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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 20-F

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

For the fiscal year ended December 31, 2003

Commission file number: 000-30078

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WAVECOM S.A.(Exact name of Registrant as specified in its charter)

France(Jurisdiction of Incorporation or Organization)

3, esplanade du Foncet
92442 Issy-les-Moulineaux Cedex,
France
Tel. 011 33 1 46 29 08 00(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Title of each class

Name of each exchange on which registeredShares, nominal value €1.00 each*
American Depositary Shares, evidenced by
American Depositary Receipts, each representing one Share.

NASDAQ National Market


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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

The number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

Shares (including 156,345 shares of treasury stock)

15,342,789American Depositary Shares

2,286,161


Indicate
by check mark whether the 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 ý    No o

Indicate by check mark which financial statement item the Registrant has elected to follow.

Item 17 o    Item 18 ý



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TABLE OF CONTENTS



|PART I   
|---------
|Item 1:  
|Item 2:  
|Item 3:  
|Item 4:  
|Item 5:  
|Item 6:  
|Item 7:  
|Item 8:  
|Item 9:  
|Item 10: 
|Item 11: 
|Item 12: 
|PART II  
|Item 13: 
|Item 14: 
|Item 15: 
|Item 16A:
|Item 16B:
|Item 16C:
|Item 16D:
|         
|PART III 
|Item 18: 
|Item 19: 

PRESENTATION OF INFORMATION

Unless the context otherwise indicates, references to "Wavecom," "we" or us include Wavecom S.A. and its subsidiaries. References to "U.S. dollars" or "$"
contained herein are to the lawful currency of the United States, and references to "euro" or "€" are to the currency of the European Monetary Union.

FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not guarantees of Wavecom's future operational or financial performance and are subject to risks and uncertainties. Actual operational and financial results may differ materially from
Wavecom's expectations contained in the forward-looking statements as a result of various factors. Factors that may cause such differences include, but are not limited to, factors discussed in "Item
3Key InformationRisk Factors" and "Item 5Operating and Financial Review and Prospects."

2          Wavecom Annual Report Form 20-F 2003

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The following selected financial data for the five years ended December 31, 2003 are derived from the consolidated financial statements of Wavecom, which
have been prepared in accordance with U.S. GAAP and have been audited by Ernst & Young Audit, independent auditors. The data should be read in conjunction with "Operating and Financial Review
and Prospects," the consolidated financial statements, related notes and other financial information included in this annual report.

|                                                                       |                                             | Years ended December 31, |           
|---------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ----------
|
|
|Consolidated statements of operations data:                            |                                             |                          |           
|Revenues:                                                              |                                             |                          |           
|                                                                       | Product sales                               |                          | €         
|                                                                       | Technology development and other services   |                          |           
|                                                                       | License fees and royalties                  |                          |           
|                                                                       |                                             |                          |           
|                                                                       |                                             | Total revenues           |           
|Cost of revenues:                                                      |                                             |                          |           
|                                                                       | Cost of goods sold                          |                          |           
|                                                                       | Cost of services                            |                          |           
|                                                                       |                                             |                          |           
|                                                                       |                                             | Total cost of revenues   |           
|                                                                       |                                             |                          |           
|Gross profit                                                           |                                             |                          | 8,176     
|Operating expenses:                                                    |                                             |                          |           
|                                                                       | Research and development                    |                          |           
|                                                                       | Sales and marketing                         |                          |           
|                                                                       | General and administrative                  |                          |           
|                                                                       | Amortization and impairment of goodwill     |                          |           
|                                                                       | Deferred compensation amortization          |                          |           
|                                                                       | Provision for lossICO Development contract |                          |           
|                                                                       |                                             |                          |           
|                                                                       |                                             | Total operating expenses |           
|                                                                       |                                             |                          |           
|Operating income (loss)                                                |                                             |                          | (14,434   
|Interest and other financial income (expense), net                     |                                             |                          | (207      
|Provision for loss on long-term investment                             |                                             |                          |          
|Beneficial conversion feature of convertible debt                      |                                             |                          | (1,072    
|Income (loss) before minority interests and income taxes               |                                             |                          | (15,713   
|                                                                       |                                             |                          |           
|Minority interest                                                      |                                             |                          |          
|                                                                       |                                             |                          |           
|Income (loss) before income taxes                                      |                                             |                          | (15,713   
|Income tax expense (benefit)                                           |                                             |                          | (736      
|                                                                       |                                             |                          |           
|Net income (loss)                                                      |                                             | €                        | (14,977   
|                                                                       |                                             |                          |           
|Basic net income (loss) per share(1)                                   |                                             | €                        | (1.26     
|Diluted net income (loss) per share                                    |                                             | €                        | (1.26     
|Cash dividends declared per share(2)                                   |                                             |                          |          
|Number of shares used in computing basic net income (loss) per share   |                                             |                          | 11,922,770
|Number of shares used in computing diluted net income (loss) per share |                                             |                          | 11,922,770

