UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                    FORM 10-K


        (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended December 31, 2000

                                  OR

 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

                   Commission File Number 333-4128

                   BOSTON COMMUNICATIONS GROUP, INC.
                 ----------------------------------
           (Exact Name of Registrant as Specified in its Charter)

MASSACHUSETTS                                                04-3026859
-------------                                                ----------
(State or Other Jurisdiction                                 (I.R.S. Employer
 of Incorporation or Organization)                           Identification No.)

100 Sylvan Road, Suite 100, Woburn, Massachusetts            01801
-------------------------------------------------            -----
(Address of Principal Executive Office)                      (Zip Code)

Registrant's telephone number, including area code:          (781) 904-5000
                                                             --------------

 Securities registered pursuant to Section 12(b) of the Act:
            None

                Securities registered pursuant to Section 12(g) of the Act:
                Common Stock, par value $.01 per share
                --------------------------------------

         Indicate  by check mark  whether  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
         YES  X                                                        NO
             ---                                                          -----
         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. []
         The   approximate   aggregate   value  of  the  voting  stock  held  by
non-affiliates  of the  registrant,  computed by reference to the closing  sales
price of such stock  quoted on the Nasdaq  National  Market on March 9, 2001 was
$144,909,870. The number of shares outstanding of the Registrant's common stock,
$.01 par value per share, as of March 9, 2001 was 17,048,220.

                       DOCUMENTS INCORPORATED BY REFERENCE

The following  document is  incorporated  by reference in the following  part of
this Form 10-K:  information  required  by Part III (Items 10, 11, 12 and 13) of
this  Annual  Report  on Form  10-K is  incorporated  from the  Proxy  Statement
relating to the 2001 Annual Meeting of Stockholders of the Company.

<PAGE>


                                                                            -37-

This Annual Report  contains  forward-looking  statements that involve risks and
uncertainties,  including without limitation, statements regarding the continued
decline in Prepaid  Wireless per minute rates as carriers grow their  subscriber
bases, minutes of usage and utilize volume discounts, seasonal trends in Prepaid
Wireless  revenues and churn,  that the loss of subscribers due to Rogers AT&T's
departure  from the BCGI platform in the first quarter of 2001 will be offset by
increased net subscriber adds among BCGI's  existing and new carrier  customers,
that with the loss of Rogers AT&T the Company  expects  gross  margin  levels to
decrease in at least the first few quarters of 2001,  reduction of  unregistered
roaming  revenues  resulting  from the trend of  consolidation  in the  wireless
industry and national  carriers  offering  one-rate  registered  roaming  plans,
decreases  in roaming  margins as revenues  continue to  decline,  increases  in
engineering, research and development expenditures to support future development
and  enhancements  of its prepaid and other  wireless  services  and systems and
reductions in sales and marketing and general and administrative expenses as the
Company continues to leverage and effectively manage its expenses. The Company's
actual  results  may differ  significantly  from the  results  discussed  in the
forward-looking statements.

Any statements  contained  herein that are not statements of historical fact may
be deemed to be forward looking statements.  Without limiting the foregoing, the
words  "believes,"  "anticipates,"  "plans,"  "expects,"  "intends," and similar
expressions are intended to identify  forward-looking  statements,  although not
all forward-looking statements contain these words.

There are a number of important  factors  that could cause actual  events or the
Company's  actual  results to differ  materially  from those  indicated  by such
forward-looking statements. These factors include, without limitation, those set
forth under the  captions  "Management's  Discussion  and  Analysis of Financial
Condition and Results of  Operations",  "Certain  Factors That May Affect Future
Results", "Quantitative and Qualitative Disclosures About Market Risk" and those
set forth in Items 1 and 3 of Part I of this  Annual  Report on Form  10-K.  The
factors  discussed  herein do not reflect  the  potential  future  impact of any
mergers,  acquisitions  or  dispositions.   The  Company  does  not  assume  any
obligation to update any forward-looking statements made herein.


Item 1.  Business

                               Background

General

Boston  Communications  Group, Inc. ("BCGI" or the "Company") provides flexible,
real-time  transaction  processing,  billing  and  payment  services  and  other
enhanced voice and data services to wireless  carriers.  Through its Intelligent
Voice Services Network ("IVSN"),  one of the largest and most advanced automated
voice resource networks in North America,  and its proprietary,  highly scalable
transaction  processing  platform,  BCGI provides one or more of its services to
approximately  70 wireless  carriers and  resellers,  including the five largest
carriers  in  the  United  States--Verizon  Wireless,  Cingular  Wireless,  AT&T
Wireless, Sprint PCS and ALLTEL.

As of December 31, 2000,  BCGI  operated 46 IVSN Points of Presence  ("PoPs") in
North  America,  providing  coverage  of over  160  Metropolitan  Service  Areas
("MSAs"), and encompassing over 95% of the U.S. population and all major markets
in Canada. As of that date,  wireless carriers utilized over 42,700 voice ports,
or approximately 50% of the deployed network capacity of the IVSN, handling over
125 million  minutes of voice  traffic per month.  The IVSN is  integrated  with
BCGI's proprietary  transaction processing platform,  which enables the delivery
of sub-second  response  times for  approximately  70 million  transactions  per
month.

The Company's strategy is enhanced by its deployed network  infrastructure,  and
the synergies  afforded by its complimentary  lines of business,  namely Prepaid
Wireless  Services,  Roaming  Services and Systems,  each of which is summarized
below. In addition,  the Company  believes that it is well positioned to deliver
end-to-end  m-commerce  solutions  for  wireless  carriers,   telecommunications
providers  and other  enterprises  by leveraging  its key assets,  including its
deployed   infrastructure,   which  currently   enables  low  cost   transaction
processing.

The Company's launched its beta trial for its first m-commerce service offering,
BCGI Wireless Wallet(TM),  in January 2001 and it is now commercially available.
The Wireless Wallet service is designed to provide  carriers with an end-to-end,
outsourced, cost-effective payment platform solution for the monetization of the
mobile Internet, as well as an opportunity to retain the carrier's position as a
key link in the value chain for m-commerce services.


Prepaid Wireless Services.  BCGI's nationwide,  real-time service bureau prepaid
solution has gained wide acceptance among wireless  carriers,  and is the leader
in the U.S.  prepaid  wireless market by number of subscribers,  as estimated by
the Yankee  Group.  Prepaid  Wireless  Services  generates  revenue by  charging
carriers  based on the number of minutes of use ("MOUs")  processed by the IVSN.
This network  enables  carrier's  subscribers  to use their wireless phone as if
they were a traditional post-pay subscriber, thereby expanding carriers' service
offerings to new and existing  subscribers  without the added  billing costs and
collection risk.  After achieving early success in Europe,  prepaid wireless has
recently emerged as the fastest-growing  segment of the U.S. wireless market, as
several  domestic  carriers  began to launch  prepaid  programs in late 1999 and
2000.  The Yankee Group  estimates  that prepaid  calling  plans will  represent
approximately  50% of net  subscriber  additions in the U.S.  over the next five
years, and projects the number of prepaid subscribers to grow from approximately
4.9  million  at the  end  of  1999  to  approximately  33.7  million  by  2003,
representing a compound annual growth rate of over 60%.

As a result of its established  position in the prepaid  wireless  market,  with
prepaid customers  including the three largest U.S. wireless carriers,  BCGI has
increasingly  begun to realize the benefits of the carriers'  increased focus on
prepaid  programs.  As of December  31, 2000,  the  Company's  Prepaid  Wireless
Services  provided  outsourced,  real-time voice and transaction  processing for
approximately  3.0 million prepaid wireless  subscribers,  an increase of nearly
60% from  December  31,  1999.  In the fourth  quarter of 2000,  BCGI's IVSN was
handling over 1.5 billion minutes of prepaid wireless phone use on an annualized
basis.

Roaming  Services.  The Company  pioneered the concept of  unregistered  roaming
services,  allowing carriers to generate incremental revenue by serving visiting
subscribers  who are not recognized  automatically  by their wireless  networks.
These  subscribers,  who  were  previously  denied  service,  are  automatically
forwarded to the  Company's  proprietary  network,  through which BCGI bills and
collects from the subscriber.  This  proprietary  network is integrated with the
IVSN to enable  nationwide  roaming for  prepaid  subscribers.  Since 1991,  the
Company has  maintained a leadership  position in the delivery of this  service,
and is responsible for generating  approximately  $80 million in profits for its
carrier customers.

Systems. The Company's Systems operation develops, assembles and markets turnkey
solutions  for  prepaid   wireless  and  other  enhanced   services,   targeting
international and smaller domestic wireless carriers. The Systems operation also
develops and assembles the voice service  nodes,  or V-nodes,  that comprise the
technology backbone of the IVSN.

The Company was organized as a  Massachusetts  corporation  in 1988. The Company
launched its initial prepaid wireless marketing trials in mid-1994,  and in 1995
initiated the build-out of the IVSN. In 1996, the Company acquired Voice Systems
Technology,  Inc.  (VST),  which is now its  Systems  operation.  The  Company's
principal office is located at 100 Sylvan Road, Suite 100, Woburn, Massachusetts
01801 and its telephone number is (781) 904-5000.

                        Description of Business

Prepaid Wireless Services

The Company  introduced its prepaid wireless service offering in mid-1994 and as
of December  31,  2000 was  offering  the service in over 160 U.S.  Metropolitan
Service  Areas (MSA's) that cover more than 95% of the U.S.  population  and all
major  markets in Canada.  The Company has become the leading  prepaid  wireless
service  provider for wireless  carriers in the United States and Canada and has
grown its  subscriber  base nearly 60%, from 1.9 million at December 31, 1999 to
approximately 3.0 million at December 31, 2000. The Company added  approximately
1.1 million new net subscribers to its platform during that time.

BCGI's  prepaid  wireless  service  offering  provides  economies  of  scale  by
combining  many  carrier   subscribers  onto  one   comprehensive   network  and
transaction  processing platform.  The Company's extensive experience in prepaid
has also allowed the Company to offer rich and robust features and functionality
as well as knowledgeable  guidance to carriers to facilitate  profitable prepaid
programs. In addition,  several distinguishing  features of BCGI's offering make
its prepaid product more competitive in the marketplace,  especially as wireless
carriers continue to consolidate.  BCGI's platform provides  nationwide  prepaid
roaming because of the Company's coverage of more than 95% of the US population,
a feature  that most  carriers  and  competitors  cannot  offer,  nor provide as
economically  as  BCGI.   BCGI's  prepaid  wireless  service  offering  is  also
"technology  neutral",  which means it can easily  integrate  with virtually all
switch types, wireless system types (GSM, TDMA, CDMA, etc.) and billing systems.
This feature has been a key factor in helping the Company  increase its customer
base. BCGI's high reliability and telecommunications  quality uptime performance
for call processing is another key competitive advantage,  which is supported by
many redundant features and facilities in the network and transaction processing
platform and by the use of "best-in-class"  vendor technologies,  including Sun,
EMC and Cisco. As an example, BCGI's investment in its redundant processing site
in Waltham,  Massachusetts  provides load balancing for its primary  transaction
processing  platform  site  in  Woburn,  Massachusetts,  further  enhancing  the
Company's platform  reliability.  Currently this redundant site supports primary
transaction  processing  for the Prepaid  Connection  service and is expected to
support additional services later in 2001.

In a wireless  carrier's prepaid service offering,  a subscriber  establishes an
account with the carrier by prepaying a specific  dollar amount that is credited
toward future service. Subsequently,  each call that is initiated or received by
the subscriber is routed by the wireless carrier to the IVSN, which is linked to
the transaction  processing platform,  where information regarding the status of
that subscriber's  prepaid account is maintained.  The call is completed and the
subscriber's  account is debited on a real-time  basis,  without  requiring  the
subscriber to enter a debit or credit card number or other information. When the
minute  balance  in  the  subscriber's   account  becomes  low,  the  subscriber
periodically receives notifications indicating service minutes will soon expire,
and the call is  immediately  terminated  once the  balance  in the  account  is
depleted.  This  feature is referred to as real-time  rating and  differentiates
BCGI's  service from most other  prepaid  platforms and billing  systems,  which
typically do not rate the call until it is completed,  thus  allowing  potential
call  overruns.  Therefore,  BCGI's  solution  eliminates the carrier's bad debt
expense  resulting from their prepaid  customers'  call  overruns.  Each call is
rated in real-time based on the telephone number called,  carrier usage charges,
taxes and applicable surcharges.

The IVSN's broad geographic coverage, combined with the Company's extensive list
of  carrier   relationships  in  its  roaming  business,   enables  carriers  to
cost-effectively  offer  prepaid  customers the ability to roam outside of their
service territory.  The Company also provides international dialing capabilities
to permit  prepaid  subscribers to make calls from within the U.S. and Canada to
countries around the world.

Prepaid  subscribers  receive service similar to subscribers  using  traditional
post-pay  billing  arrangements,  including  the  ability to make  outgoing  and
receive  incoming calls, as well as roam in other markets.  Subscribers are able
to replenish  their accounts by purchasing  additional  prepaid service from the
carrier by credit card  through  BCGI's  automated  replenishment  feature or by
purchasing  additional prepaid service at any of the carrier's affiliated retail
outlets.   The  Company  has  also   established   relationships   with  several
distribution  technology  partners  to help  expand  the  reach  of the  prepaid
replenishment  options.  Using the Company's technology,  the partners,  through
carrier  relationships   brokered  through  BCGI,  are  able  to  offer  prepaid
replenishment  on the BCGI platform in a seamless and automated way. The Company
also made a 13%  investment in one of these  partners,  Datascape,  Inc.,  whose
Merchant  Manager product is a web-based,  point-of-sale  solution that helps to
streamline the prepaid replenishment process.

Carriers  compensate  BCGI for  usage by  contracting  at per  minute  rates for
prepaid  subscriber  usage based on the  connection  time between the  carrier's
Mobile Switching  Centers (MSCs) and the IVSN's V-nodes for all completed calls.
As MOUs increase and carriers achieve higher volume tiers, per minute rates paid
by the carriers  decrease,  yielding lower average rates per MOU. The increasing
volume of traffic over the IVSN and transaction  processing platform has allowed
the Company to  successfully  leverage its cost base,  enabling it to reduce the
MOU pricing for its carrier  customers,  while still expanding its margins.  The
Company's existing contracts to provide prepaid wireless services generally have
terms of one to three years.

In 1999,  BCGI  introduced  Prepaid  Connection,  a product  that uses a prepaid
architecture that economically delivers  full-featured prepaid services to small
and  medium-sized  U.S.  wireless  carriers.  These  carriers  represent a large
potential market opportunity,  with approximately 21 million subscribers between
them, according to Yankee Group estimates. Prepaid Connection carriers can offer
subscribers full prepaid functionality, including automatic inbound and outbound
roaming virtually  anywhere in North America at competitive  prices on a per-MOU
basis. Thus, BCGI's larger carrier  subscribers can roam into these markets and,
more  importantly,  the smaller  carriers are able to offer  prepaid  roaming at
lower rates to their  subscribers  who roam into the larger  carrier's  markets.
BCGI manages the call rating,  customer account information,  Web-based customer
care server and provides the connection to the national  roaming server complex.
The Company has  successfully  launched eight carriers on Prepaid  Connection to
date.

BCGI continues to expand the features of its prepaid wireless  services to offer
additional functionality to its carrier customers and their prepaid subscribers,
and has averaged two major software  upgrades per year.  Such expanded  features
have included short messaging service,  international  dialing,  web-based care,
automated  on-line reporting for the carriers,  automated account  replenishment
options, reward programs and credit card address verification,  which were added
to enhance features already offered to the subscribers, as well as the Converged
Prepaid feature,  which allows subscribers to make prepaid calls from a wireless
or landline  phone.  The Company  works  closely with the carriers on an ongoing
basis  to  develop   additional   features  and   functionality  to  expand  the
capabilities and value of prepaid wireless services.

In addition to providing  the  technology  and payment  infrastructure  enabling
prepaid  wireless  services,  the Company  offers a full suite of customer  care
solutions to its carrier customers.  These solutions include the ability for the
carriers to  outsource  customer  care to BCGI's  preferred  provider,  TeleTech
Holdings, Inc., or insource the care themselves. BCGI enables carriers to access
their subscriber data for license fees by utilizing BCGI's proprietary  software
systems,  Customer Care Service Terminal ("CCST") or Remote  Transaction  Server
("RTS").  BCGI also  offers  web-based  care to its  Prepaid  Wireless  Services
carrier customers.

The  Company  currently  provides  prepaid  wireless  services  to several  U.S.
carriers,  including Verizon Wireless,  Cingular Wireless,  AT&T Wireless (AWS),
Bay Area Cellular,  Cincinnati Bell Wireless and Dobson Cellular Systems,  Inc.,
and more than 20 wireless carriers and resellers.


