We report the first demonstration of OTDM-to-WDM conversion from 130 Gbit/s simultaneously to 3 × 43 Gbit/s WDM channels in a nonlinear optical loop mirror (NOLM). The scheme is exploiting the ultra-fast Kerr based XPM in a NOLM and gives full flexibility for selecting the output WDM channel wavelengths. For the success of the experiment we rely crucially on a new specially designed highly nonlinear fiber (HNLF) exhibiting low dispersion and low dispersion slope such that low walk-off operation across the C-band is possible. Error free performance is achieved with penalties ranging from 0.5 dB to 3.5 dB for all three WDM channels