Wavecom Annual Report Form 20-F 2003          3

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|                                 |  | December 31
|-------------------------------- |  | -----------
|
|Consolidated balance sheet data: |  |            
|Total current assets             |  | €          
|Total assets                     |  |            
|Total current liabilities        |  |            
|Total long-term liabilities      |  |            
|Total shareholders' equity       |  |            

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Exchange Rate Data

Since January 1, 1999 our functional currency has been the euro, the currency of the European Monetary Union, of which the Republic of France is a member.
The exchange rate for conversion of euros into U.S. dollars (using the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York) on April 13, 2004 was $1.1923 = €1.00. Fluctuations in the exchange rate between the euro and the dollar will affect the dollar amounts received
by owners of ADSs on conversion of dividends, if any, paid in euro on the shares and may affect the dollar price of the ADSs on the Nasdaq National Market.

The
following table shows the noon buying rates for the number of U.S. dollars per euro for the period since January 1, 1999. The average is computed using the noon buying rate on
the last business day of each month during the period indicated.

|Month |          | High |        | Low
|----- | -------- | ---- | ------ | ---
|2004  |          |      |        |    
|      | March    |      | 1.2431 |    
|      | February |      | 1.2848 |    
|      | January  |      | 1.2853 |    
|2003  |          |      |        |    
|      | December |      | 1.2597 |    
|      | November |      | 1.1995 |    
|      | October  |      | 1.1833 |    

|Year ended December 31, |      | Average
|----------------------- | ---- | -------
|                        | 2003 |        
|                        | 2002 |        
|                        | 2001 |        
|                        | 2000 |        
|                        | 1999 |        

4          Wavecom Annual Report Form 20-F 2003

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Risk Factors:

In addition to the other information contained in this annual report, the following risk factors should be carefully considered in
evaluating us and our business. These statements are intended to highlight the material risk factors that may affect our results.

Intense competition from companies in both the wireless device sector and the semiconductor sector could reduce our market share in all of our geographic markets and reduce our
revenues

The market for wireless core technology is fragmented but intensely competitive. We currently compete in different segments of the market with different types of
suppliers. In the market to supply core technology to telephone handset manufacturers, we compete primarily with major international semiconductor companies. In the vertical applications markets, we
compete with a broad array of companies, from manufacturers of integrated wireless modules and modems to specialist designers. We expect competition to intensify, especially in the vertical
applications markets, as growth in these markets attracts additional participants.

Many
of our competitors operate their own fabrication facilities and have longer operating histories and presence in key markets, greater name recognition, a larger customer base and
significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we do. These competitors may be able to adapt more quickly to new and emerging
technologies and changes in customer requirements, and they may also be able to devote greater resources to the promotion and sale of their products. In addition, current and potential competitors
have established or may establish financial or strategic relationships among themselves or with existing or potential customers, resellers or other third parties. New competitors, or alliances among
competitors, could emerge and rapidly acquire significant market share. Existing or new competitors may also develop technologies that more effectively address our markets with products that offer
enhanced features and functionality, lower power requirements, greater levels of integration or lower cost. Competition has forced us to reduce the average selling prices for some of our products, and
we expect such price reductions to continue in the future. Competition may also result in reduced gross margins and loss of market share in certain markets. We cannot assure you that we will be able
to continue to compete successfully or that competitive pressures will not materially and adversely affect our business, financial condition and results of operations.