Roaming Services

BCGI's ROAMERplus roaming service enables wireless carriers to  cost-effectively
generate  revenues from subscribers  roaming in a carrier's service area who are
not covered under traditional  roaming  agreements.  These unregistered  roamers
attempting to place calls in the serving  carrier's  territory are automatically
switched to BCGI's proprietary network,  through which BCGI arranges payment for
the calls,  completes the calls and pays the serving carrier based on the length
of the call. When an unregistered  roamer places a call in the carrier's service
area, the carrier's  mobile switching center forwards the call, at the Company's
expense, to the Company's proprietary digital call processing system. The roamer
may  complete  the call by charging  the call to a  telephone  calling  card,  a
commercial  credit card, a prepaid  account or as a collect  call.  All incoming
traffic is  initially  handled by an automated  call  processing  system,  which
prompts the caller for billing and calling information.  The Company's specially
trained  service  representatives  handle  all  calls  that  require  additional
operator  assistance.  The Company's  roaming service is currently being used by
over 50 wireless  carriers in the United  States and Canada.  BCGI services 7 of
the 10  largest  wireless  carriers,  by number of  subscribers,  in the  United
States.

In order to implement the Company's ROAMERplus service, a carrier need only make
a minor software change in its switches. BCGI pays for transport of the calls to
its  facilities  and for  completion  of the calls.  Under its  agreements  with
carriers, BCGI pays the serving carrier for the airtime that the roamer uses and
charges the roamer for the call.  The charge for the call appears  directly on a
telephone  or credit  card  bill,  with BCGI  (typically,  under the trade  name
"Wireless Roaming") as the vendor.  ROAMERplus  eliminates  collection and fraud
risk for the carrier because BCGI takes  responsibility  for collection from the
customer.  The Company  manages this  collection and fraud risk by utilizing its
own  proprietary  and external  fraud control  systems as well as validating the
caller's credit before completing the call.

Although  roaming  service  revenues  have been  declining,  it is  currently  a
profitable  segment and enhances the Company's prepaid offering by expanding the
geographic  prepaid  roaming   footprint.   The  revenue  decline  is  primarily
attributable to fewer suspensions of inter-carrier automatic roaming agreements,
increased carrier  consolidation and some reduction of unregistered  roaming use
because of the growth of prepaid wireless services.  In addition,  consumers may
be less willing to use the Company's  premium priced roaming  service due to the
increase in  lower-priced,  one-rate  registered  roaming  plans offered by some
national carriers.  The Company anticipates that these trends will continue and,
therefore, roaming services revenues will continue to decrease over time.

Since the Company expects the unregistered  roaming business segment to continue
to decline,  the Company is focusing its efforts on cost  management and finding
new  sources of revenue  for this  platform.  In order to  maintain  margins and
realize contributing profits from ROAMERplus,  the Company has improved its call
routing and streamlined operations to reduce  telecommunications rates, bad debt
and labor costs.


Systems

The Company's Systems business delivers prepaid wireless solutions, which enable
prepaid   wireless  calling  on  a  turnkey  basis  primarily  to  international
customers.  The  Systems  business  also  markets  and sells  systems  for voice
messaging,  toll limitation and other enhanced service  applications to Original
Equipment  Manufacturers  (OEM's) and wireless and wireline carriers  throughout
North America. In addition, the Systems business also develops and assembles the
V-nodes that comprise the technology backbone of the IVSN.

The Company continues to sell prepaid systems to several customers whose efforts
are  focused  on  international   prepaid  wireless   services,   including  ADC
Telecommunications  (formerly Centigram Communications),  Cable & Wireless, Bell
South Wireless  International and Nortel Networks. The relationship with ADC was
solidified in 1999 when the Company entered into an agreement  pursuant to which
BCGI's prepaid system solution is offered  through ADC's worldwide  distribution
channels.  The Systems' business customers have operations  throughout the world
and have  enabled  the  Company to make  prepaid  system  sales in El  Salvador,
Nigeria,  Guam,  Gibraltar,  Venezuela,  Ecuador,  Guatemala  and several  other
countries in Central America and the Caribbean.


M-Commerce/BCGI Wireless Wallet Offering

Thousands of  subscribers  in Europe,  Asia and the U.S.  already  utilize basic
mobile commerce ("m-commerce") services, including stock trading, online banking
and delivery of  purchased  content.  Wireless  access  devices,  such as mobile
phones,  pagers  and PDAs,  are being  transformed  into  electronic  "wallets,"
providing  easy-to-use  solutions for personal portable  information sharing and
transaction  enabling.  Though  the  U.S.  has  only a few  thousand  m-commerce
subscribers today,  International Data Corporation ("IDC") projects this base to
grow to approximately  29 million  subscribers in four years. IDC also estimates
that  m-commerce in the U.S. will generate over $20 billion in  transactions  in
2004.

Micropayment  transactions  are  expected  to  play a  significant  role  in the
delivery of m-commerce applications, such as content purchases, music downloads,
vending  machines,   public   transportation   and  tolls.   These  micropayment
transactions  require an efficient,  low-cost  transaction  processing  vehicle,
since  existing  payment  mechanisms,  such as credit cards,  carry  substantial
processing fees (typically a minimum of $0.25 per  transaction) and are prone to
delays associated with the authorization  process.  The Company believes that it
is uniquely positioned to deliver end-to-end  m-commerce  solutions for wireless
carriers,  telecommunications  providers and other enterprises by leveraging its
key  assets,  including  its  deployed  infrastructure.  In  addition,  the BCGI
Wireless Wallet  differentiates  itself from competitive offerings since it does
not need to be credit card based.  A consumer  may  establish  an account  using
cash, making it an ideal solution for the youth market,  which is ineligible for
credit,  and for individuals  wary of sending their credit card information over
the Internet.

In March 2001,  the Company  announced  the  availability  of the BCGI  Wireless
Wallet, following a successful beta trial program with Cincinnati Bell Wireless'
i-Wireless  prepaid  offering.  This product is a foundation  on which  wireless
carriers can build new  m-commerce  services.  Enabled by the Company's  current
transaction-processing capabilities, BCGI Wireless Wallet provides carriers with
an end-to-end,  secure,  cost-effective  m-commerce  payment solution that links
stored value accounts to a network of e-commerce and  m-commerce  merchants.  By
leveraging the Company for their m-commerce billing needs, wireless carriers can
focus on developing  value-added services for their subscribers.  Since wireless
carriers have established  brands and have earned the end-user's trust, they are
well  positioned  to play a vital role as preferred  suppliers to enable  mobile
payment solutions for their subscribers. Specifically, the carriers can use BCGI
to host the carrier's  privately labeled Wireless Wallet and provide transaction
processing  on behalf of  m-commerce  merchants,  content  providers and service
providers.  This presents the carriers with an opportunity to effectively retain
customer access control,  acquire an additional  brand loyalty tool and tap into
additional revenue streams.  Carriers who successfully develop this position can
act as an important  catalyst to the  significant  growth  opportunities  in the
emerging m-commerce market.

A natural  extension of the technology  behind BCGI's Prepaid Wireless  service,
BCGI  Wireless  Wallet  allows  wireless  carriers'  subscribers  to  activate a
Wireless Wallet account using traditional  Internet access via personal computer
or personal digital assistant and,  subsequently,  adding money to their account
at a wireless carrier's retail  distribution  points.  Using wireless,  voice or
PC-based  Internet  connectivity,  the user can purchase goods and services from
certain web-enabled merchants.  Users can also access account history, real-time
balance  information,  link  credit/debit  card to their account for funding and
transfer  money to BCGI  Wireless  Wallet  accounts.  The user's  account can be
replenished at over 75,000 potential points of distribution  available to BCGI's
wireless carrier customers.  BCGI Wireless Wallet provides carriers' subscribers
with a safe and easy payment solution for m-commerce.


Engineering, Research and Development

BCGI believes  that one of its key  competitive  advantages  is its  proprietary
software and that its future success will depend in large part on its ability to
enhance  existing  services  and  develop  new  services in response to changing
market,  customer  and  technological  requirements  of the  wireless  telephone
industry.  An important  factor in the future  success of the Company's  prepaid
wireless  service  will be the  Company's  ability to  provide,  at  competitive
prices,  more functionality and features than those typically available in other
competitive offerings.

The Company has  developed  proprietary  software to enable its call  processing
platform to handle  custom  signaling  interfaces  to various  types of wireless
switches, specialized call rating requirements of prepaid wireless services, and
interfaces to wireless  administration and information  technology systems.  The
Company is  developing  a number of  enhanced  services  that it intends to make
available  to  prepaid  and  traditional  subscribers  through  the IVSN and the
Company's transaction  processing platform. In addition,  BCGI believes that its
IN-based solution (Intelligent Networking),  which is expected to be deployed in
the next several months, will improve call processing efficiency and enable BCGI
to provide  additional  benefits  to its  carrier  clients,  including  improved
reliability and reduced telecommunications costs.

BCGI's engineering, research and development staff consists of 96 professionals,
including  40 in software  development.  The Company  spent $7.1  million,  $7.9
million and $9.9 million on  engineering,  research and  development  (including
capitalized  software costs) in 1998, 1999 and 2000,  respectively.  The Company
expects to continue to devote significant resources to its engineering, research
and development activities in future years.


Sales, Marketing and Distribution

The  Company's   sales   strategy  is  to  establish   and  maintain   long-term
relationships  with its customers.  The Company  utilizes a  consultative  sales
process to understand and define customer needs and to determine how those needs
can be  addressed  by the  Company's  services.  BCGI  seeks to  build  upon its
existing  customer  relationships by integrating and cross-selling its different
service  offerings.  The Company's sales cycle varies for different services and
can be up to 12 months for the Company's  Prepaid Wireless  Services and Systems
businesses.

The Company's sales force consists of 10 business development professionals with
an average of over 12 years of  experience in the  telecommunications  industry,
either as former  employees  of  wireless  carriers or in selling  products  and
services  to  wireless  carriers.  The  Company  typically  assigns  each  sales
professional  to a single  group of  wireless  carriers  in order to support the
development and maintenance of long-term strategic customer relationships. These
professionals are supported by product-specific account and service managers who
also typically have experience in the wireless  industry and manage the accounts
on a daily  basis  after the  completion  of the  initial  sale.  Most  business
development  professionals  are  strategically  located in the  carriers'  major
geographic regions.  However,  the Company's  marketing,  account management and
product management  activities are supported from its Woburn,  Massachusetts and
Tulsa, Oklahoma locations.

The Company's direct sales strategy is complemented by a marketing  program that
includes  participation  in  industry  trade  shows,  conferences  and  speaking
engagements and public  relations.  Because the Company's  target  customers are
wireless  carriers  and  resellers,  the  Company  seeks to gain broad  industry
recognition  through  carefully  selected events and activities  specific to the
wireless industry.

The  Company's has  established  product and account  management  groups for the
Prepaid Wireless Services and Systems segments. Each group focuses on supporting
carriers'  operational  issues,  understanding  the prepaid market and providing
carriers with valuable  information  regarding  prepaid marketing and subscriber
trends, distribution techniques and marketing success factors. The Company works
closely with the carriers and the industry to  disseminate  and  integrate  this
information  into their  prepaid  programs to help  generate and retain  prepaid
subscribers.  In addition,  the product and account  management  groups focus on
identification  of new features  and  functionality  that have the  potential to
drive incremental prepaid business by working closely with all BCGI customers.

Distribution of prepaid  wireless is an integral piece of the service because it
provides  consumers  with  numerous  channels to purchase or  replenish  prepaid
service.  The Company continues to expand distribution options for prepaid cards
on behalf of wireless  carriers  through its  Technology  and Partners  Program,
under  which  the  Company  seeks   arrangements  with  national   distributors,
retailers, resellers and alternative channels to increase market penetration and
exposure.  Currently,  Western Union, Radio Shack, Datascape, UPP and PreNet are
all part of BCGI's  Technology  and  Partners  Program,  providing  over  75,000
potential  points of  distribution  to BCGI  customers.  BCGI has also  recently
signed  a  memorandum  of  understanding  with  iATMglobal,  a  provider  of ATM
interface  technology.  The Company is aggressively pursuing additional partners
and arrangements for distribution, including online activation and replenishment
opportunities.  The Company has recently  focused  much effort on its  marketing
program to expand  awareness of its prepaid  product  offering,  specifically to
provide more assistance to its carrier customers in strategically  marketing and
promoting prepaid services through their sales and distribution channels.


Customers

The Company provides its services to wireless  carriers and resellers of varying
size, expertise and capabilities.  The Company currently provides one or more of
its services to over 70 wireless carriers and resellers in the United States and
Canada,  including  the five largest  wireless  carriers and 7 of the 10 largest
wireless carriers in the United States.  Historically,  a significant portion of
the Company's  total revenues in any particular  period has been attributed to a
limited  number of  customers.  Net revenues  attributable  to the Company's ten
largest customers  accounted for approximately 82%, 86% and 93% of the Company's
total revenues in 1998, 1999, and 2000, respectively. Verizon Wireless, Cingular
Wireless  and AT&T  Wireless,  accounted  for  approximately  30%,  25% and 13%,
respectively,  of total revenues in 1999 and for 28%, 30% and 13%, respectively,
of total revenues in 2000.


Competition

The market for providing  services to wireless  carriers is highly  competitive
and subject to rapid change.  A number of companies currently  offer one or more
of the services  provided by the Company.  In addition,  many wireless  carriers
are providing, or can provide in-house, the services that the Company offers.
Trends in the wireless  industry,  including  greater  consolidation  and
technological or other  developments that make it simpler or more cost-effective
for wireless carriers to provide certain services themselves,  could  affect
demand  for the  Company's  services  and  could  make it more  difficult for
the Company to offer a cost-effective  alternative to a wireless carrier's
in-house capabilities.  In addition, the Company anticipates the entrance of new
competitors in the wireless carrier services market in the future.  BCGI's
principal  competitor in the unregistered  roaming market is National
Telemanagement  Corporation (NTC, a subsidiary of Illuminet Holdings,  Inc.)
and in the Prepaid Wireless Services market are Intervoice Brite, Inc., NTC,
Convergys Corp., TSI (a subsidiary of Verizon Wireless,  Inc.), Lucent
Technologies,  Inc., Compaq Computer Corp.,  Tracfone  Wireless,  Inc. and
Ericcson  Telecommunications.  The Systems  Division's  principal  competitors
in the turnkey prepaid and voice  processing  systems markets are Lightbridge,
Inc.  (formerly  Corsair  Communications  Inc.),  Comverse Technology, Inc.
and Intervoice Brite, Inc.

The Company  believes  that the  principal  competitive  factors in the wireless
carrier  services  industry  include  the ability to easily  integrate  with all
switch types,  wireless system types (GSM, TDMA, CDMA, etc.) and billing systems
(especially as United States wireless  carriers  continue to  consolidate),  the
ability to identify  and respond to customer  needs,  the quality and breadth of
features and functionality, the size and scale of its prepaid wireless platform,
the  availability  of  nationwide  roaming,  competitive  pricing and  technical
expertise.  The Company's ability to compete also depends in part on a number of
competitive  factors  outside  its  control,  including  the ability to hire and
retain  employees,  the  development by others of products and services that are
competitive with the Company's products and services,  the price at which others
offer  comparable  products  and  services  and the  extent of its  competitors'
responsiveness to customer needs. As a result of these and other factors,  there
can be no  assurance  that  the  Company  will be able to  continue  to  compete
successfully with its existing competitors or with new competitors.


Government Regulation

 The  Federal  Communications   Commission  ("FCC"),  under  the  terms  of  the
Communications Act of 1934, as amended,  including the Telecommunications Act of
1996,  regulates  interstate  communications  and  the  use of  radio  spectrum,
including  entry,  exit, rates and terms of operation.  Presently,  BCGI neither
operates any facilities  utilizing  radio spectrum nor has any  facilities-based
services involving interstate communications.  Consequently,  it is not required
to and does not hold any licenses or other authorizations  issued by the FCC for
interstate operations.  Two subsidiaries of the Company,  Cellular Express, Inc.
and BCGI Communications  Corp., have been granted licenses by the FCC to provide
international  telecommunications  services.  BCGI Communications Corp. has been
certified to provide intrastate telecommunication services in 45 states, and has
applications  on file to provide  intrastate  telecommunication  services in the
remaining 5 states and is, therefore, subject to state regulatory requirements.

The wireless  carriers that constitute the Company's  customers are regulated at
both the federal and state levels.  Proposals to intensify or reduce  government
regulations  continue to be discussed at both the federal and state levels. Such
changes may decrease the growth of the wireless  telephone  industry,  result in
new  competitors  or  industry  consolidation,  limit the  number  of  potential
customers  for the Company's  services or impede the Company's  ability to offer
competitive services to the wireless market or otherwise have a material adverse
effect on the Company's business and results of operations.

Employees

As of December 31, 2000,  the Company had a total of 366 full-time and part-time
employees.  Of these employees, 73 serve in its Roaming Services call center and
related functions,  198 serve in technical operations and software  development,
36 serve in sales,  marketing,  product and account  management  and 59 serve in
administration and management.  None of the Company's  employees are represented
by a labor union. The Company believes that its employee relations are good.


