1H 01 2H 01 1H 02

Global Internet - # of Hosts• >25% annual growth• Exceeds 162M globally

CTIACTIA

ISCISC

US Wireless in 1H 2002

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The New Reality: Access is Wireless

0

500

1,000

1,500

2,000

2,500

82 84 86 88 90 92 94 96 98 00 02 04

Mobile now exceeds Fixed in almost 100 countries

MobileDevices

FixedDevices

Source: ITU, 2001

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Traffic & Revenue Don’t Match

Source: Nortel & analyst estimates

0

2

4

6

8

10

12

14

16

1999 2000 2001E 2002E 2003E 2004E 2005E

IP

Private (mixed)

Switched non-IPData

LD Voice

US Backbone Traffic (Exabytes)

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005

Asia

CALA

EMEA

North America

Millions of Mobile IP Users: Global

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

1999 2000 2001E 2002E 2003E 2004E 2005E

Wireline Data

Wireless Data

Wireless Voice

Wireline Voice

Total Service Revenue: US• Business Case is shifting

• Traffic is Data

• Revenues are Voice

• Volume is growing

• Low Service Cost is critical

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The End of the Voice ONLY Business Case

3G License Debt

Bandwidth Bubble

OverInvestment

Recession

Wireline VoiceAnalog & 2G Wireless

Voice Business Case

Voice Business Cycle is Ended

VoP and Packet Data2.5G and 3G Wireless

Voice & Data Business Case

Application BusinessCycle is Starting

Industry needs to redefine itself

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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

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Universal solution in the Core:Packet Transport & Switching

TelecomSynchronous / Circuit

Wireline / WirelessVoice Optimized

DatacomAsynchronous / Routed

Wireline / OpticalData Optimized

Nortel Packet CoreCarrier-Grade Platforms, Multi-Service

Switching & Optical Transport

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Broadband Wireless Access:Two Solution Sets – Mobile & Nomadic

Mobile Voice and<2Mbps Data2.5G / 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 AccessGPRS / EDGE / CDMA2000 /

UMTS / WLAN

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Applications Development & Delivery:Ecosystem Tools & Support

Network ApplicationsCommercial grade services such as VPN, Firewall, Security, VoP, Authentication, QoS, SIP, etc.

Media GatewaysApps built on industry standards

such as IMS for voice, data, & video; wireline and wireless

Service ManagementCommercialization services such as billing, metering, SLA support,

& ecommerce

Service IntegrationNetwork integration for third party servers and applications with core

network services

ApplicationsDeveloper driven such as MMS,

SMS, WAP, xTML, email etc.

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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

• 802.11 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

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Market Update: Wireless Data Today

Sprint1x launched

Bell Mobility5k 1x data Subscribers

Verizon35k 1x data Subscribers

VodafoneSoft-launch

Vodafone live!

HutchisonSoft-launch

MobilkomSoft-launch

KTF / SKT / LG7.5M 1x data Subscribers

DoCoMo136k Foma Subscribers

KDDI805k 1x data Subscribers

Unicom1x Pilot

2.5M+ GPRS Subscribers16.7M+ 1xRTT Subscribers47 MMS networks launched

Stats as of 2Q02Stats as of 2Q02

Telesp / Telerj35k 1x data SubscribersSmartcom

1x launched

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Wireless Investment:2006

Other

CDMA/1x

GSM/GPRSUMTS

Other

CDMA/1x

GSM/GPRSUMTS

2006EGlobal

TechnologyMix

Other

CDMA/1x

GSM/GPRS

UMTS

Other

CDMA/1x

GSM/GPRS

UMTS

EMEA39% of market

Other

CDMA/1x

GSM/GPRS

UMTS

Other

CDMA/1x

GSM/GPRS

UMTS

CALA5% of market

Other

CDMA/1x

GSM/GPRS

UMTS

Other

CDMA/1x

GSM/GPRS

UMTS

North America18% of market

Other

CDMA/1x

GSM/GPRS

UMTS

Other

CDMA/1x

GSM/GPRS

UMTS

Developing Asia22% of marketOther

CDMA/1x

GSM/GPRS

UMTS

Other

CDMA/1x

GSM/GPRS

UMTS

Developed Asia15% of market

Black represents “other”Black represents “other”

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Nortel Networks and WirelessOther, $44

Optical$1,121

Enterprise$1,928

Wireless$3,199 Wireline

$1,748

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 YTDRevenue

Mix

Nortel Revenue by Segment

$0

$5

$10

$15

$20

$25

$30

1999 2000 2001

US

$ B

illio

n OtherSegments

Wireless

• Stable Revenues from

• Global Diversity

• Multiple Product lines

• Services & Support

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Overtaking the Incumbents Top 6 Western Europe Operators

Top 6 WE Operators account for >75% of SubscribersVodafone - mmO2 - DT - Orange (FT) - TIM - Telefonica

Source: Nortel Networks Q3/02

Includes Industry Estimated Contract Values

62%

28%

28%

14%

21%21%

52%

Nortel

Nokia

Ericsson

Siemens

Motorola

Lucent

Alcatel29%

26%

9%34%

49%

2G Network Presence 3G Network Presence

Nortel Networks is the only vendor to increase presence as advanced networks are deployed

Totals >100% due to multi-vendor networks

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Nortel Networks Wireless Presence

AT&TAT&T WirelessWireless

TelusTelus

Sprint PCSSprint PCS

BellBell MobilityMobility

TelstraTelstra

CingularCingular

VoiceStreamVoiceStream

ChinaChina UnicomUnicom

ChinaChina MobileMobile

ChungHwaChungHwa

OrangeOrange

O2O2T-MobileT-Mobile

VerizonVerizonVodafoneVodafone

Anticipating gains as Wireless Data Networks continue to roll outCapitalizing on global diversity, and multi-technology portfolio

Winning new business with Optical & Multi-service market leadershipDemonstrated end-to-end IP expertise

TelefonicaTelefonica

NextelNextel

Bouygues TelecomBouygues Telecom

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