Declining sales prices of personal communication devices, such as mobile telephones, and other wireless products could affect our operating results adversely

The prices of mobile telephones decreased rapidly during 2003. We believe that the prices of other wireless communications products will also decrease over time.
As a result, prices for our Wismo modules, wireless modems and component solutions have declined and are likely to continue to decline at an accelerated pace in the years to come. More importantly, in
order for us to address a larger market, and in order for our customers to introduce attractively priced products, we believe we must continue to reduce our selling prices. We will be unable to return
to profitability unless we can offset these price decreases with increases in unit volumes and reductions in per unit costs.

We rely on a small number of major customers. The loss of one or more of these customers, or a reduction of purchases by one or more major customers, may adversely affect our
sales, operating results and cash flows

Although the global handset market experienced significant growth worldwide in 2003, we experienced declining revenues during this period as the market for mobile
telephones in East Asia, and particularly in China, was flooded with low-end products. Although our customers in the East Asian market have been particularly successful in building market
share in that expanding market, many of their product offerings address the lower end of the market and do not incorporate our products or technology. The revenue decline

Wavecom Annual Report Form 20-F 2003          5

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that
we experienced in 2003 may continue if the Chinese and other markets in which our customers sell their products should experience a downturn; if our customers are unable to remain competitive and
increase their market share in their local markets; if they decrease sales of products based on our offering; if we are unable to win new customers or if we are unable to significantly lower our
prices to compete with other suppliers.

In
2003 we were able to achieve a more balanced portfolio among our customers and within our geographic regions, but overall revenues for the year were significantly lower than revenues
in 2002. The dynamics of the personal communication device markets and vertical markets in Europe, the Americas and Asia are all very different, and we cannot assure you that the strategies that
enabled us to grow quickly in the Asian handset supply market in the past will work in those other markets, or that we will be successful in serving those markets.

The
following table sets forth revenues from our largest customers for the past three years:

|                                                                       |  | 2001 |    | 2002 |     | 2003 |     
|---------------------------------------------------------------------- |  | ---- | -- | ---- | --- | ---- | ----
|Percentage of total revenues represented by the five largest customers |  | 80.4 | %* | 83.9 | %** | 63.3 | %***
|Percentage of total revenues represented by the ten largest customers  |  | 88.1 | %  | 90.1 | %   | 76.0 | %   

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Significant cancellations or deferrals of orders could adversely affect our business

We sell products pursuant to advance purchase orders that customers may be allowed to cancel or defer on short notice, at our discretion, sometimes without
incurring a significant penalty. Significant deferrals have in the past, and may again in the future, result in shortfalls from expected revenues in a fiscal quarter or fiscal year. Significant
cancellations could materially and adversely affect our business, financial condition and results of operations. If we experience significant order cancellations or deferrals, or if we overstock
products in anticipation of orders that fail to materialize, or if we accept the return of previously sold products, we may end up with excess or obsolete inventory, which could reduce our profit
margins and result in inventory write-offs.

We operated at a loss during 2003. As a result, our cash reserves were reduced. If we continue to operate at a loss our cash reserves will continue to decrease which could
result in our major suppliers requiring different payment terms or bank guarantees

Our company is "fabless," which means it operates without factories. As a result, our capital expenditures are relatively low and our main cash flows come from,
and are used in, operations. During 2003 we experienced negative cash flows from operations. Our cash reserves as of December 31, 2002 were €135 million and as of
December 31, 2003 were €111 million. If we continue to operate at a loss, our main suppliers, specifically the contract manufacturers who make our products, may require
us to have stricter payment terms or may eventually require us to provide bank guarantees or letters of credit, which would have a negative impact on our cash flows. Based on our current plans, we
believe that our available capital resources will be adequate to satisfy our cash requirements for at least 12 months from the date of this report. If our plans change, or if we do not achieve
profits or if our profits are significantly lower than anticipated, we may need additional funding to remain in business.