Backlog

As of December  31,  2000,  there was  $788,000 in backlog of firm orders of the
Systems business. The Company includes in backlog only those orders for which it
has received completed purchase orders and for which delivery has been specified
within 12 months.  Most  orders are  subject to  cancellation  by the  customer.
Because  of  the  possibility  of  customer   changes  in  delivery   schedules,
cancellation of orders and potential delays in product shipments,  the Company's
backlog as of any particular date may not be  representative of actual sales for
any succeeding period.


Item 2.  properties

The Company leases space at its principal location in Woburn,  Massachusetts and
owns the facility at its Tulsa,  Oklahoma  location.  In  addition,  the Company
leases a facility in Waltham,  Massachusetts,  which serves as a redundant  site
for its  transaction  processing  platform.  The Woburn  location  serves as the
operations  center for Roaming  Services and has separate  facilities that house
the  Company's  network  operations  center as well as the  Company's  executive
headquarters, training facility, engineering, sales, human resources and finance
personnel.  The Tulsa  facility  is used for the  assembly of systems and houses
other support  functions for the Systems business such as software  development,
product management,  sales support and finance.  The Company has 33 other leased
facilities  throughout  the United  States that are used to house the  Company's
voice nodes and certain equipment for the IVSN.

The following is a listing of the Company's significant leased facilities:

Location                  Square Footage      Expiration Date
---------                 --------------      ---------------
Woburn, MA                62,205              March 2001-February 2006


Item 3.  LEGAL PROCEEDINGS

In December 1999, the Company was named as a defendant in a suit filed in United
States  District  Court for the Northern  District of Iowa by a former  supplier
(the  "Supplier")  of  materials  to a  subsidiary  of the  Company.  A purchase
contract  for an  unspecified  number of  components  was signed in 1997 and the
Supplier  became the sole  supplier for a certain  system  component in 1997 and
early 1998. The Company  subsequently  changed suppliers.  The suit alleges that
the Company breached the  confidentiality  clause of the contract and interfered
with  actual and  prospective  contracts  with  other  customers.  The  Supplier
initially  claimed  misappropriation  of trade secrets and sought an injunction,
but it has since  dropped  these  claims.  The Supplier  seeks  damages for lost
profits and damage to the  supplier's  reputation  in excess of $1 million.  The
Company believes that the claim is without merit.

In March, 2000, a suit was filed by Freedom Wireless,  Inc. in the United States
District Court for the Northern District of California against the Company and a
number of wireless  carriers,  including  customers and former  customers of the
Company.  The suit alleges that the defendants infringe a patent held by Freedom
Wireless, Inc. and seeks injunctive relief and damages in an unspecified amount.
Upon  motion by the  Company,  the suit was  transferred  to the  United  States
District Court in Massachusetts  in October,  2000 and is pending in that court.
The Company does not believe that it infringes  this patent and believes that it
has meritorious defenses to the action.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders of the Company,  through
solicitation of proxies or otherwise,  during the last quarter of the year ended
December 31, 2000.


EXECUTIVE OFFICERS OF THE REGISTRANT

The  executive  officers  of the  Company  and their ages and  positions  are as
follows:

----------------------------- ------------------ --------------
Name                          Age                Position
----------------------------- ------------------ --------------

Paul J. Tobin                 57                 Chairman
----------------------------- ------------------ --------------
Brian E. Boyle                53                 Vice Chairman
----------------------------- ------------------ --------------
E.Y. Snowden                  46                 President and Chief Executive
                                                 Chief Executive Officer,
                                                 Director
------------------------------ ------------------ ---------------
Karen A. Walker               36                 Treasurer,  Vice President,
                                                 Financial  Administration and
                                                 Chief Financial Officer
----------------------------- ------------------ ---------------
William D. Wessman            51                 Executive Vice President and
                                                 Chief Technology Officer
----------------------------- ------------------ ---------------
Frederick E. Von Mering       48                 Vice President, Corporate
                                                 Development, Director
----------------------------- ------------------ ---------------
Robert J. Sullivan            56                 Vice President and General
                                                 Manager, Roaming Services
----------------------------- ------------------ ----------------


Mr. Tobin has over 16 years  experience in the  telecommunications  and wireless
industry.  Mr.  Tobin is one of the  founders  of the  Company and has served as
BCGI's  Chairman  since 1988. Mr. Tobin also held the position of President from
February 1990 until February  1996, and from April 1997 to February 1998.  Prior
to  his  tenure  with  BCGI,   Mr.   Tobin  was   President   of  Cellular   One
Boston/Worcester  and  Portsmouth,   NH,  and  Regional  Marketing  Manager  for
Satellite Business Systems (a joint venture of IBM, Comsat and Aetna). Mr. Tobin
began his career as a Securities Analyst at Chase Manhattan Bank after receiving
his  undergraduate  degree in Economics from Stonehill College and his M.B.A. in
Marketing/Finance from Northeastern  University.

Mr.  Boyle  has  over 25  years  of  experience  in the  wireless  and  computer
industries. Mr. Boyle has held his position as the Company's Vice Chairman since
1994.  Mr. Boyle has founded and operated  several  highly  successful  ventures
servicing the wireless  industry,  including Appex Corporation (now EDS Personal
Communications),  Lightbridge,  Inc. and Microfinancial Corp. Mr. Boyle earned a
B.A. degree in Mathematics and Economics from Amherst College and a Ph.D. degree
in Operations Research from M.I.T. For the past three years, he has been focused
on investing in early stage technology companies, including GoldK, Inc., as well
as serving as a director of several public companies,  including Saville Systems
and MicroFinancial, Inc.

Mr.  Snowden  joined BCGI as President and Chief  Executive  Officer in February
1998.Prior to BCGI, he was  President  and Chief  Operating  Officer of American
Personal  Communications,  L.P. d/b/a Sprint Spectrum,  where he was responsible
for the successful launch of the nation's first Personal Communications Services
("PCS") network.  Before joining APC/Sprint Spectrum in 1994, Mr. Snowden was an
Area Vice President at Pacific  Telesis Group,  where he was integral in Pacific
Bell's entry into the PCS market  through the  development  of the business plan
for Pacific Bell Mobile Services.  Previously, he was Chief Executive Officer of
Universal Optical Company, a manufacturer and marketer of designer eyewear.  Mr.
Snowden began his career as a Corporate Strategy Consultant and Manager with the
Boston  Consulting  Group.  Mr.  Snowden  holds a B.S.  degree  in  Mathematical
Sciences  from  Stanford  University  and an M.B.A.  from the  Harvard  Business
School.

Ms.  Walker  joined BCGI in 1993 as Corporate  Controller.  In August 1998,  Ms.
Walker became BCGI's Vice President of Finance and Administration,  and in April
1999 she was promoted to the position of Chief  Financial  Officer.  As CFO, Ms.
Walker is responsible for overseeing all finance,  accounting and human resource
aspects of the Company.  She also played an integral part in guiding the Company
through its IPO and follow-on offering.  Prior to joining BCGI, Ms. Walker spent
six years at Ernst & Young LLP, where she earned her C.P.A. and was a Manager in
E&Y's  Entrepreneurial  Services  Group.  Ms.  Walker  holds  a B.S.  degree  in
Accounting from Boston College.

Mr.  Wessman has over 30 years of  experience  in the  communications  industry.
Prior to  joining  BCGI in April  1995,  Mr.  Wessman  spent 24 years with NYNEX
Corporation,  where he managed  the  development  of billing  systems and became
Director of Quality Assurance,  responsible for managing system testing, quality
assurance and customer  billing  support.  Mr. Wessman holds  undergraduate  and
M.B.A. degrees from Northeastern University.

Mr.  Von Mering  has been  involved  with the  telecommunications  and  wireless
industries for 15 years. Mr. Von Mering held the position of the Company's Chief
Financial Officer from June 1990, when he joined the Company,  until April 1999.
Prior to joining BCGI, he was Regional  Vice  President and General  Manager for
Metromedia's  paging division,  and held various positions at Coopers & Lybrand,
where he earned  his  C.P.A.  Mr.  Von  Mering  has an  undergraduate  degree in
Accounting from Boston College and an M.B.A. from Babson College.

Mr. Sullivan has over 25 years of wireless and  communications  experience.  Mr.
Sullivan  has been a Vice  President  at BCGI since  June  1990,  and in 1997 he
assumed his current  position of Vice  President  and General  Manager of BCGI's
Roaming Services. From 1984 to 1989, Mr. Sullivan worked for Cellular One, where
he was responsible for building the cellular systems in Boston,  Worcester,  and
Portsmouth,  NH.  Prior  to  Cellular  One,  Mr.  Sullivan  spent 10 years as an
Engineering  Manager for Zip-Call,  where he built New England's  largest paging
network.  Mr.  Sullivan holds a graduate degree in Electrical  Engineering  from
Northeastern University.





<PAGE>


PART II


Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information for Common Stock

      Boston  Communications  Group, Inc.'s Common Stock is traded on the Nasdaq
National  Market,  under the symbol BCGI. The following table reflects the range
of high and low selling  prices of the  Company's  common  stock for the periods
indicated.

                        1999                    2000
                        ----                    ----
                       High        Low         High           Low
First Quarter       $ 13 1/4      $8 1/16    $ 12 13/16  $   5 5/16
Second Quarter        14 11/16     7 3/8       15 3/8        5 5/8
Third Quarter         17 1/4       4 9/16       20 3/4       11 7/8
Fourth Quarter         7 7/16      3 1/2        29 7/8       16

Holders

At February 28, 2001, there were approximately 5,000 holders of record of Common
Stock.

Dividends

The Company  has never paid a cash  dividend  on its Common  Stock.  The Company
currently  intends to retain all of its earnings to finance  future  growth and,
accordingly,  does not anticipate  paying any cash dividends in the  foreseeable
future.


Item 6.  SELECTED FINANCIAL DATA

The  following  tables  should  be read in  conjunction  with  the  Consolidated
Financial Statements of the Company and the notes thereto and with "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
appearing elsewhere in this report.
<TABLE>
                                                                                        Year ended December 31,
                                                            ----------------------      -----------------------
                                                            1996 (1)     1997        1998        1999         2000
                                                            --------- ---------    ---------  --------    --------
Consolidated Statements of Operations Data:                            (in thousands, except per share data)
<S>                                                          <C>        <C>         <C>          <C>         <C>
Total revenues                                               $37,238    $51,090     $60,481      $64,181     $75,570
Operating income (loss) (2)                                    3,644    (3,830)     (4,753)      (2,681)       3,506
Income (loss) from continuing operations (2)                   3,633    (2,557)     (2,791)      (1,595)       3,710
Income (loss) from discontinued operations                    (3,034)    1,441         991          809        6,506
Net income (loss) (2)                                            599    (1,116)     (1,800)        (786)      10,216
Basic net income (loss) from continuing operations per
common share                                                    0.33     (0.18)      (0.17)       (0.10)        0.22
Diluted net income (loss) from continuing operations per
common share                                                    0.33     (0.18)      (0.17)       (0.10)        0.21
Basic net income (loss) from discontinued operations per
common share                                                   (0.28)     0.10        0.06         0.05         0.39
Diluted net income (loss) from discontinued operations per
common share                                                   (0.28)     0.10        0.06         0.05         0.37
Basic net income (loss) per common share                        0.05     (0.08)      (0.11)       (0.05)        0.61
Diluted net income (loss) per common share                      0.05     (0.08)      (0.11)       (0.05)        0.58
Consolidated Balance Sheet Data:
Cash and short-term investments                               21,421     33,704      25,609       30,236      54,610
Working capital                                               26,433     43,132      41,835       38,632      47,261
Property and equipment, net                                   12,906     33,165      33,617       39,365      45,037
Total assets                                                  51,959     93,385      91,760       99,331     118,644
Capital lease obligations, net of current maturities            --        1,598         546        1,828         740
Shareholders' equity                                         $42,893    $80,104     $78,658      $79,369     $94,697
</TABLE>
(1)  In February 1996, the Company acquired VST for Common Stock and cash for an
     aggregate purchase price of approximately $2.5 million.
(2)  Results  for the year ended  December  31, 1997 and 1998  include  one-time
     charges of $569,000 and  $698,000,  respectively,  for  impairment  of long
     lived assets no longer being used in the  Company's  business.  Results for
     the year  ended  December  31,  1999  include a  one-time  cost of  systems
     revenues charge of $1.8 million for reorganization of the Systems business.
     The  charge  principally  related to  expenses  associated  with  inventory
     write-downs  to bring the level of  inventory in line with the future sales
     strategy,  as well as severance costs.  Results for the year ended December
     31, 2000 include an impairment of long-lived  assets charge of $1.1 million
     for a write-down  of assets no longer  being used to support the  Company's
     business, a one-time charge to cost of services revenues of $2.6 million to
     accrue for estimated  legal  expenses and additional  depreciation  of $1.7
     million resulting from write-offs of certain equipment.


Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS


Consolidated Results of Operations

The Company's  total revenues  increased 18% from $64.2 million in 1999 to $75.6
million in 2000. The growth was  attributable to a 44% increase in revenues from
the Company's Prepaid Wireless Services business,  and partially offset by a 20%
decline in Roaming Services  revenues and a 6% decline in Systems  revenues.  In
1999,  total  revenues  increased  6%  compared to 1998  primarily  due to a 98%
increase  in  Prepaid  Wireless  Services  revenues,  partially  offset by a 21%
decline in Roaming Service revenues and a 63% decline in Systems revenues.

The Company  increased  its operating  income from  continuing  operations  from
operating  losses of $4.8 million and $2.7 million for the years ended  December
31, 1998 and 1999, respectively,  to operating income from continuing operations
of $3.5 million for the year ended December 31, 2000. The  significant  increase
in Prepaid Wireless Services revenues principally contributed to the improvement
in operating income from continuing  operations in 1999 and 2000.  Excluding the
effects of the loss on impairment of long-lived  assets and one-time  charges in
the three years ended  December 31, 1998,  1999 and 2000,  the operating  losses
from  continuing  operations for the years ended December 31, 1998 and 1999 were
$4.1 million and $857,000,  respectively,  and operating  income from continuing
operations for the year ended December 31, 2000 was $7.2 million.  The specifics
of each  segment's  revenues  and gross margin are  discussed in greater  detail
below.

The  Company's   reportable  operating  segments  consist  of  Prepaid  Wireless
Services,  Roaming Services and Systems  businesses.  The accounting policies of
the  operating  segments  are the  same as those  described  in the  summary  of
significant  accounting  policies  in  Note  2  of  the  Company's  Consolidated
Financial  Statements,  except  that the  financial  results  for the  Company's
operating segments have been prepared using a management approach. This approach
is  consistent  with the basis and  manner  in which  the  Company's  management
internally  analyzes  financial  information  for the  purposes of  assisting in
making internal operating decisions.  The Company evaluates performance based on
the gross margin of each stand-alone  business.  In 2000, for segment  reporting
purposes,  the  Company  began  reporting  inter-segment  sales from the Systems
business to the Prepaid Services business for voice nodes, known as V-nodes, and
related  equipment  shipped  during  the  year.  Prior  year  amounts  have been
reclassified to permit comparison. Segment disclosure information is included in
Note 7 of the Company's Consolidated Financial Statements.

The  Company's  chief  operating  decision-maker  is  its  President  and  Chief
Executive  Officer.  The  Company's  operating  segments are managed  separately
because each represents a strategic business unit that offers different products
and serves unique markets within the wireless industry.  However, the businesses
complement  each other providing the Company with a strong suite of products and
services to meet the needs of wireless carriers. The Company's customers include
seven of the ten largest domestic wireless carriers by subscribers served.


Segment Data (in thousands except for percentages)
<TABLE>
                                     Prepaid
                                  Wireless   Roaming
                                  Services    Services    Systems    Eliminations    Total
     --------------------------- ----------- ----------- ---------- --------------- ---------
     <S>                         <C>            <C>        <C>           <C>         <C>
     2000
     Revenues                       $53,221     $17,650    $18,449       ($13,750)   $75,570
                                    =======     =======    =======       =========   =======
     Gross margin (1)                36,561       3,257      7,856         (5,347)    42,327
                                     ======       =====      =====         =======    ======
     Gross margin percentage            69%         19%        43%           (39%)       56%
                                        ===        ===         ===           =====       ===
     (1)
     1999
     Revenues                       $36,920     $22,249    $10,327        ($5,315)   $64,181
                                    =======     =======    =======        ========   =======
     Gross margin (2)                24,638       4,017      1,821         (2,067)    28,409
                                     ======       =====      =====         =======    ======
     Gross margin percentage            67%         18%        18%           (39%)       44%
                                        ===         ===        ===           =====       ===
     (2)
     1998
     Revenues                       $18,624     $28,235    $17,038        ($3,416)   $60,481
                                    =======     =======    =======        ========   =======
     Gross margin                     9,787       6,364      6,502         (1,328)    21,325
                                      =====       =====      =====         =======    ======
     Gross margin percentage            53%         23%        38%           (39%)       35%
                                        ===         ===        ===           =====       ===
</TABLE>
(1)   The gross margin for Prepaid Wireless  Services includes a one-time charge
      for a $2.6 million accrual of legal expenses in December 31, 2000.
(2)   The gross  margin for the  Systems  business  includes a one-time  cost of
      systems  revenues  charge of $1.8  million in  December  31,  1999 for the
      reorganization  of the  Systems  business,  which  principally  related to
      expenses  associated  with  inventory  write-downs  to bring  the level of
      inventory  in line with the future  sales  strategy,  as well as severance
      costs.


