TORONTO - Nortel* [TSX: NT, OTC: NRTLQ], today announced it intends to reduce its workforce by an additional net 3,200 positions worldwide. The company expects to carry out these reductions over the next several months, in accordance with local country legal requirements.  These new reductions are incremental to the 1,800 remaining reductions from previously announced plans that require completion.

"There is nothing more difficult than notifying employees, and Nortel is extremely conscious of the personal financial burden this will cause affected employees and their families," said Mike Zafirovski, Nortel president and chief executive officer. "Nortel is a company driven by people and innovation.  But with the unprecedented economic environment and resultant impacts on revenues, significant changes are required to regain our financial footing.  Tough decisions are being made to restructure the company and work towards a successful emergence from creditor protection." 

As previously announced, Nortel is in the process of preparing a comprehensive business and financial restructuring plan with the goal of emerging from the creditor protection process as a more focused and competitive company. The Company is working with several parties, including its creditors, to define the best plan forward to present to the courts. Nortel is taking the initial steps announced today in a disciplined fashion to ensure it has appropriate resources to fully serve its customers with leading solutions and innovations. 

"We remain deeply committed to our customers and are staffed to meet their needs as we take the necessary actions to strengthen the Company," said Zafirovski. "Throughout the process, we are committed to maintaining current high service levels and appropriate innovation investment levels to ensure best in class technology continues to be available to Nortel's global customer base.

" Employee Compensation Program Changes The Board of Directors has approved changes to Nortel compensation programs consistent with best practices for companies working through restructuring in order to maximize stakeholder value and emerge as a more focused and competitive company. The Board has approved management's recommendation to not pay any bonuses under the Nortel Annual Incentive Plan (AIP) for 2008. In addition, Nortel is seeking Canadian court approval to terminate its equity based compensation plans, including all outstanding equity under the plans (including stock options, restricted stock units and performance stock units), whether vested or unvested, and no further equity will be awarded in 2009. 

Nortel will continue its AIP in 2009 for all eligible full and part-time employees. The plan is being modified to permit quarterly rather than annual award determinations and payouts. This will provide a more immediate incentive for employees upon the achievement of critical shorter-term corporate performance objectives, including specific operational metrics in support of customer service levels as the Company works through its business and financial restructuring.

The Company will seek to implement, and request court approval where required, retention and incentive compensation for certain key eligible employees deemed essential to the business while under court protection.

More information about Nortel's restructuring process can be found at http://www.nortel.com/restructuring