6          Wavecom Annual Report Form 20-F 2003

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The wireless communication market in which we operate is characterized by rapidly changing and increasingly complex technologies. If we are unable to keep pace with these new
technology trends, our product offerings may not remain competitive and we may lose customers

The markets in which we sell our wireless solutions are developing new types of products and new versions of existing products regularly. To be competitive,
manufacturers who purchase our Wismo modules and wireless modems for use in their mobile telephones and other applications must offer products that satisfy consumer demand for smaller, less expensive
products with more features. To meet our customers' needs, we must continuously update and enhance our products, shortening their life cycles so that they meet the latest standards and include
up-to-date features.

To
develop these enhancements, new designs and technologies, we must spend time and significant amounts of money on research and development. These investments are generally made before
commercial viability for such enhanced products is ensured and we may not receive any significant revenues from these products if we misjudge the market or miss a product life-cycle
window. We intend to introduce our own chipset solutions during 2004, to be commercialized under the name WISMO Flex, and cannot assure you that these products will be commercially successful. We may
lose market share if our competitors, most of which are larger and have greater resources than we do, are more successful or faster than we are in updating and improving products and technology.

In
addition, several of our products rely on unproven or evolving technologies that may contain defects or other quality or performance problems, which may harm our reputation and
increase our costs.

Our sales and operating results could be adversely affected if the third parties on whom we rely for the supply, assembly and manufacture of our components and finished
products are unable to meet our supply, quality or manufacturing requirements

We rely primarily on third parties to supply components for our products and to assemble and to test our products.

Through
the end of 2003, we relied on three separate contract manufacturers to produce our modules and modems. In October of 2003 we made the decision to concentrate all manufacturing
with a single contract manufacturer. We chose Solectron, using its plant in Suzhou, China. We will be consolidating the production of all of our modules and modems at this new site during 2004. If
this transfer is not done in a timely and successful manner or if the actual costs are higher than anticipated or if this transfer causes disruption to our operations, our revenues and profitability
could suffer. Although we believe the use of a single contract manufacturer will help us to reduce costs and improve controls over the manufacture of our products, reliance on a single manufacturer
will increase the risk that we could encounter manufacturing or supply problems.

Using
third parties to manufacture key components of our products and to assemble and test our products reduces our control over product delivery schedules, quality assurance,
manufacturing yields and costs. The third parties who manufacture, assemble and test our components and our products have other customers and may not have sufficient capacity to meet all of our
supply, manufacturing, assembly and testing needs during periods of excess demand. They may experience financial difficulties, or delays or disruption to their production, or may fail to meet our
specified requirements, notably our quality standards.

We
believe that a number of our suppliers are sole sources for key components. These key components are complex and difficult to manufacture and require long lead times. We work with our
suppliers on a twelve-month rolling forecast basis and we currently believe that we have secured an adequate supply based on our production forecasts for the next twelve months. To reduce such
uncertainty, we have developed a proprietary baseband chipset and intend to continue developing other key components for our products, but we still run a risk in subcontracting the production of these
chipsets. In the event of a reduction or interruption of supply, or a degradation in quality, it could take several months before we could begin

Wavecom Annual Report Form 20-F 2003          7

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receiving
adequate supplies from alternative sources. Supply interruptions could delay product shipments, causing our revenues to decline and operating results to suffer.

Fluctuations in the rate of exchange between our reporting currency, the euro, and the U.S. dollar can affect our net sales and costs

Although the functional currency of Wavecom S.A. is the euro, a significant portion of our revenues is recorded in U.S. dollars. At the same time, most of our
components are purchased in U.S. dollars and a portion of our operating expenses is in U.S. dollars. The value of the euro increased significantly against the dollar throughout 2003. A further
strengthening of the euro against the U.S. dollar could reduce our reported revenues and negatively affect our reported operating and net results.

We
incurred foreign exchange losses in 2002 and 2003 and we may incur such losses again in the future. Beginning in January 2003, we put in place a program to hedge our currency
risk through the use of forward contracts and put and call options, covering expected net cash flows in U.S. dollars. The objective of this program is to minimize our risk, but we will never be able
to eliminate the risk.

We need to attract, retain and develop key personnel who are skilled in our business and technology to remain competitive and properly manage our growth

It is important to our success that we retain our highly skilled product development, sales, marketing and other key employees, and continue to attract and
motivate additional skilled employees. We rely to a large extent on independent contractors who work for consulting firms.