Prepaid Wireless Services

Prepaid Wireless Services revenues increased from $18.6 million in 1998 to $36.9
million in 1999 and  increased 44% to $53.2 million in 2000. At the end of 2000,
there were  approximately  3.0 million paid  subscribers  on the Company's  IVSN
compared  to  1.9  million  subscribers  at the  end of  1999,  an  increase  of
approximately  60%. The subscribers  increased over 113% in 1999 from 890,000 at
the end of 1998.  The  increases  in revenues  were  primarily  due to increased
numbers  of  subscribers  and  greater  minutes  of use,  partially  offset by a
decrease in the average price per minute as carriers  availed  themselves of the
Company's volume discounts.  The Company expects the average price per minute to
continue  to decline as carriers  grow their  subscriber  bases and  continue to
utilize the Company's volume discounts.

Gross  margins for the Prepaid  Wireless  Services  improved from 53% of prepaid
wireless  service  revenues  in 1998 to 67% of  revenues  in 1999  and to 69% of
revenues in 2000. The Company's  gross margin  increased  during each quarter of
2000 (excluding the one-time charge),  even with the carrier's additional volume
discounts.  With the loss of  Rogers  AT&T in the  first  quarter  of 2001,  the
Company  expects  gross  margin  levels  to  decrease  in at least the first few
quarters of 2001.  The gross  margin for 2000  includes a one-time  charge for a
$2.6  million  accrual  for  legal  expenses.  The  charge  for  legal  expenses
represents  the  fees  the  Company  may  incur  in  the  defense  of  a  patent
infringement  suit brought by Freedom  Wireless.  The Company  believes that the
claims made by Freedom Wireless are without merit and will vigorously defend the
action. The improvement in both years resulted from the significant  increase in
prepaid  wireless  services  revenues  in  1999  and  2000  that  leveraged  the
predominantly  fixed cost  infrastructure.  This  increase in gross  margins was
partially  offset by increased  personnel and related costs  incurred to support
the growth of the IVSN and transaction processing platform.

The  Company  previously  announced  that Rogers AT&T will not renew its prepaid
contract  and that it would bring its  prepaid  program  in-house.  In the first
quarter of 2001,  the  Company  expects  approximately  800,000  subscribers  to
migrate off of the BCGI  platform.  While  management  believes that the loss of
subscribers due to Rogers AT&T's departure from the BCGI platform will be offset
by increased net subscriber  additions,  among BCGI's existing carrier customers
later in 2001 and the  addition  of new  carriers  to its  platform,  management
revised its  financial  projections  downward  for first  quarter and  full-year
fiscal 2001.


Roaming Services

Roaming  services  revenues  decreased  21% from $28.2  million in 1998 to $22.2
million in 1999 and  decreased  20% to $17.7  million in 2000.  The  decrease in
roaming  services  revenues was primarily  attributable to  consolidation in the
industry and an increase in one-rate  registered  roaming  plans offered by some
national carriers.  The Company anticipates that these trends will continue and,
therefore,  roaming  services  revenues  are expected to continue to decrease at
similar rates compared to prior periods.

Gross  margins  for  Roaming  Services  decreased  from 23% of roaming  services
revenues in 1998 to 18% in 1999 and  increased to 19% in 2000.  The gross margin
increased  slightly  in 2000 due to  negotiation  of  reduced  rates for  vendor
telecommunications  costs.  The decrease in 1999 resulted  primarily  from lower
revenues and therefore lower  absorption of fixed costs,  higher revenue sharing
rates   paid   to  the   Company's   carrier   customers   and   higher   vendor
telecommunications  costs. The Company anticipates that margins will decrease as
revenues continue to decline.


Systems

In  2000,  the  Company  began  reporting   inter-segment  revenues  (which  are
eliminated in  consolidation)  from Systems to Prepaid  Services for V-nodes and
related  equipment  deployed  during  the year.  Prior  year  amounts  have been
reclassified to permit  comparison.  Systems  revenues  decreased 39% from $17.0
million in 1998 to $10.3  million in 1999 and  increased 77% to $18.4 million in
2000.  Excluding  inter-segment  revenues,  Systems revenues declined from $13.6
million in 1998 to $5.0 million in 1999 and $4.7  million in 2000.  The increase
in gross Systems revenues in 2000 reflects increased  shipments of inter-segment
prepaid V-nodes while external revenues remained fairly consistent. The decrease
in 1999 was due to a  significant  decline in orders for  international  prepaid
systems.

Gross margins for Systems  decreased from 38% of systems revenues in 1998 to 35%
in 1999  (excluding  the effects of the  one-time  charge  discussed  below) and
increased to 43% of systems  revenues in 2000. The increase in 2000 was a result
of  increased  revenues  for  inter-segment  sales of voice nodes in addition to
increased recurring service revenues that yield a higher margin. The decrease in
1999 was primarily due to the reduced sales levels for 1999 that absorbed  fewer
fixed  costs.  In  addition,  the gross  margin was  further  reduced in 1999 as
compared to 1998 by the one-time  charge of $1.8  million  recorded in the third
quarter  of 1999 for the  reorganization  of the  Systems  business.  The charge
principally related to expenses  associated with inventory  write-downs to bring
the  level of  inventory  in line with the  future  sales  strategy,  as well as
severance costs.

The Company  currently prices and sells all of its systems to international
customers in U.S.  dollars.  All payments are received in U.S. dollars, which
helps to protect the Company from the need to hedge against foreign currency
risk.

<TABLE>

Operating Data
($ in thousands)
                                                       2000                   1999                  1998
                                                           % of                    % of                 % of
                                              Total     Revenue       Total     Revenue     Total    Revenue
--------------------------------------------- --------- ------------- --------- ----------- -------- -------------
<S>                                            <C>              <C>    <C>            <C>   <C>              <C>
Total revenues                                 $75,570          100%   $64,181        100%  $60,481          100%
Engineering, research and development            8,018           11%     5,986          9%    5,439            9%
Sales and marketing expense                      5,162            7%     6,075         10%    5,182            9%
General and administrative expense               6,752            9%     6,244         10%    5,518            9%
Depreciation and amortization expense           17,795           24%    12,785         20%    9,241           15%
Impairment of long-lived assets                  1,094            1%         0          0%      698            1%
</TABLE>


Engineering, research and development expenses

Engineering,  research and development  expenses  primarily include the salaries
and benefits for software development and engineering  personnel associated with
the  development,  implementation  and maintenance of existing and new services.
Engineering, research and development expenses increased from 9% to 11% of total
revenues  for the years ended  December  31, 1999 and 2000,  respectively.  This
increase primarily  resulted from additional  resources devoted to expanding and
enhancing the features and  functionality  of the Company's IVSN and transaction
processing  platform,   in  addition  to  resources  devoted  to  the  Company's
m-commerce initiatives.

Engineering,  research and  development  expenses  remained  consistent at 9% of
total  revenues  for the years ended  December  31,  1998 and 1999.  The Company
intends to  continue to  increase  its  engineering,  research  and  development
expenditures to support ongoing and future  development and  enhancements of its
prepaid and other  wireless  services  and  systems.  In  addition,  the Company
intends to invest additional resources to expand the capabilities of its current
network to be positioned to take advantage of new wireless opportunities.


Sales and marketing expenses

Sales  and  marketing  expenses  include  direct  sales and  product  management
salaries,  commissions,  travel and entertainment  expenses,  in addition to the
cost of trade  shows,  advertising  and other  promotional  expenses.  Sales and
marketing  expenses  decreased  from 10% to 7% of total  revenues  for the years
ended  December  31, 1999 and 2000 due to the  reorganization  of the  Company's
sales organization into one group to centralize efforts and leverage resources.

As a percentage of total revenues,  sales and marketing increased from 9% to 10%
for the years ended  December  31,  1998 and 1999,  respectively.  The  increase
resulted from new marketing  and business  development  efforts for the Company.
Sales and  marketing  expenses  are expected to continue to decrease in absolute
dollars and as a percentage of total revenues in 2001, as the Company  continues
to focus on leveraging and managing expenses.


General and administrative expenses

General and  administrative  expenses include salaries and benefits of employees
and other  expenses that provide  administrative  support to the Company.  Total
general and administrative  expenses decreased as a percentage of total revenues
from 10% in 1999 to 9% in 2000,  respectively.  The decrease  resulted  from the
ability  of  the  Company  to  leverage   its   existing   workforce   and  cost
infrastructure to support increased revenues.

General and administrative  expenses increased as a percentage of total revenues
from 9% in 1998 to 10% in 1999. The increase resulted principally from increased
personnel and other related costs to support the company's  growth.  General and
administrative expenses are expected to continue to decrease in absolute dollars
and as a percentage of total revenues in 2001, as the Company continues to focus
on leveraging and managing expenses.


Depreciation and amortization expense

Depreciation    and    amortization    expense    includes    depreciation    of
telecommunications  systems, furniture and equipment and leasehold improvements.
The Company provides for depreciation  using the  straight-line  method over the
estimated  useful lives of the assets,  which range from three to twenty  years.
Goodwill related to acquisitions is amortized over eight years. Depreciation and
amortization  expense increased from 15% to 20% to 24% of total revenues for the
years ended  December 31, 1998,  1999 and 2000,  respectively.  The increases in
both  years were due  primarily  to the  depreciation  of  additional  technical
equipment  and software to support the rapid  expansion and  enhancement  of the
Company's IVSN and transaction  processing platform.  In addition,  the increase
for 2000 included $1.7 million of additional  depreciation recorded to write-off
certain equipment no longer being used to support the Company's operations.


Impairment of long-lived assets

The Company  recognized  a pre-tax  charge of $1.1  million and $698,000 for the
years ended December 31, 2000 and 1998, respectively, to write-down equipment no
longer being used to support the Company's Prepaid Wireless Services  operation,
as these assets were not expected to generate any additional cash flows.


Interest income, net

Interest income  decreased from $1.3 million in the year ended December 31, 1998
to $941,000 in 1999, and increased to $2.0 million in 2000.  Interest income was
earned  primarily  from  investments  from the  increased  cash  generated  from
operations and the proceeds from the Company's public offerings.


Provision (benefit) for income taxes

The  effective  income tax rate for the year  ended  December  31,  2000 was 33%
principally due to the reversal of valuation  allowance as the Company  utilized
net operating losses in the current year.

The  income  tax  benefit  was  $145,000,  or 8% of the loss for the year  ended
December  31, 1999 and  $613,000 or 18% of the loss for the year ended  December
31,  1998.  The income tax  benefits  were less than 40% as the  Company did not
provide any additional benefit for the net operating losses generated along with
the non-deductibility of goodwill.


Income from discontinued operations

The Company's Teleservices business was a customer service call center operation
that was sold to  Teletech  Holdings,  Inc.  on November 7, 2000 for $15 million
including  the  assumption  of certain  liabilities  and has been  recorded as a
discontinued  operation  for all periods  presented.  Income  from  discontinued
operations  increased  from  $809,000 in 1999 to $1.5  million in 2000.  Despite
lower  revenues in 2000, the increase in income was primarily due to streamlined
operations and improved cost  management,  and the fact that 1999 included costs
associated with closing the Company's  Woburn call center,  including  severance
and  asset  write-offs.  Income  from  discontinued  operations  decreased  from
$991,000  in 1998 to $809,000 in 1999  principally  due to the costs  associated
with closing the Woburn call center.

The gain on disposal  of the  Teleservices  business  was $5.0  million,  net of
income taxes of $2.5 million.


Selected Quarterly Operating Results

The following table sets forth certain unaudited quarterly results of operations
of the Company for the eight quarters in the two-year  period ended December 31,
2000,  including such amounts expressed as a percentage of total revenues.  This
quarterly  information is unaudited,  has been prepared on the same basis as the
audited  Consolidated  Financial Statements and, in the opinion of the Company's
management,  reflects  all  necessary  adjustments,  consisting  only of  normal
recurring adjustments,  necessary for a fair presentation of the information for
the periods  presented.  The  quarterly  operating  results are not  necessarily
indicative  of future  results of operations  and should be read in  conjunction
with the audited  Consolidated  Financial  Statements and Notes thereto included
elsewhere in this Annual Report on Form 10-K.

<TABLE>
                                                                                            Three months ended
                                           -----------------------------------------------------------------------------------------
                                           March 31,  June 30,  Sept. 30,   Dec. 31,   March 31,   June 30,   Sept. 30,  Dec. 31,
(In thousands                                  1999       1999       1999       1999        2000       2000       2000       2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>        <C>        <C>        <C>       <C>         <C>        <C>        <C>
Revenues:
      Prepaid wireless services              $7,872      $9,731     $9,115    $10,202    $12,344     $12,716   $13,940    $14,221
      Roaming services                        5,435       5,733      5,956      5,125      4,807       4,589     4,556      3,698
      Systems                                 1,014       1,250        955      1,793        391       1,563     1,353      1,392
------------------------------------------------------------------------------------------------------------------------------------
           Total revenues                    14,321      16,714     16,026     17,120     17,542      18,868    19,849     19,311
Expenses:
      Cost of service revenues                7,312     7,987       8,292      6,923       7,124      7,268      7,470      6,591
      Cost of service revenues - one time
      charge (2)                               --        --           --        --          --           --         --      2,600
      Cost of system revenues                   735       863         728      1,108         434        687        449        620
      Cost of system revenues -
        one-time charge (1)                      --        --       1,824       --           --          --         --         --
      Engineering, research and development    1,248     1,536      1,619     1,583        1,807      1,860      2,155      2,196
      Sales and marketing                      1,501     1,553      1,387     1,634        1,462      1,352      1,101      1,247
      General and administration               1,407     1,544      1,716     1,577        1,712      1,722      1,658      1,660
      Depreciation and amortization  (3)       2,836     2,992      3,370     3,587        3,786      3,928      4,197      5,884
      Impairment of long-lived assets (2)        --        --        --         --           ---         --         --      1,094
-----------------------------------------------------------------------------------------------------------------------------------
            Total expenses                    15,039    16,475     18,936     16,412      16,325     16,817     17,030     21,892
-----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)                        (718)       239      (2,910)       708      1,217      2,051     2,819      (2,581)
Interest income, net                             274       247          227       193        357        456       499          737
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes               (444)      486      (2,683)       901      1,574      2,507     3,318      (1,844)
Provision (benefit) for income taxes            (157)      243        (598)       367        679      1,078     1,194      (1,106)
Income (loss) from continuing operations        (287)      243      (2,085)       534        895      1,429     2,124        (738)
Income (loss) from discontinued operations       477       419        (129)        42        177        414       586        5,329
Net income (loss)                                190       662      (2,214)       576      1,072      1,843     2,710        4,591
Basic earnings (loss) per share from
continuing operations                         $(0.02)    $0.01      $(0.13)     $0.03      $0.05      $0.09     $0.13      $(0.04)
Basic earnings (loss) per share from
discontinued operations                         $0.03    $0.03      $(0.01)     $0.00      $0.01      $0.02     $0.03        $0.31
Basic earnings (loss) per share                 $0.01    $0.04      $(0.13)     $0.03      $0.06      $0.11     $0.16        $0.27
Diluted earnings (loss) per share from
continuing operations                          $(0.02)   $0.01      $(0.13)     $0.03      $0.05      $0.08     $0.12      $(0.04)
Diluted earnings (loss) per share from
discontinued operations                         $0.03    $0.02      $(0.01)     $0.00      $0.01      $0.02     $0.03        $0.29
Diluted earnings (loss) per share               $0.01    $0.04      $(0.13)     $0.03      $0.06      $0.11     $0.15        $0.25

(1)  Results for the three  months ended  September  30, 1999 include a one-time
     $1.8 million charge for reorganization of the Systems business.  The charge
     principally  relates to expenses  associated with inventory  write-downs to
     bring the level of  inventory in line with the future  sales  strategy,  as
     well as severance costs.
(2)  Results for the three months ended December 31, 2000 include  impairment of
     long-lived  assets,  a charge of $1.1 million for a write-down of assets no
     longer being used to support the Company's  business and a one-time  charge
     to cost of services  revenues of $2.6 million for estimated  legal expenses
     expected to be incurred in connection with the defense  ofFreedom  Wireless
     patent infringement suit.
(3)  Depreciation  and amortization for the three months ended December 31, 2000
     includes additional  depreciation of $1.7 million resulting from write-offs
     of certain equipment.


