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We anticipate that demand for wireless networking equipment will be driven by continued subscriber and traffic growth, and the effectiveness
of 2.5G and 3G wireless networking systems. There are two key aspects to the migration from 2G wireless communications technologies to
2.5G and 3G wireless communications technologies. The first is that all current 3G technologies, including CDMA 3G and UMTS, are based
on spread spectrum technology. The second is that the migration from 2G to 2.5G and 3G technologies is largely based on a transition from
circuit switching technologies in 2G core networks to packet-based networking technologies in 3G core networks. We believe that our
extensive experience in deploying CDMA wireless communications networks, combined with our expertise in packet-based networking for
wireline networks, will be a competitive strength during the migration from 2G wireless communications networks to 2.5G and 3G wireless
communications networks.
Commercial CDMA 3G networks have been launched in the United States, Canada, CALA and the Asia Pacific region. CDMA networks
operating in the 450 MHz radio spectrum are also expanding into Central and Eastern Europe. GPRS and UMTS networks have already been
launched in EMEA, the Asia Pacific region and the United States. In addition, EDGE has been launched to support higher speed transmission
of data in the United States and also by several operators in Western Europe and the Asia Pacific region. GSM-R has already been deployed by
many countries across the world, including member states of the European Union, China and India. The GSM-R market is one of the fastest
growing segments of the overall wireless market.
In the United States, Canada and CALA, usage rates of wireless communications services continue to increase, and we anticipate that capital
spending decisions by wireless service providers will be driven by capacity requirements, new wireless subscribers, increased use of wireless
devices for Internet access and technology migration from 2G wireless technologies to 2.5G and 3G wireless technologies. We also anticipate
that the migration from 2G to 2.5G and 3G wireless will initially be driven by CDMA 3G 1xRTT and 1xEV-DO deployment for CDMA-based
networks, and by GPRS, EDGE and UMTS deployment for GSM- and TDMA-based networks.
Within EMEA, wireless subscriber growth remains slower in many Western European countries, largely due to relatively high wireless
subscriber penetration levels. However, other parts of EMEA continue to grow their subscriber base due to the lower market penetration for
wireless services. Investment decisions by wireless service providers in Western Europe are being driven by anticipated growth in wireless data
communications services. As a result, infrastructure spending in Western Europe is currently primarily driven by the migration from GSM to
GPRS and UMTS technologies, and the associated migration from circuit switching technologies to packet-based networking technologies.
In the Asia Pacific region, we anticipate that capital spending by wireless service providers will be driven by the migration to 3G technologies
in Japan and Korea, and by continued growth in wireless subscribers in the People’s Republic of China, or China. Growth in China may be
further driven by anticipated new national licenses for 3G. However, the timing of the issuance of new national licenses for 3G in China is
uncertain. The issuance of new national licenses for 3G in China is also expected to impact the entire 3G market. Many countries in South and
South East Asia have very low wireless subscriber penetration levels, and are expected to experience increased wireless subscriber growth over
the next five years. India is also anticipated to be a major wireless infrastructure market in the next five years.
Customers
Our Wireless Networks customers are wireless service providers, and their customers are the subscribers for wireless communications services.
The top 20 global wireless service providers collectively account for a majority of all wireless subscribers around the world. We are currently
focused on increasing our market presence among the top global wireless service providers. None of our Wireless Networks customers
represented more than 10% of Nortel Networks consolidated revenues in 2003.
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• Our Wireless Mesh Network solution, designed to allow our customers to reduce the costs of high-speed wireless data transport
from wireless access networks to wired broadband networks, is now generally available and has been deployed in the United States
and Asia Pacific.
• Our enterprise grade WLAN access products are generally available for commercial deployment by our wireless service provider
customers.