In
January 2004 we announced a plan to restructure our business organization, which is expected to result in significant headcount reductions throughout our company. If we fail to
complete the restructuring properly, we may lose personnel, either voluntarily or involuntarily, whose contributions are needed for the development, sales and marketing of our current and future
products. This headcount reduction may also make it more difficult for us in the future to attract and retain the personnel needed for growth. If we fail to attract, hire or retain appropriately
qualified personnel, we could experience delays in our research and development projects or our product roll-outs which could affect our ability to bring new products to market
successfully or on a timely basis.

Changes
in our market and in our business organization have placed a significant strain on our management systems and resources. In order to manage these changes, and to successfully
restructure our business, we will need to modify our internal systems, controls and procedures, improve coordination among departments and better manage our workforce. If we fail to effectively face
changes in our markets and manage our business to address the above concerns, our operating results could suffer and we may be unable to expand our business.

Destabilizing events in Asia, particularly in China, could hurt our revenues

In 2001, 2002 and 2003, sales to Asian customers represented 84%, 82% and 69%, respectively, of revenues, reflecting shipments pursuant to large contracts with
customers in China, Taiwan and South Korea. We expect that, for the foreseeable future, a significant portion of our revenues will be generated from Asian customers, and in particular from customers
based in China or serving the Chinese market.

The
outbreak of the SARS virus in parts of China caused travel and business disruption throughout Asia during much of 2003. In response to the outbreak, we curtailed business travel
between our European and Asian offices. Personnel shortages and logistics problems resulting from the outbreak caused delays in deliveries of vital electronic components from Asia to many companies
worldwide, and impaired their ability to meet commitments to their own customers. While the SARS outbreak did not directly affect production of our products or delivery of components to our contract
manufacturers' facilities, a protracted or more

8          Wavecom Annual Report Form 20-F 2003

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widespread
epidemic of the SARS virus, or of "bird flu" or another communicable disease, could affect the production or the distribution of our products, which could materially harm our business.

Similarly,
a financial crisis in Asia, particularly in China, could substantially reduce our revenues from Asian customers or customers selling to end users in Asia. Political upheaval
in China or a change in the political climate, making China a less favorable environment for foreign businesses, could also substantially reduce our revenues.

Our costs may increase or we may have to redesign our products if they infringe other companies' intellectual property rights

Other companies have patents, copyrights, trade secrets and other intellectual property rights covering technology used in the wireless communications industry.
Although we have entered into intellectual property licenses permitting us to use rights of third parties, if any of our products were found to infringe on protected technology, we could be required
to redesign them, to obtain further intellectual property licenses or to pay royalties or damages to the owner of the technology. The resulting costs would harm our business. If we were unable to
obtain these licenses or to redesign our products to make them non-infringing, we could be prohibited from marketing our products.

Our business could be hurt by the unauthorized use of our technology

We rely on a combination of patents, copyrights, trade secrets, trademarks and proprietary information to maintain and enhance our competitive position. If we
were unable to prevent a competitor from using our designs and techniques to produce competing products, our business would be adversely affected.

Our quarterly revenues fluctuate significantly and may affect the price of our shares and ADSs

Our revenues and operating results fluctuate significantly from quarter to quarter. The many factors that could cause our quarterly results to fluctuate include:



Due
to these and other factors, our results of operations could fluctuate substantially in the future and quarterly comparisons may not be reliable indicators of future performance.
Because many of our expenses for personnel, facilities and equipment are relatively fixed in nature, we may not be able to reduce expenses quickly to balance a decline in our revenues and could
experience net losses during extended periods. Quarterly fluctuations may have a negative effect on the price of our shares and ADSs. It is possible that in some future quarter our results of
operations will be below the expectations of public market analysts and investors, in which case the price of our shares and ADSs could fall.

Wavecom Annual Report Form 20-F 2003          9

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Our U.S. shareholders could suffer adverse tax consequences if we are characterized as a passive foreign investment company

If, for any taxable year, our passive income or our assets that produce passive income exceed levels provided by law, we may be characterized as a passive foreign
investment company, or PFIC, for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences to our shareholders who are subject to U.S. taxation. U.S.
persons should consult with their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our shares or our ADSs. See "Item 10Additional
InformationTaxationUnited States TaxationPassive Foreign Investment Company".