                                                                                        As a Percentage of Total Revenues
------------------------------------------------------------------------------------------------------------------------------------
                                                 March 31,  June 30,   Sept. 30,  Dec. 31,   March 31, June 30,  Sept. 30,  Dec. 31
                                                    1999       1999       1999       1999       2000     2000       2000       2000
------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
<S>                                                 <C>        <C>        <C>        <C>        <C>        <C>       <C>       <C>
Revenues:
      Prepaid wireless services                      55%        58%        57%        60%        70%        68%        70%       74%
      Roaming services                               38         34         37         30         28         24         23        19
      System                                         7          8          6          10         2           8          7         7
------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
           Total revenues                           100        100        100        100        100        100        100        100
Expenses:
      Cost of service revenues                       51         48         52         41         41         38         38         34
      Cost of service revenues - one time charge     --         --         --         --         --          --        --         13
      Cost of system revenues                        5          5          4          6          2           4          2          3
      Cost of system revenues-one-time charge        --         --         11         --         --          --        --         --
      Engineering, research and development          9          9          10         9          10         10         11         11
      Sales and marketing                            10         9          9          10         8           7          6         7
      General and administration                     10         9          11         9          10          9          8         9
      Depreciation and amortization                  20         18         21         21         22         21         21         30
      Impairment of long-lived assets                --         --         --         --         --         --         --          6
------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
Total expenses                                      105         98        118         96         93         89         86        113
Operating income (loss)                              (5)         2       (18)          4          7         11         14       (13)
Interest income, net                                  2          1          1          1          2          2          3         3
------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
Income (loss) before income taxes                    (3)         3          (17)       5           9        13         17      (10)
Provision (benefit) for income taxes                 (1)         1           (4)       2           4         5          6       (6)
------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
Income (loss) from continuing operations            (2)         2          (13)       3           5          8         11      (4)
Income (loss) from discontinued operations           3          2           (1)       --          1          2          3       28
------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----
Net income (loss)                                    1          4          (14)       3           6         10         14       24
</TABLE>

The Company has experienced  fluctuations in its quarterly operating results and
such  fluctuations  may continue and could  intensify.  The Company's  quarterly
operating  results  may vary  significantly  depending  on a number of  factors,
including the timing of the  introduction or acceptance of new services  offered
by the Company or its competitors,  seasonality,  changes in the mix of services
provided by the Company, changes in regulations affecting the wireless industry,
changes in the Company's  operating  expenses,  personnel  changes,  and general
economic  conditions.  In particular,  Prepaid  Wireless  Services  revenues are
affected  by  seasonal  trends as the fourth  quarter  typically  generates  the
highest number of net additions as compared to the other three quarters.  During
the fourth quarter of 2000, most of the Company's carrier customers  experienced
the same seasonal  trends,  however,  total Company results were offset by lower
than expected net additions from its largest  customer,  Verizon  Wireless.  The
timing of carrier contract  renewals and the related minute of usage pricing can
also impact Prepaid Wireless Service  revenues.  The Company's  Roaming Services
revenues  are  affected  by the  frequency  and  volume of use of the  Company's
service,  which may also be influenced by seasonal trends.  The timing of orders
and the number of large prepaid systems shipped during a particular  quarter may
fluctuate based upon the needs of the Systems business  customers and can have a
significant impact on the level of revenues for the Systems business.

Because a significant  portion of the Company's operating expenses are committed
in advance,  the Company may be unable to adjust  spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, unexpected revenue
shortfalls could cause significant  variations in operating results from quarter
to quarter and could have a material adverse effect on the Company's  results of
operations. As a result, the Company believes that period-to-period  comparisons
of its results of operations  are not  necessarily  meaningful and should not be
relied upon as an indication of likely future performance.


Liquidity and Capital Resources

Cash, cash equivalents and short-term  investments  increased from $30.2 million
in 1999 to $54.6 million in 2000. The increase was due to the Company's improved
cash flow from operations and $11.8 million in net proceeds from the sale of the
Teleservices  business. Net cash provided by operations of $35.6 million in 2000
resulted from $3.7 million in net income from continuing  operations  along with
adjustments  for  depreciation  and  amortization  of $17.8 million,  income tax
benefit from exercise of options of $1.8 million,  deferred income taxes of $1.2
million,  impairment  charges of $1.1  million  and $2.6  million in legal costs
accrued.  In  addition,  $4.8  million  of  cash  was  generated  from  improved
collections  of  accounts  receivable,  inventory  levels  were  reduced by $1.1
million due to improved inventory  management and the Company's accounts payable
and accrued expenses increased $2.0 million due to the timing of payments.

The Company's  investing  activities  utilized $7.2 million of net cash in 2000.
The Company  purchased  capital equipment and software of $24.0 million in 2000,
including $22.5 million for  telecommunications  systems  equipment and software
for expansion of the Company's IVSN and  transaction  processing  platform.  The
Company also  received  $11.8  million in net cash proceeds from the sale of the
Teleservices  business  and $5.0  million  in  proceeds  on sales of  short-term
investments,  net of purchases.  The Company  anticipates  that over the next 12
months it will continue to make significant  capital  investments for additional
equipment and enhanced  feature  capabilities to strengthen its Prepaid Wireless
Services  and  other  enhanced  services.  The  Company's  financing  activities
provided cash of $1.0 million in 2000,  including  proceeds of $2.2 million from
the exercise of options, net of $1.6 million in capital lease repayments.

The Company believes that its short-term  investments and the funds  anticipated
to be generated  from  operations  will be  sufficient  to finance the Company's
operations for at least the next 12 months.


Certain Factors That May Affect Future Results

Historically,  a significant portion of the Company's revenues in any particular
period  have  been   attributable  to  a  limited  number  of  customers.   This
concentration  of  customers  can cause the  Company's  revenues and earnings to
fluctuate  from  quarter  to  quarter,  based on the  volume of minutes of usage
generated from these customers.  A significant  decrease in business from any of
the Company's major  customers,  including a decrease in business due to factors
outside  the  Company  control,  would  have a  material  adverse  effect on the
Company's business, financial condition and results of operations.

Certain  Prepaid  Wireless  services  contracts have been extended  beyond their
expiration  dates or will expire in 2001 and beyond.  There can be no assurances
that the Company will be successful in renewing any of these  contracts.  If any
of these contracts are not renewed the Company's  business,  financial condition
and results of operations could be materially adversely affected. Also, when and
if each of the  contracts  is renewed,  some  contractual  rates per minute will
likely be lower than in  previous  years.  If  subscriber  levels and minutes of
usage begin to drop off,  revenue and gross margins could be adversely  affected
due to these lower rates. These contracts do not prevent the Company's customers
from offering wireless services like those offered by the Company in-house or by
the Company's competitors.  One of the Company's former customers,  Rogers AT&T,
did not renew its prepaid contract and brought its prepaid program in-house.  In
the first quarter of 2001, the Company expects approximately 800,000 subscribers
to migrate off of the BCGI  platform.  As a result,  there can be no  assurances
that the Prepaid  Wireless  Services  gross  margins will return to those levels
attained in 2000,  excluding  one-time charges.  There can be no assurances that
other customers will not follow suit and elect not to use the Company's services
to offer prepaid  wireless  services or that the Company will be able to replace
these subscribers with new subscribers.

There can be no assurance that the Company will successfully support and enhance
the IVSN and transaction processing platform effectively to avoid system outages
and any associated  loss in revenue.  Nor can there be any  assurances  that the
market for the Company's  prepaid service will continue to develop,  or that the
Company's IVSN and transaction  processing  platform will  successfully  support
current and future  growth.  Furthermore,  the Company has expended  significant
amounts of capital to support the  agreements  it has  secured  with its carrier
customers.  Because  prepaid  revenues  are  principally  generated  by  prepaid
subscriber  minutes  of use,  the  Company's  revenues  can be  impacted  by the
carrier's  ability to successfully  market and sell prepaid  services.  Revenues
from the  Company's  Prepaid  Wireless  Service  business  are  dependent on the
Company's  ability  to retain  subscribers  on the  network  and there can be no
assurance that the Company's churn rate  (percentage of total  subscribers  that
terminate  service  on the  network)  will not  increase.  Any  increase  in the
Company's churn rate could result in reductions in related  revenues.  There can
be no assurance that the Company will be able to replace these  subscribers with
new  subscribers or that the Company's  other  customers will not offer in-house
solutions that reduce the number of subscribers on the Company's network.

The Company is currently devoting  significant  resources toward the support and
enhancement  of its prepaid  wireless  services  and systems to maintain  system
reliability and expand the IVSN and transaction processing platform. The Company
has experienced  network outages that have resulted in reductions in revenue due
to  penalty  clauses  contained  in certain of the  Company's  carrier  customer
contracts.  If the Company's  future efforts to avoid outages are  unsuccessful,
such outages could result in additional  lost revenue for the Company and damage
the  Company's  reputation.  The  occurrence of one or more outages could have a
material  adverse  effect  on the  Company's  business,  operating  results  and
financial condition.

The Company  announced  in 2000 that it had sold the assets of its  Teleservices
business to Teletech Holdings,  Inc. for $15 million including the assumption of
certain  liabilities,  with potential additional cash payments to the Company of
up to $20 million through 2005, based upon achievement of predetermined  revenue
targets.  There can be no  assurances  that the Company  will be  successful  in
meeting the  predetermined  revenue targets or earning any of the potential cash
payments available.

The  Company  continues  to invest in  additional  technologies  including  BCGI
Wireless Wallet, Datascape,  Inc., Conference Calling, an Intelligent Networking
(IN) prepaid wireless  solution and other new applications to expand its Prepaid
Wireless  Services  business.  There can be no  assurances  that there will be a
market for these technologies,  that the Company will be successful in marketing
and selling these  technologies  in the  marketplace or that the Company will be
able to leverage its existing infrastructure to provide these services in a cost
effective  manner.  In addition,  the failure of any of these  technologies  may
result in asset  impairment  charges or other  write-offs  could  materially and
adversely affect the Company's overall business, operating results and financial
condition.

The Company has experienced  fluctuations in its quarterly operating results and
such  fluctuations  may continue and could  intensify.  The Company's  quarterly
operating  results  may vary  significantly  depending  on a number  of  factors
including,  variations in subscriber additions and minutes of use, the timing of
the  introduction  or acceptance  of new services  offered by the Company or its
competitors, changes in the mix of services provided by the Company, the loss of
customers,  seasonal trends, variations in the level of system sales, changes in
the  Company's  operating  expenses,  the ability to  identify,  hire and retain
qualified personnel and general economic conditions. Due to all of the foregoing
factors,  it is possible that in some future  quarter the  Company's  results of
operations  will be below prior  results or the  expectations  of public  market
analysts and investors.  In such event,  the price of the Company's Common Stock
would likely be materially and adversely affected.

In September 1999, a reorganization plan was implemented in an effort to realign
the Systems  business  and reduce  operating  expenses.  The Company has reduced
operating  expenses  and  stabilized  the  division,  however,  there  can be no
assurances that the Systems business' operating losses (excluding  inter-segment
revenues)  will not  increase or that it may incur asset  impairment  charges or
other  write-offs  that could  materially  and  adversely  affect the  Company's
overall business, operating results and financial condition.

The Company  historically  has  provided  its  services  almost  exclusively  to
wireless  carriers.   Although  the  wireless   telecommunications   market  has
experienced  significant  growth in recent years, there can be no assurance that
such growth will continue at similar rates, or at all, or that wireless carriers
will continue to use the Company's services. The Company expects that demand for
its roaming  services will continue to decline as  consolidation in the wireless
industry  reduces the number of  unregistered  roamers and  carriers  offer more
national  one-rate  roaming plans. In addition,  prepaid  wireless  services are
relatively new services in new markets.  If the growth in prepaid  services does
not  materialize  as expected or if the carriers in these markets do not use the
Company's services,  the Company's business,  financial condition and results of
operations would be materially and adversely affected.

The Company's future success depends, in large part, on the continued use of its
existing  services and systems,  the  acceptance of new services in the wireless
industry and the Company's  ability to develop new services and systems or adapt
existing services or systems to keep pace with changes in the wireless industry.
Furthermore,  a rapid  shift  away  from the use of  wireless  in favor of other
services  could affect  demand for the  Company's  service  offerings  and could
require the Company to develop  modified or  alternative  service  offerings  to
address the particular needs of the providers of such new services. There can be
no assurance  that the Company will be successful in developing or marketing its
existing or future service offerings or systems in a timely manner, or at all.

The Company has expanded its operations rapidly, creating significant demands on
the Company's management, administrative, operational, development and financial
personnel and other resources.  Additional  expansion by the Company may further
strain the Company's management,  financial and other resources. There can be no
assurance that the Company's  systems,  procedures,  controls and existing space
will be  adequate  to support  expansion  of the  Company's  operations.  If the
Company's management is unable to manage growth effectively,  the quality of the
Company's  services,  its  ability to retain  key  personnel  and its  business,
financial  condition and results of operations could be materially and adversely
affected.

The Company's  operations are supported by many hardware components and software
applications from third party vendors,  sometimes  licensed from single vendors,
which are sometimes  small  corporations.  There can be no assurances that these
hardware  components and software  applications will function in accordance with
specifications  agreed upon by the Company and its vendors, that these suppliers
will  continue to license  this  software  to the  Company  or, if any  supplier
terminates  its  agreement  with the  Company,  that the Company will be able to
develop or otherwise  procure  software from another  supplier on a timely basis
and at  commercially  acceptable  prices.  If the  hardware  and software do not
function as  specified  or if the Company can no longer  license  software  from
certain  vendors or  otherwise  obtain the  software,  the  Company's  business,
financial  condition and results of operations could be materially and adversely
affected.

The  Company  currently  prices and sells all of its  systems  to  international
customers in U.S. dollars. In addition, many Systems customers are multinational
corporations  that are publicly  traded in the U.S. All payments are received in
U.S.  dollars  that help to protect the Company  from the need to hedge  against
foreign  currency risk. While these provisions serve to protect the Company from
accounts  receivable  losses,  there can be no assurances  that systems sales to
foreign  countries  will not  result in losses  due to  devaluation  of  foreign
currencies or other  international  business conditions outside of the Company's
control.

The market for services to wireless  carriers is highly  competitive and subject
to rapid  change.  A number  of  companies  currently  offer  one or more of the
services  offered by the  Company.  In  addition,  many  wireless  carriers  are
providing,  or can provide  in-house,  the services that the Company offers.  In
addition,  the  Company  anticipates  continued  growth and  competition  in the
wireless  carrier  services  industry  and,  consequently,  the  entrance of new
competitors  in the future.  An  important  factor in the future  success of the
Company's prepaid wireless service will be the Company's ability to provide,  at
competitive  prices,  more  functionality  and  features  than  those  typically
available in other  competitive  offerings.  An increase in  competition  or the
inability of the Company to provide,  at competitive  prices, more functionality
and features could result in price reductions and loss of market share and could
have a material adverse effect on the Company's business, financial condition or
results of operations.
The  Company's  success  and  ability to compete is  dependent  in part upon its
proprietary  technology and its ability to protect such technology.  The Company
continues  to defend its  proprietary  technology  against  patent  infringement
litigation,  including  the Freedom  Wireless  lawsuit.  If patent  infringement
judgments are entered against the Company or  unauthorized  copying or misuse of
the Company's  technology were to occur to any substantial degree, the Company's
business,  financial  condition  and results of  operations  could be materially
adversely affected.

The Company's  operations are dependent on its ability to maintain its computer,
switching  and other  telecommunications  equipment  and  systems  in  effective
working  order and to protect its  systems  against  damage  from fire,  natural
disaster, power loss,  telecommunications failure or similar events. Any damage,
failure or delay that causes  interruptions  in the Company's  operations  could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

Proposals to intensify or reduce government regulations continue to be discussed
at both the federal and state  levels.  Such  changes may decrease the growth of
the  wireless  telephone  industry,   result  in  new  competitors  or  industry
consolidation,  limit  the  number  of  potential  customers  for the  Company's
services or impede the Company's  ability to offer  competitive  services to the
wireless  market or otherwise  have a material  adverse  effect on the Company's
business and results of operations.


Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company maintains an investment  portfolio in accordance with its Investment
Policy.  The  primary  objectives  of its  Investment  Policy  are  to  preserve
principal,  maintain  proper  liquidity  to meet  operating  needs and  maximize
yields.  Although  our  investments  are subject to credit risk,  the  Company's
Investment  Policy  specifies  credit quality  standards for our investments and
limits the amount of credit  exposure from any single  issue,  issuer or type of
investment.  While the Company's  investments  are also subject to interest rate
risk and will decrease in value if market interest rates  increase,  the Company
typically  holds  all of its  investments  until  maturity.  However,  since the
investments are typically held to maturity and are generally conservative in
nature and of relatively short duration,  interest rate risk is mitigated.  The
Company does not own derivative financial instruments in its investment
portfolio.  The interest  rates  on the  Company's  capital  lease  obligations
are fixed and therefore not subject to interest rate risk.

The  Company  currently  prices and sells all of its  systems  to  international
customers in U.S. dollars. In addition,  many of the Systems business' customers
are  multinational  corporations,  which are  publicly  traded  in the U.S.  All
payments are received in U.S.  dollars,  which helps to protect the Company from
the need to hedge against foreign currency risk. While these provisions serve to
protect the Company from accounts receivable losses,  there can be no assurances
that  systems  sales to  foreign  countries  will not  result in  losses  due to
devaluation of foreign  currencies or other  international  business  conditions
outside of the Company's control.

Accordingly,  we do not believe that there is any material  market risk exposure
with respect to derivative or other  financial  instruments  which would require
disclosure under this item.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following  Consolidated  Financial  Statements  and  supplementary  data are
included as part of this Annual Report on Form 10-K:


Consolidated Balance Sheets at December 31, 2000 and 1999.....................21
Consolidated  Statements  of Operations  for the
years ended  December 31, 2000, 1999  and  1998...............................22
Consolidated  Statements  of  Shareholders' Equity for the
years ended December 31, 2000, 1999 and 1998..................................23
Consolidated Statements  of Cash  Flows for the
 years  ended  December  31,  2000,  1999 and 1998............................24
Notes to Consolidated Financial Statements....................................25
Report of  Ernst & Young LLP, Independent Auditors.. .........................34


<PAGE>


                                              Boston Communications Group, Inc.
                                                  Consolidated Balance Sheets
                             (In thousands, except share and per share amounts)
<TABLE>
                                                                                                December 31,
                                                                                       2000                  1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                  <C>

ASSETS
Current assets:
        Cash and cash equivalents                                                         $50,499             $21,145
          Short-term investments                                                            4,111               9,091
          Accounts receivable, net of allowance for billing adjustments and
               doubtful accounts of $2,032 in 2000 and $2,025 in 1999                      13,761              18,546
          Inventory                                                                           895               2,007
          Deferred income taxes                                                                --               1,169
          Prepaid expenses and other assets                                                 1,163                 820
          Assets held for sale                                                                 --               3,988
------------------------------------------------------------------------------- ------------------ -------------------
           Total current assets                                                            70,429              56,766
Property and equipment:
        Telecommunications systems & software                                              61,082              55,147
        Furniture and fixtures                                                                754               2,135
        Leasehold improvements                                                              1,664               2,571
        Systems in development                                                              9,294               5,560
------------------------------------------------------------------------------- ------------------ -------------------
                                                                                           72,794              65,413
        Less allowance for depreciation and amortization                                   27,757              26,048
------------------------------------------------------------------------------- ------------------ -------------------
                                                                                           45,037              39,365
Goodwill, net                                                                               2,247               2,854
Other assets                                                                                  931                 346
------------------------------------------------------------------------------- ------------------ -------------------
           Total assets                                                                  $118,644             $99,331
------------------------------------------------------------------------------- ------------------ -------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
       Accounts payable                                                                    $1,481              $  941
       Accrued expenses                                                                    16,166              13,378
       Deferred revenue                                                                     2,851               1,634
       Income taxes payable                                                                 1,484                 505
       Current maturities of capital lease obligations                                      1,186               1,676
------------------------------------------------------------------------------- ------------------ -------------------
            Total current liabilities                                                      23,168              18,134
Commitments and contingencies
Deferred income taxes                                                                          39                  --
Capital lease obligations, net of current maturities                                          740               1,828

Shareholders' equity:
         Preferred Stock,  $.01 par value, 2,000,000 shares authorized,
             none issued and outstanding                                                       --                  --
         Common Stock, voting, par value $.01 per share, 35,000,000 shares
             authorized;  17,078,988 shares in 2000 and 16,699,874 shares
                    in 1999 issued                                                            171                 167
         Additional paid-in capital                                                        98,285              93,177
         Treasury Stock (101,420 shares), at cost                                           (673)               (673)
         Accumulated deficit                                                              (3,086)            (13,302)
------------------------------------------------------------------------------- ------------------ -------------------
            Total shareholders' equity                                                     94,697              79,369
------------------------------------------------------------------------------- ------------------ -------------------
            Total liabilities and shareholders' equity                                   $118,644             $99,331
------------------------------------------------------------------------------- ------------------ -------------------

See accompanying notes.

</TABLE>
<PAGE>

<TABLE>
                                                  Boston Communications Group, Inc.
                                               Consolidated Statements of Operations
                                         (In thousands, except share and per share amounts)


                                                                                    Year Ended December 31,
                                                              --------------------------------------------------------
                                                                            2000              1999              1998
------------------------------------------------------------- ------------------- ----------------- ------------------
<S>                                                             <C>                      <C>                <C>
REVENUES:
     Prepaid wireless services                                           $53,221           $36,920            $18,624
     Roaming services                                                     17,650            22,249             28,235
     System sales                                                          4,699             5,012             13,622
------------------------------------------------------------- ------------------- ----------------- ------------------
                                                                          75,570            64,181             60,481

 EXPENSES:
     Cost of services revenues                                            28,453            30,514             30,708
     Cost of services revenues - one-time charge                           2,600                --                 --
     Cost of system revenues                                               2,190             3,434              8,448
     Cost of system revenues - one-time charge                                --             1,824                 --
     Engineering,  research and development                                8,018             5,986              5,439
     Sales and marketing                                                   5,162             6,075              5,182
     General and administrative                                            6,752             6,244              5,518
     Depreciation and amortization                                        17,795            12,785              9,241
     Impairment of long-lived assets                                       1,094                --                698
------------------------------------------------------------- ------------------- ----------------- ------------------
                                                                          72,064            66,862             65,234
------------------------------------------------------------- ------------------- ----------------- ------------------
Operating income (loss)                                                    3,506           (2,681)            (4,753)
Interest income, net                                                       2,049               941              1,349
------------------------------------------------------------- ------------------- ----------------- ------------------
Income (loss) before income taxes                                          5,555           (1,740)            (3,404)
Provision (benefit) for income taxes                                       1,845             (145)              (613)
------------------------------------------------------------- ------------------- -------- --------- ------------------
  Income (loss) from continuing operations                                 3,710           (1,595)            (2,791)
  Discontinued operations:
       Income from operations (net of income taxes of $735,
          $540 and $613, respectively)                                     1,491              809                991
      Gain on disposal (net of income taxes of $2,452 in 2000)             5,015                -                  -
------------------------------------------------------------- ------------------- ----------------- ------------------
Income from discontinued operations                                        6,506              809                991
------------------------------------------------------------- ------------------- ----------------- ------------------
Net income (loss)                                                        $10,216            $(786)           $(1,800)
------------------------------------------------------------- ------------------- ----------------- ------------------
Basic net income (loss) per common share:
      Continuing operations                                                $0.22           $(0.10)            $(0.17)
      Net income (loss)                                                    $0.61           $(0.05)            $(0.11)
      Weighted average common shares outstanding                          16,769            16,529             16,274

Diluted net income (loss) per share:
      Continuing operations                                                $0.21           $(0.10)            $(0.17)
      Net income (loss)                                                    $0.58           $(0.05)            $(0.11)
      Weighted average common shares outstanding                          17,575            16,529             16,274
------------------------------------------------------------- ------------------- ----------------- ------------------

See accompanying notes.

</TABLE>
<PAGE>


                                             Boston Communications Group, Inc.
                              Consolidated Statements of Shareholders' Equity
                                          (In thousands, except share amounts)


<TABLE>





                                            Treasury Stock          Common Stock       Additional                  Total
                                                                                        Paid In   Accumulated   Shareholders'
                                                                                        Capital     Deficit        Equity
                                            Shares     Dollars      Shares     Dollars
------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>         <C>          <C>      <C>       <C>               <C>
   Balance at
    December 31, 1997                        46,420     $(372)     16,273,947    $163    $91,029    $(10,716)         $80,104

    Exercise of stock options                 --            --        143,488       1        572           --             573

    Issuance  of common stock
    undere employee stock purchase plan         --         --         18,593      --          82           --              82

    Treasury stock purchase                  55,000      (301)             --      --         --           --            (301)

    Net loss                                     --         --             --      --         --      (1,800)          (1,800)
---------------------------------------- ----------- ---------- ------------- -------- ---------- ------------ ---------------
Balance at
    December 31,1998                        101,420      (673)     16,436,028     164     91,683      (12,516)         78,658

    Exercise of stock options                    --         --        208,980       2      1,209           --           1,211

    Issuance  of common stock                    --         --         54,866       1        285           --             286
    under employee stock purchase plan

    Net loss                                     --         --             --      --         --        (786)            (786)
---------------------------------------- ----------- ---------- ------------- -------- ---------- ------------ ---------------
Balance at
    December 31,1999                        101,420      (673)     16,699,874     167     93,177      (13,302)         79,369

   Compensation expense related
   to acceleration of vesting of stock
   options in connection with sale of
   Teleservices business                         --         --            --       --        800           --             800

    Exercise of stock options                    --         --       336,983        3      3,978           --           3,981
    and related income tax
    benefit

    Issuance of common stock                     --         --        42,131        1        330           --             331
    under employee stock
    purchase plan

    Net income                                   --         --            --       --         --       10,216          10,216
---------------------------------------- ----------- ---------- ------------- -------- ---------- ------------ ---------------
Balance at                                  101,420     $(673)    17,078,988     $171    $98,285     $(3,086)         $94,697
     December 31, 2000
---------------------------------------- ----------- ---------- ------------- -------- ---------- ------------ ---------------

See accompanying notes
</TABLE>

<PAGE>

<TABLE>
                                                 Boston Communications Group, Inc.
                                               Consolidated Statements of Cash Flows
                                                           (In thousands)

                                                                            Year Ended December 31,

                                                           -----------------------------------------------------------

                                                                        2000            1999                  1998
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>                 <C>
OPERATING ACTIVITIES
 Net income (loss) from continuing                                       $3,710           $(1,595)           $(2,791)
  operations
 Adjustments to reconcile  net income  (loss) to net cash
   provided by operating activities:
        Depreciation and amortization                                    17,795             12,785              9,241
        Deferred income taxes                                             1,208                395                 --
        Income tax benefit from exercise of stock                         1,745                 --                 --
        options
        Impairment of long-lived assets                                   1,094                 --                698
        One-time special charges                                          2,600              1,824                 --
        Changes in operating assets and liabilities,
         excluding effects of business dispositions:
           Accounts receivable                                            4,785                114            (5,987)
           Inventory                                                      1,112                 41            (1,975)
           Prepaid expenses and other assets                              (928)              (118)               (14)
           Accounts payable and accrued expenses                          1,945              4,598                918
           Income taxes payable                                             979                  9                 30
----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of
continuing operations                                                    36,045             18,053                120
----------------------------------------------------------------------------------------------------------------------
Income from discontinued operations                                       6,506                809                991
Net change in operating assets and liabilities of
    discontinued operations                                             (6,998)                293                382
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities
    from discontinued operations                                          (492)              1,102              1,373
----------------------------------------------------------------------------------------------------------------------
Net cash provided by operations                                          35,553             19,155              1,493

INVESTING ACTIVITIES
Purchase of short-term investments                                      (8,859)           (18,777)           (14,095)
Sale of short-term investments                                           13,839             16,772             17,112
Purchase of property and equipment                                     (23,954)           (14,290)            (8,815)
Net proceeds from sale of line of business                               11,786                 --                 --
----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                   (7,188)           (16,295)            (5,798)

FINANCING
ACTIVITIES
Proceeds from exercise of stock options                                   2,236              1,211                573
Proceeds from issuance of common stock                                      331                286                 82
Purchase of treasury stock                                                   --                --               (301)
Repayment of capital lease obligations                                   (1,578)            (1,735)            (1,127)
----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                         989               (238)              (773)
----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                         29,354              2,622             (5,078)
Cash and cash equivalents at beginning of year                           21,145             18,523             23,601
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                $50,499            $21,145           $ 18,523
----------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of non-cash transactions:
----------------------------------------------------------------------------------------------------------------------
Capital lease obligations                                                    --             $3,641                 --
----------------------------------------------------------------------------------------------------------------------

See accompanying notes.

</TABLE>
<PAGE>

                            Boston Communications Group, Inc.
                           Notes to Consolidated Financial Statements



1. BASIS OF PRESENTATION

The Company

Boston Communications Group, Inc. (the "Company") provides universal,  real-time
transaction  processing,  billing and payment  services and other enhanced voice
and data services to wireless  carriers  through its Intelligent  Voice Services
Network  (IVSN),  one of the largest and most advanced  automated voice resource
networks in North America,  and its  proprietary,  highly  scalable  transaction
processing  platform.  The Company also  provides  roaming  services to wireless
carriers and assembles and sells prepaid and voice systems equipment.

2. SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company  earns prepaid  wireless  services  revenues by  processing  prepaid
wireless  minutes and earns roaming  services  revenues by  processing  wireless
calls for  unregistered  wireless  subscribers  who have roamed outside of their
service area.  These revenues are recognized when the service is provided and is
recorded net of estimated billing  adjustments.  The Company  recognizes revenue
from the sale of  systems  at the time the  systems  are  shipped.  Installation
revenue is deferred until the entire installation is complete.

In the fourth quarter of 2000,  the Company  adopted the Securities and Exchange
Commission's (SEC) Staff Accounting  Bulletin (SAB) 101, Revenue  Recognition in
Financial  Statements and its adoption did not have a significant  impact on the
Company's financial statements.

Principles of Consolidation

The  financial  statements  include 100% of the accounts and  operations  of the
Company and all of its majority-owned  subsidiaries.  All intercompany  accounts
and transactions have been eliminated.

Cash and Cash Equivalents

The Company  considers  all highly liquid  investments  with a maturity of three
months or less at the date of purchase to be cash equivalents.

Short-Term Investments

The Company  accounts  for its  marketable  securities  under the  Statement  of
Financial  Accounting  Standards No. 115, "Accounting for Certain Instruments in
Debt and Equity Securities." The Company has classified all of its securities as
available-for-sale, and are thus reported at fair market value.

Investments   that  mature  between  three  and  twelve  months  are  considered
short-term  investments.  The Company's  short-term  investments are invested in
corporate notes maturing in less than twelve months.

Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities,  the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Legal Costs

The Company accrues costs of settlements, damages and, under certain conditions,
costs of defense  when such costs are probable and  estimable:  otherwise,  such
costs are expensed as incurred.

<PAGE>


Concentrations of Credit Risk

The Company's prepaid wireless services allows wireless carriers  throughout the
United States to access the Company's ISVN and transaction  processing platform,
enabling such carriers to offer prepaid wireless  calling to their  subscribers.
Accounts  are not  activated  until  payment is  received  by the  carrier.  The
Company's  roaming  customers  are  individuals  who place  wireless  calls from
service areas, which are not covered by traditional  roaming  agreements.  These
calls are  forwarded by wireless  carriers to the Company for  processing.  Each
transaction is small in size and the Company minimizes credit risk by validating
appropriate billing information. The Company sells its voice and prepaid systems
in North and South America.  The Company  generally does not require  collateral
from its customers.

The Company has roaming and prepaid wireless service  agreements with, and sells
its  systems to numerous  carriers.  The  Company's  accounts  receivable  as of
December 31, 2000 includes three customers whose balances are 26%, 13% and 6% of
total accounts  receivable.  During the years ended December 31, 2000, 1999, and
1998,  the  Company's  top 10  customers  accounted  for 93%, 86% and 82% of the
Company's total revenues,  respectively. The following table summarizes sales in
excess of 10% of total  revenues  only,  as a percentage of total  revenues,  to
major customers:


                                                          December 31,
                                                  2000        1999       1998
--------------------------------------------------------------------------------
Cingular Wireless (P,R,S)                            30%        25%      30%
Verizon Wireless (P,R)                               28         30       27
AT&T (P,R)                                           13         13        9
------------------------------------------------- --------- ---------- ---------

Revenue  from these customers was generated from the following  businesses:
        P - Prepaid wireless services
        R - Roaming services
        S - Systems

Inventory

Inventory,  which consists of computer  hardware and electronic  components,  is
recorded at the lower of cost (first-in,  first-out method) or market. Inventory
is categorized as follows (in thousands):

                                              December 31,
                                        --------------------------
                                         2000                1999
  ----------------------------------------------------------------
  Raw materials                         $490               $1,356
  Work in process                        405                  651
  ------------------------------------- ------------ -------------
                                       $895                $2,007
  ------------------------------------- ------------ -------------

Property and Equipment

Property  and  equipment  are  recorded  at  cost  and  are   depreciated  on  a
straight-line  basis over the estimated useful lives of the assets,  which range
from 3 to 20 years.  Systems  in  development  represent  the cost of  purchased
hardware  and  software to be used in  switching  equipment  not yet placed into
service and will be depreciated between 3 and 5 years.

Impairment of Long Lived Assets

In accordance  with  Financial  Accounting  Standards  Board  Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be  Disposed  Of," the  Company  reviews its  long-lived  assets for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If it is determined that the carrying amount of
an asset cannot be fully recovered, an impairment loss is recognized.

Goodwill

Goodwill  represents  the excess of cost of  acquired  businesses  over the fair
market  value of all net  assets  acquired.  Goodwill  is being  amortized  on a
straight-line basis over an eight-year period.  Accumulated amortization totaled
approximately  $2.6  million and $2.0  million as of December 31, 2000 and 1999,
respectively.

Stock-Based Compensation

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting  for  Stock  Issued to  Employees"  (APB 25) in  accounting  for its
stock-based   compensation   plans,  rather  than  the  alternative  fair  value
accounting  method  provided  for under  Financial  Accounting  Standards  Board
Statement  (SFAS) No. 123,  "Accounting  for Stock-Based  Compensation,"  as the
latter  alternative  requires the use of option  valuation  models that were not
developed for use in valuing  employee  stock  options.  Under APB 25, since the
exercise  price of options  granted under these plans equals the market price of
the underlying stock on the date of grant, no compensation expense is required.

In March 2000,  the FASB issued  Interpretation  No. 44,  Accounting for Certain
Transactions   Involving   Stock   Compensation   (the   Interpretation).   This
Interpretation  clarifies how companies  should apply the Accounting  Principles
Board's  Opinion  No.  25,  Accounting  for  Stock  Issued  to  Employees.   The
Interpretation  is  applied  prospectively  to  new  awards,   modifications  to
outstanding  awards,  and changes in  employee  status on or after July 1, 2000,
except as follows: the definition of an employee applies to awards granted after
December 15, 1998; the  Interpretation  applies to modifications that reduce the
exercise  price of an award after  December  15,  1998;  and the  Interpretation
applies  to  modifications  that add a reload  feature  to an award  made  after
January 12, 2000.  There wee no awards  granted by the Company which resulted in
an adjustment as a result of this Interpretation in 2000.

Accounting Pronouncement

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
established  standards  for  the  recognition,  measurement,  and  reporting  of
derivatives and hedging activities. The Company anticipates that the adoption of
this  accounting  standard  in 2001  will  not  have a  material  impact  on the
Company's consolidated financial statements.

Basic and Diluted Net Income (Loss) Per Share

Basic and  diluted  net income  (loss) per share  represents  net income  (loss)
divided by weighted average shares outstanding.

Reclassifications

Certain  amounts  in the  accompanying  1999  and  1998  consolidated  financial
statements have been reclassified to permit comparison with the current year.


3.  SPECIAL CHARGES

In the fourth quarter of 2000, the Company  recorded an impairment  loss of $1.1
million  for the  write-down  of  equipment  that could no longer be used in its
Prepaid  Wireless  Services  business to its fair market value,  as these assets
were not expected to generate any  additional  cash flows.  In addition,  in the
fourth quarter of 2000, the Company  recorded a one-time  charge of $2.6 million
to accrue for legal expenses  estimated by the Company's  outside  counsel to be
incurred  in the  defense  of a patent  infringement  suit  brought  by  Freedom
Wireless.  The Company  believes  that the claims made by Freedom  Wireless  are
without merit and will  vigorously  defend the action.  As of December 31, 2000,
there was $2.5 million remaining in the accrual.

In September  1999, the Company  recorded a one-time charge of $1.8 million as a
result of the  reorganization  of the Systems business.  The charge  principally
related to expenses associated with inventory  write-downs to bring the level of
inventory in line with the future sales strategy, as well as severance costs. In
1998, the Company  recorded an impairment loss of $698,000 for the write-down of
equipment that could no longer be used in its Prepaid Wireless Services business
to its fair market  value,  as these  assets were not  expected to generate  any
additional cash flows.


4.        DISCONTINUED OPERATIONS

On  November  7,  2000,  the  Company  sold the net  assets of its  Teleservices
business for  approximately  $15 million  including  the  assumption  of certain
liabilities, with potential additional cash payments to the Company of up to $20
million  through  2005,  based upon the  achievement  of  predetermined  revenue
targets.  There can be no  assurances  that the Company  will be  successful  in
meeting the  predetermined  revenue targets or earning any of the potential cash
payments  available.  Pursuant to APB 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business," the  Consolidated
Financial  Statements  have  been  reclassified  to  reflect  the  sale  of  the
Teleservices  business.  Accordingly,  the operating results of the Teleservices
business have been  segregated as  discontinued  operations in the  Consolidated
Statement of Operations, Consolidated Balance Sheets and Consolidated Statements
of Cash Flows. Operating results from discontinued operations are as follows:
<TABLE>
                                                                         For the years ended December 31,
---------------------------------------------------------------------- --------------------------------------
                                                                           2000         1999         1998
---------------------------------------------------------------------- ------------- ------------ -----------
<S>                                                                     <C>             <C>          <C>
Net revenues                                                                $24,432      $40,870     $26,001
---------------------------------------------------------------------- ------------- ------------ -----------
Operating income (net of income tax of $735, $540 and
$613, respectively)                                                          $1,491         $809        $991
Gain on disposal (net of income tax  of $2,452 in 2000)                       5,015            -           -
Income from discontinued operations                                         $ 6,506         $809        $991
---------------------------------------------------------------------- ------------- ------------ -----------
Basic net income (loss) from discontinued operations per common share          0.06         0.05        0.39
-------------------------------------------------------------------------------------------------------------
Diluted net income (loss) from discontinued operations per common share        0.06         0.05        0.37
-------------------------------------------------------------------------------------------------------------

</TABLE>
5.  EARNINGS PER SHARE

    The  following  table sets forth the  computation  of basic and  diluted net
    income  per share (in  thousands,  except per share  amounts)  for the years
    ended December 31:
<TABLE>
                                                                            2000         1999         1998
                                                                            ----         ----         ----
------------------------------------------------------------------------ ------------ ------------ ------------
<S>                                                                       <C>           <C>           <C>
     Numerator for basic and diluted earnings per share:
       Income (loss) from continuing operations                               $3,710     $(1,595)     $(2,791)
------------------------------------------------------------------------ ------------ ------------ ------------
     Income from discontinued operations                                       6,506          809          991
------------------------------------------------------------------------ ------------ ------------ ------------
     Net income (loss)                                                       $10,216       $(786)     $(1,800)
------------------------------------------------------------------------ ------------ ------------ ------------
Denominator:
     Denominator for basic earnings per share                                 16,769       16,529       16,274
     Effect of dilutive employee stock options                                   806            -            -
------------------------------------------------------------------------  ------------ ------------ ------------
     Denominator for diluted earnings per share                               17,575       16,529       16,274
------------------------------------------------------------------------  ------------ ------------ ------------
Basic net income (loss) per common share:
     Income (loss) from continuing operations                                  $0.22      $(0.10)      $(0.17)
     Income from discontinued operations                                       $0.39        $0.05        $0.06
------------------------------------------------------------------------ ------------ ------------ ------------
     Net income (loss)                                                         $0.61      $(0.05)      $(0.11)
------------------------------------------------------------------------ ------------ ------------ ------------
Diluted net income (loss) per common share:
     Income (loss) from continuing operations                                  $0.21      $(0.10)      $(0.17)
     Income from discontinued operations                                       $0.37        $0.05        $0.06
------------------------------------------------------------------------ ------------ ------------ ------------
     Net income (loss)                                                         $0.58      $(0.05)      $(0.11)
------------------------------------------------------------------------ ------------ ------------ ------------
</TABLE>

6.  ACCRUED EXPENSES

Accrued expenses consist of the following:

                                               December 31,
                                         -------------------------
  (In thousands)
                                              2000            1999
------------------------------------------------------------------
Billing adjustments                         $1,112         $1,171
Cellular airtime                             1,752          1,898
Payroll                                      2,892          2,333
Telecommunication Costs                      1,104          1,122
Call center management fees                     --          1,830
Equipment costs                              2,201            136
Legal fees                                   2,486             20
Other                                        4,619          4,868
---------------------------------------- ------------ ------------
                                           $16,166        $13,378
---------------------------------------- ------------ ------------


7. SEGMENT REPORTING

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information"  established  standards for reporting  information  about operating
segments in annual financial  statements and requires selected information about
operating segments in interim financial reports issued to stockholders.  It also
established  standards for related disclosures about products and services,  and
geographic areas.  Operating segments are defined as components of an enterprise
about which  separate  financial  information  is  available  that is  evaluated
regularly by the chief  operating  decision  maker, or decision making group, in
deciding how to allocate resources and in assessing  performance.  The Company's
chief operating decision-maker is the President and Chief Executive Officer. The
operating  segments  are  managed  separately  because  each  operating  segment
represents a strategic  business unit that offers different  products and serves
different niches in the wireless industry.

The  Company's   reportable  operating  segments  consist  of  Prepaid  Wireless
Services,  Roaming Services and Systems. The Company's Prepaid Wireless Services
offerings  allow wireless  carriers to access the Company's ISVN and transaction
processing platform, enabling such carriers to offer prepaid wireless calling to
their  subscribers.  The Roaming Services segment provides wireless carriers the
ability  to  generate  revenues  from  subscribers  who  are not  covered  under
traditional  roaming  agreements  by arranging  payment for roaming  calls.  The
Systems segment assembles and markets voice processing platforms to wireless and
wireline  carriers  throughout  North and South America with  enhanced  features
including prepaid wireless,  voice messaging and toll limitation  services.  The
Systems  segment  also sells  prepaid  systems  to  international  carriers  and
assembles the voice nodes used to support the Company's  ISVN. The other segment
assets include cash equivalents and short-term  investments and other assets not
allocated to the reportable operating segments.

The  accounting  policies  of the  operating  segments  are the  same  as  those
described in the summary of  significant  accounting  policies,  except that the
financial results for the Company's  operating segments have been prepared using
a management approach. This is consistent with the basis and manner in which the
Company's management  internally analyzes financial information for the purposes
of assisting  in making  internal  operating  decisions.  The Company  evaluates
performance based on stand-alone  operating  segment gross margin.  Revenues are
generated from external customers,  except for inter-segment  revenues generated
from V-nodes  assembled for Prepaid Wireless  Services by the Systems  business,
which are  eliminated in  consolidation.  Revenues are  attributed to geographic
areas based on the location of the  customers to whom the services were provided
or the location  where the systems were shipped.  Capital  expenditures  include
equipment  purchased  directly from vendors or acquired through a capital lease.
The summary of operating  segment  information  is as follows at December 31 (in
thousands):
<TABLE>
                                     Prepaid
                                 Wireless   Roaming                         Elimination
                                 Services   Services    Systems    Other                    Total
-------------------------------- ---------- ---------- ---------- --------- ------------- ----------
<S>                               <C>        <C>        <C>         <C>        <C>          <C>
2000
Revenues                           $53,221    $17,650    $18,449     $  --     $(13,750)    $75,570
Depreciation and amortization       14,934        597      2,264        --                   17,795
Gross margin                        36,561      3,257      7,856        --       (5,347)     42,327
Assets                              42,259      2,858      5,980    67,547                  118,644
Capital expenditures                22,573         51        996       334                   23,954
-------------------------------- ---------- ---------- ---------- --------- ------------- ----------
1999
-------------------------------- ---------- ---------- ---------- --------- ------------- ----------
Revenues                           $36,920    $22,249    $10,327     $  --      $(5,315)    $64,181
Depreciation and amortization       10,247        945      1,593        --                   12,785
Gross margin                        24,638      4,017      1,821        --       (2,067)     28,409
Assets                              37,620      4,083      8,566    49,062                   99,331
Capital expenditures                14,231        233      1,624     1,843                   17,931
-------------------------------- ---------- ---------- ---------- --------- ------------- ----------
1998
-------------------------------- ---------- ---------- ---------- --------- ------------- ----------
Revenues                           $18,624    $28,235    $17,038     $  --      $(3,416)    $60,481
Depreciation and amortization        6,782        808      1,182       469                    9,241
Gross margin                         9,787      6,364      6,502        --       (1,328)     21,325
Assets                              31,501      5,518     12,855    41,886                   91,760
Capital expenditures                 6,603        199      1,184       829                    8,815
-------------------------------- ---------- ---------- ---------- --------- ------------- ----------
</TABLE>
Information concerning principal geographic areas is as follows (in thousands):

                                    Year ended December 31,
                                    2000          1999          1998
--------------------------- ------------- ------------- -------------
Net revenues:
     United States               $67,681       $56,405       $53,535
     Other                         7,889         7,776         6,946
--------------------------- ------------- ------------- -------------
  Total                          $75,570       $64,181       $60,481
--------------------------- ------------- ------------- -------------


8.  INCOME TAXES

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

                                                                    December 31,
                                                         -----------------------
(In thousands)                                                2000          1999
--------------------------------------------------------------------------------
Deferred tax assets:
    Net operating loss carryforwards                         $418        $3,503
    Allowance for doubtful accounts and billing
    adjustments                                              1,038          719
    Inventory valuation adjustments                            331          815
    Minimum tax credit carryforwards                           444          101
    Research tax credits                                       421           --
    Accrued expenses and other                               1,435          692
--------------------------------------------------------------------------------
                                                             4,087         5,830
    Valuation allowance                                         --       (1,063)
--------------------------------------------------------------------------------
Total deferred tax assets                                    4,087         4,767
Deferred tax liabilitities:
    Tax over book depreciation and amortization            (4,126)       (3,598)
    expense
-------------------------------------------------------- ---------- ------------
Total deferred tax liabilities                             (4,126)       (3,598)
-------------------------------------------------------- ---------- ------------
Net deferred tax assets (liabilities)                      $  (39)        $1,169
-------------------------------------------------------- ---------- ------------

The provision (benefit) for income taxes from continuing  operations consists of
the following (in thousands):

                                                  Year Ended December 31,
                                                -------------------------------
(In thousands)
                                                2000       1999          1998
------------------------------------------------------------------------------
Current:
  Federal                                          $ 541     $(459)    $(521)
  State                                               96       (81)      (92)
------------------------------------------------------------------------------
                                                     637      (540)     (613)
Deferred:
  Federal                                          1,027        336        --
  State                                              181         59        --
------------------------------------------------------------------------------
                                                   1,208        395        --
------------------------------------------------------------------------------
Income tax provision (benefit)                    $1,845    $ (145)    $(613)
------------------------------------------------------------------------------

At  December  31,  2000,  the  Company  had  approximately  $5.2  million of net
operating loss  carryforwards for state income tax return purposes available for
use in future years,  which expire  beginning in 2003,  and federal  minimum tax
credits of $444,000,  which may be carried  forward  indefinitely.  In 2000, the
Company reversed the $1.1 million  valuation  allowance  ($547,000 in continuing
operations and $516,000 included in discontinued  operations) due to utilization
of the net operating losses in the current year.

A reconciliation of the income tax provision  (benefit) at the statutory rate to
the income tax provision from continuing operations as reported is as follows:

<TABLE>                                             Year Ended December 31,
                                                   --------------------------------
                                                     2000       1999       1998
-------------------------------------------------- ---------- ---------- ----------
<S>                                                    <C>       <C>       <C>
Federal provision (benefit) at statutory rate        $1,889    $(592)   $(1,157)
State income provision (benefit) net of federal taxes   233      (71)      (139)
Permanent differences                                   335       334        288
Research tax credits                                   (114)       --       --
Other                                                    49      (26)       --
Change in valuation allowance                          (547)      210        395
-------------------------------------------------- ---------- ---------- ----------
                                                      $1,845   $(145)     $(613)
-------------------------------------------------- ---------- ---------- ----------
</TABLE>
Income taxes paid were $384,000 in 2000, $41,000 in 1999 and $61,000 in 1998.


9. CAPITAL STOCK

Preferred Stock

The Board of Directors are authorized, subject to certain limitations prescribed
by law, without further shareholder  approval,  to issue from time to time up to
an aggregate of 2,000,000 shares of Preferred Stock in one or more series and to
fix or alter  the  designations,  preferences,  rights  and any  qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights,  dividend rates, conversion rights, voting rights, terms of
redemption  (including  sinking fund  provisions),  redemption  price or prices,
liquidation  preferences  and the  number of shares  constituting  any series or
designations of such series. The issuance of Preferred Stock may have the effect
of  delaying,  deferring  or  preventing  a change of  control  of the  Company.
Currently,  there are no shares of Preferred Stock issued and  outstanding.  The
Company has no present plans to issue any shares of Preferred Stock.

Stock Option Plans

The Company's  1996, 1998 and 2000 Stock Option Plans (the "Plans") were adopted
by the Board of  Directors  and approved by the  stockholders  of the Company in
1996,  1998 and 2000,  respectively.  The Plans  provide  for the grant of stock
options to employees,  officers,  directors and  consultants and advisors to the
Company and its  subsidiaries.  Under the Plans,  the Company may grant  options
that are intended to qualify as incentive  stock  options  within the meaning of
Section  422 of the  Internal  Revenue  Code of 1986,  as amended  (the  "Code")
("Incentive  Stock  Options"),  or options not  intended to qualify as incentive
stock options  ("Non-Statutory  Options").  Incentive  stock options may only be
granted to employees of the Company.  A total of 1,264,792,  600,000 and 500,000
shares of Common Stock may be issued upon the exercise of options  granted under
the 1996, 1998 and 2000 Stock Option Plans, respectively.  The maximum number of
shares with respect to which  options may be granted to any  employee  under the
1996,  1998 and 2000 Stock  Option  Plans shall not exceed  200,000,  60,000 and
100,000  shares of Common Stock,  respectively,  during any calendar  year.  All
options  granted have 10-year  terms and generally  vest and become  exercisable
over one to five years.

In 1998, the Company granted 400,000 Non-Statutory Options to purchase shares of
common stock at an exercise price of $7.06. In 1999, the Company granted 25,000,
and 10,000  Non-Statutory  Options to purchase  shares of common stock at $13.13
and $8.44 respectively.  In 2000, the Company granted 150,000, 2,450 and 15,625,
Non-Statutory  Options to purchase  shares of common  stock at $7.31,  $6.00 and
$6.88,  respectively.  The exercise prices of all options were equal to the fair
market value as  determined by the closing price of the stock as reported on the
date of grant.

Pro forma information regarding net income and earnings per share is required by
Statement  123, and has been  determined as if the Company had accounted for its
options under the fair value method of that statement.  The fair value for these
options was estimated at the date of grant using a Black-Scholes  option pricing
model with the following  weighted average  assumptions for 2000, 1999 and 1998:
risk-free  interest  rates of 6.3%,  5.5%, and 5.4%,  respectively,  no dividend
yield,  the  volatility  factor of the expected  market  price of the  Company's
common stock of 0.9,  0.5 and 0.5 and a  weighted-average  expected  life of the
option of 3 to 5 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions,  including expected stock price volatility.  Because the
Company's  options have  characteristics  significantly  different from those of
traded  options,  and because  changes in the subjective  input  assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma information follows (in thousands, except for per share information):
<TABLE>
                                                                    December 31,
                                               -------------------------------------------
                                                   2000          1999           1998
------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>           <C>
Pro forma net income (loss)                          $6,740       $(2,569)      $ (4,034)
Pro forma basic net income (loss) per share           $0.40        $(0.16)        $(0.25)
Pro forma diluted net income (loss) per share         $0.38       $ (0.16)       $ (0.25)
------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
Stock option information is as follows:

                                           2000                     1999                     1998
--------------------------------- ----------- ----------- ------------- ----------- ------------ -----------
                                              Weighted                  Weighted                 Weighted
                                              Average                   Average                  Average
                                              Exercise                  Exercise                 Exercise
                                     Options  Price       Options       Price      Options       Price
--------------------------------- ----------- ----------- ------------- ----------- ------------ -----------
<S>                                <C>             <C>       <C>            <C>       <C>            <C>
Outstanding - beginning of year    2,104,546       $7.27     1,935,976      $ 6.90    1,417,654      $ 6.74
Granted                              900,275        9.86       684,000        7.98      966,500        7.33
Exercised                           (336,983)       6.69      (208,580)       5.80     (143,888)       4.00
Canceled                            (226,275)       7.18      (306,850)       7.48     (304,290)       9.00
--------------------------------- ----------- ----------- ------------- ----------- ------------ -----------
Outstanding - end of year          2,441,563       $8.31     2,104,546       $7.27    1,935,976      $ 6.90
--------------------------------- ----------- ----------- ------------- ----------- ------------ -----------
</TABLE>
The following  table  summarizes the options  outstanding  and exercisable as of
December 31, 2000:

    Options         Options          Exercise
  Exercisable     Outstanding         Price
---------------- --------------- -----------------
        189,660         371,432    $3.69 - 4.88
        416,374         856,674     5.00 - 7.06
         82,335         577,815     7.31 - 8.63
         24,825          72,225     8.66 - 9.81
        175,817         543,367    12.75 - 17.50
         11,200          20,050    20.38 - 27.13
---------------- --------------- -----------------
        900,211       2,441,563       $8.31
---------------- --------------- -----------------

There were 148,599 options  available for grant at December 31, 2000. There were
779,812 and 628,437 options exercisable at  weighted-average  exercise prices of
$7.27  and  $6.91  at   December   31,   1999  and   1998,   respectively.   The
weighted-average  fair value of options  granted  during 2000 and 1999 was $6.55
and  $3.98,  respectively.  The  weighted-average  contractual  life of  options
outstanding at December 31, 2000 and 1999 was 7.8 and 8.0 years, respectively.

Employee Stock Purchase Plan

The  Company's  1996 Employee  Stock  Purchase  Plan (the  "Purchase  Plan") was
adopted  by the Board of  Directors  and  approved  by the  shareholders  of the
Company in April 1996.  The  Purchase  Plan  authorizes  the issuance of up to a
total of  225,000  shares  of Common  Stock to  participating  employees.  As of
December  31,  2000,  there were  99,842  shares  available  for grant under the
Purchase  Plan.  In May 1999,  the  Purchase  Plan was  amended  by the Board of
Directors to shorten the initial eligibility period and increase the discount to
the employees.

All full-time employees of the Company who have been employed by the Company for
a minimum of three months, including directors of the Company who are employees,
are  eligible  to  participate  in the  Purchase  Plan.  On the  first  day of a
designated  payroll deduction period (the "Offering  Period"),  the Company will
grant to each eligible  employee who has elected to  participate in the Purchase
Plan an option to purchase  shares of Common Stock as follows:  the employee may
authorize an amount (up to a maximum of 10% of such  employee's  regular pay) to
be deducted by the Company from such pay during the Offering Period. On the last
day of the Offering Period, the employee is deemed to have exercised the option,
at the option exercise price, to the extent of accumulated  payroll  deductions.
Under the terms of the Purchase Plan, the option price is an amount equal to 85%
of the fair market  value per share of the Common  Stock on either the first day
or the last day of the Offering  Period,  whichever is lower. In no event may an
employee  purchase in any one  Offering  Period a number of shares  which has an
aggregate  market value  (determined on the last day of the Offering  Period) in
excess of $25,000. The Compensation Committee may, in its discretion,  choose an
Offering  Period  of 12 months or less for each of the  Offerings  and  choose a
different Offering Period for each Offering.


10.  LEASES

The Company  entered  into capital  leases  totaling  $3.6 million in 1999.  The
accumulated amortization of the assets under capital leases was $3.4 million and
$2.2 million at December 31, 2000 and 1999,  respectively.  The Company also has
non-cancelable operating lease commitments for office space and equipment,  many
of which are  renewable at the  Company's  option.  Rent and  equipment  expense
approximated  $1.6  million in 2000,  $1.7  million in 1999 and $2.2  million in
1998. Future minimum payments under non-cancelable  capital leases and operating
leases are as follows (in thousands):

                                                 Capital      Operating
Year ending December 31,                          Leases        Leases
---------------------------------------------- ------------- -------------
2001                                                 $1,304        $2,322
2002                                                    761         2,350
2003                                                     --         1,180
2004                                                     --           949
2005                                                     --           827
-----------------------------------------------------------
2006 and beyond                                          --           136
-------------------------------------------------------------------------
Total minimum lease payments                         $2,065        $7,764
                                                           --------------
Amounts representing interest                           139
-----------------------------------------------------------
Present value of net minimum payments                 1,926
Less: current portion                                 1,186
 ----------------------------------------------------------
                                                       $740
---------------------------------------------- -------------







<PAGE>


                        REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS




                     REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



Board of Directors and Shareholders
Boston Communications Group, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Boston
Communications Group, Inc. and its subsidiaries as of December 31, 2000 and 1999
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 2000.
Our audits also included the financial  statements  schedule listed in the Index
at Item 14(a). These financial statements and schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the  consolidated   financial   position  of  Boston
Communications  Group,  Inc. and subsidiaries at December 31, 2000 and 1999, and
the  consolidated  results of their  operations and their cash flows for each of
the three years in the period  ended  December  31,  2000,  in  conformity  with
accounting  principles  generally  accepted in the United  States.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  presents  fairly in all
material respects the information set forth therein.



/s/ Ernst & Young LLP



Boston, Massachusetts
February 2, 2001







<PAGE>


Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The sections  entitled  "Election of Directors"  and "Reports Under Section
16(a) of the Exchange Act"  appearing in the Company's  proxy  statement for the
annual  meeting of  stockholders  to be held on June 13, 2001 set forth  certain
information  with respect to the  directors of the Company and reports  filed by
certain  persons under  Section  16(a) of the Exchange Act and are  incorporated
herein by reference. Certain information with respect to persons who are, or may
be  deemed to be,  executive  officers  of the  Company  is set forth  under the
caption "Executive Officers of the Company" in Part I of this report.


Item 11.  EXECUTIVE COMPENSATION

     The sections entitled "Executive Compensation", "Employment Agreements with
Named Executive Officers" and "Report of the Compensation  Committee"  appearing
in the Company's  proxy  statement for the annual meeting of  stockholders to be
held on June  13,  2001  set  forth  certain  information  with  respect  to the
compensation  of  management  of the  Company  and are  incorporated  herein  by
reference.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The section entitled  "Security  Ownership of Certain Beneficial Owners and
Management" appearing in the Company's proxy statement for the annual meeting of
stockholders  to be held on June 13, 2001 sets forth  certain  information  with
respect to the  ownership  of the  Company's  Common  Stock and is  incorporated
herein by reference.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The sections entitled "Executive Compensation," "Employment Agreements with
Named Executive Officers" and "Certain Transactions"  appearing in the Company's
proxy  statement for the annual meeting of  stockholders  to be held on June 13,
2001  set  forth   certain   information   with  respect  to  certain   business
relationships  and  transactions  between  the  Company  and its  directors  and
officers and are incorporated herein by reference.


<PAGE>

                                 PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K

(a)(1)   Financial Statements

The following consolidated financial statements of
Boston Communications Group, Inc. are included as Item 8:

Consolidated Balance Sheets at December 31, 2000 and 1999....................21
Consolidated Statements of Operations -
 Years ended December 31, 2000, 1999 and 1998................................22
Consolidated Statements of Shareholders' Equity -
 Years ended December 31, 2000, 1999 and 1998................................23
Consolidated Statements of Cash Flows -
 Years ended December 31, 2000, 1999  and 1998...............................24
Notes to Consolidated Financial Statements...................................25

   (2)    Financial Statement Schedules

     Index to Consolidated Financial Statement Schedules

For the years ended December 31, 2000, 1999 and 1998:
     Schedule II - Valuation and Qualifying Accounts

All other Schedules have been omitted because the required  information is shown
in the  consolidated  financial  statements  or  notes  thereto  or they are not
applicable.

    (3) The  Exhibits  listed in the Exhibit  Index  immediately  preceding  the
Exhibits are filed as part of this Annual Report on Form 10-K.

(b)  Reports on Form 8-K

     On November  21,  2000, a form 8-K was filed for the closing of the sale of
     the Teleservices business to TeleTech Customer Care Management, Inc.



<PAGE>


                                                         SIGNATURES


        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  on the 30th day of
March 2001.


                                            BOSTON COMMUNICATIONS GROUP, INC.
                                                                             -


                                            By: _/s/  E.Y. Snowden
                                            ------------------------------------
                                                     E. Y. Snowden
                                                     President and Chief
                                                     Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

Signature                               Title                     Date

/s/  E.Y. Snowden                       President, Chief          March 30, 2001
-----------------                       Executive Officer
     E.Y. Snowden                       and Director



/s/  Karen A. Walker                    Vice President,           March 30, 2001
-----------------------------------------------------
     Karen A. Walker                    Finance and
                                        Administration,
                                        Director (Principal
                                        Financial and
                                        Accounting Officer)


/s/  Paul J. Tobin                      Chairman of the           March 30, 2001
------------------                      Board of Directors
     Paul J. Tobin


/s/  Brian E. Boyle                     Vice Chairman of the      March 30, 2001
-------------------                     Board of Directors
     Brian E. Boyle







<PAGE>



    Signature                           Title                     Date


/s/  Frederick E. von Mering            Director                  March 30, 2001
----------------------------
     Frederick E. von Mering


/s/  Jerrold D. Adams                   Director                  March 30, 2001
---------------------
     Jerrold D. Adams


/s/  Paul R. Gudonis                    Director                  March 30, 2001
--------------------
     Paul R. Gudonis


/s/  Gerald Segel                       Director                  March 30, 2001
-----------------
     Gerald Segel


/s/  Rajendra Singh                     Director                  March 30, 2001
-------------------
     Rajendra Singh









<PAGE>


                                            EXHIBIT INDEX

Exhibit
   No.                              Description

3.1           Restated Articles of Organization of the Company, as amended. 1

3.3           Amended and Restated By-Laws of the Company. 1

10.1          +1996 Stock Option Plan. 1

10.2          +1996 Employee Stock Purchase Plan. 1

10.3          +Amendment Number 1, dated August 30, 1996, to 1996
              Employee Stock Purchase Plan 2

10.4          Commercial Lease dated January 24, 1996 between the Company and
              Cummings Properties Management, Inc. 1

10.5          Commercial Lease dated February 26, 1996 between the Company and
              Cummings Property Management, Inc. (Amendment No. 1). 2

10.6          Amendment No. 2, dated August 8, 1996, to the commercial lease
              between the Company and Cummings Property Management, Inc. 2

10.7          Amendment No. 3, dated February 5, 1997, to the commercial lease
              between the Company and Cummings Property Management, Inc. 2

10.8          Software License and Services Agreement dated October 30, 1996
              between the Company and Oracle Corporation. 2

10.9          Software License and Services Agreement dated September 24, 1996
              between the Company and Oracle Corporation. 2

10.10         Commercial Lease dated April 1, 1997 between the Company and
              Cummings Properties Management, Inc 3

10.11         Employment Letter Agreement dated February 10, 1998 between the
              Company and E.Y. Snowden. 4

10.12         +1998 Stock Incentive Plan

10.13^        Agreement between the Company and AG Communication Systems
              dated Nov. 16, 1998 5

10.14         Amendment No. 4, dated December 4, 1998, to the commercial lease
              between the Company and Cummings Property Management, Inc. 5

10.15         Master Equipment Lease between Boston Communications Group and
              leet Capital Corp. dated May 17, 1999. 6

10.16^        Letter of Agreement between Centigram Communications Corporation
              and Boston Communications Group dated August 12, 1999. 7

10.17^        Amendment #1 to the Agreement between A.G. Communications Systems
              Corporation and Boston Communications Group dated August 26,1999.7

10.18         Lease between Cummings Properties and Boston Communications Group
              dated June 3, 1999. 7

10.19         Amendment No. 3 to the Boston Communications Group, Inc. 1996
              Employee Stock Purchase Plan dated August 12, 1999.

10.20^        Distribution agreement between Centigram Communications
              Corporation and Boston Communications Group, Inc. dated
              January 17, 2000. 8

10.21         Boston Communications Group, Inc. 2000 Stock Option Plan

10.22         Cummings Lease Amendment dated July 20, 2000.9

10.23         Master Services Agreement with Exodus Communications Inc.
              dated December 4, 2000.

21            Subsidiaries of the Registrant.

23            Consent of Independent Auditors.



1  Incorporated by reference to the Company's Registration Statement on Form S-1
   filed June 17, 1996 (File No. 333-4128)
2  Incorporated  by  reference  to the  Company's  Form 10-K for the year  ended
   December 31, 1996.
3  Incorporated  by reference to the  Company's  Form 10-Q for the quarter ended
   June 30, 1997.
4  Incorporated  by reference to the  Company's  Form 10-Q for the quarter ended
   March 31, 1998.
5  Incorporated  by  reference  to the  Company's  Form 10-K for the year  ended
   December 31, 1998.
6  Incorporated  by reference to the  Company's  Form 10-Q for the quarter ended
   June 30, 1999.
7  Incorporated  by reference to the  Company's  Form 10-Q for the quarter ended
   September 30, 1999.
8  Incorporated  by reference to the  Company's  Form 10-Q for the quarter ended
   March 31, 2000.
9  Incorporated  by reference to the  Company's  Form 10-Q for the quarter ended
   September 30, 2000.
+  Management  contract or compensatory  plan or arrangement filed as an exhibit
   pursuant to Item 14(c) of this Report.
^  Confidential treatment granted as to certain positions,  which positions have
   been deleted and filed separately with the Securities and Exchange Commission




<PAGE>
<TABLE>


                            SCHEDULE II

        BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                 VALUATION AND QUALIFYING ACCOUNTS

                           (In thousands)


              COL. A                      COL. B                   COL. C                COL. D           COL. E
------------------------------------   ------------    -----------------------------   -----------    -------------
                                                                       ADDITIONS
                                                       -----------------------------

                                                                        CHARGED TO
                                          BALANCE AT     CHARGED TO       OTHER
                                         BEGINNING OF    COSTS AND       ACCOUNTS      DEDUCTIONS        BALANCE AT
DESCRIPTION                                 PERIOD       EXPENSES       DESCRIBE (1)   DESCRIBE (2)    END OF PERIOD
                                        -----------    --------------  -------------   -----------    --------------
<S>                                     <C>            <C>             <C>             <C>            <C>
Year ended December 31, 2000:
 Reserves and allowances deducted
  from asset accounts:
  Allowance for billing adjustments
    and uncollectible accounts            $2,025         $ --           $1,994        $1,987           $2,032


Year ended December 31, 1999:
 Reserves and allowances deducted
  from asset accounts:
  Allowance for billing adjustments
    and uncollectible accounts            $1,508         $ --          $1,688         $1,171            $2,025


Year ended December 31, 1998:
 Reserves and allowances deducted
  from asset accounts:
  Allowance for billing adjustments
    and uncollectible accounts            $1,304         $ --          $1,557         $1,353             $1,508




(1) Billing adjustments recorded as a reduction of revenue.
(2) Settlement of billing adjustments.


</TABLE>