We may not be able to sell our products under the Wavecom name or use the trademark "WISMO" in certain countries

Several companies, some of which are in businesses similar to our own, use the word Wavecom or a similar word as either a trade name or as a brand name for their
products, in particular in the United States. This could cause confusion in the marketplace and harm our sales. If one of these other companies were to take effective legal action to prohibit us from
continuing to use the name Wavecom, we could be forced to use a different name and, as a result, it would be more difficult for customers to identify us and our sales might suffer. The trademark WISMO
may not be protected in some countries where we do business. Use of the trade name WISMO was opposed in certain countries and if these opponents succeed we may be prohibited from using this trade name
in certain jurisdictions.

Adherence to technical requirements or legal regulations may increase our cost base

The implementation of new technical requirements or legal or environmental regulations, such as the European Union's recent directive mandating recycling of used
electronic components, may adversely affect the timing and costs of introduction of our products. This could ultimately impair the success of our business even though these regulations may not
directly apply to us or our industry.

Events anticipated in forward-looking statements in this annual report may not occur

This annual report contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are usually accompanied by words
such as "believe," "anticipate," "plan," "expect" and similar expressions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number
of factors, including the risks that we face, described above and elsewhere in this annual report.

Item 4. Information on the Company

Business Overview

We are one of the world's leading suppliers of complete technological solutions for wireless digital voice and data applications. We develop and sell an extensive
range of integrated solutions, including all the software and hardware elements required for designing innovative wireless devices, as well as the development tools and services required for faster,
easier market launches of our customers' end products.

Our
solutions are integrated in telecommunications terminals that use radio frequencies based on the following standards: GSM (Global System for Mobile communications); GPRS (General
Packet Radio Services); and CDMA (Code Division Multiple Access). We are currently designing solutions based on two additional standards, EDGE (Enhanced Data GSM Environment) and W-CDMA
(Wideband CDMA, also referred to as third generation or 3G).

We
have highly specialized expertise and know-how in the development and integration of digital circuit designs, radio frequency devices, silicon chip architecture and the
industrialization and manufacturing of wireless products. Our solutions are sold in the form of hardware platforms with embedded software as well

10          Wavecom Annual Report Form 20-F 2003

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as
additional software tools and support services. We are working on the design of future generations of wireless chipsets that will integrate all multimedia and mainstream features, including direct
camera interface and enhanced wireless connectivity, and will support dual mode (GSM/GPRS/EDGE and 3G standards) through our own W-CDMA chip. We expect to introduce a completely new core
architecture in late 2006 that will integrate both the baseband and radio frequency into a single chipset.

The
solutions we offer provide our customers with a number of advantages:



The wireless telecommunications sector

Over the last ten years, the wireless telecommunications sector has enjoyed rapid growth. The products and services provided by this sector have become available
to the general public at increasingly affordable prices throughout the world.

Technological
advances, changes in the wireless telecommunications sector's regulations, and the granting of licenses relating to additional frequency bands are factors that have
contributed to this industry's strong worldwide growth and have attracted new competition. Moreover, consumer demand for devices that provide greater mobility has resulted in entirely new
applications.

Transmission standards

The wireless telecommunications market is characterized by a wide variety of transmission standards in the various regions of the world, including first
generation analog standards, second generation digital standards such as GSM, and so-called emerging standardsGPRS and CMDA 1xRTT. Wireless digital systems mainly use
frequency bands at 850MHz, 900MHz, 1800MHz or 1900MHz. GSM is currently the most

Wavecom Annual Report Form 20-F 2003          11

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widely
used standard in Europe and is one of the major standards in all other regions for both voice and data transmission. Another key standard is CDMA, which is used in the U.S. and in certain other
regions and countries, particularly in South America and in Asia primarily in Korea, India and China.

The
third generation standard, or "3G", has a greater transmission capacity, especially for data transfer. The first 3G standard offered, W-CDMA, was launched in Japan in a
limited geographic area in 2001, and should be generally commercially available in the rest of Asia and in Europe by 2005. The increased capacities of the W-CDMA standard may enable it to
attract subscribers from telecommunications networks that are currently operating on other wireless telecommunications standards.

To
provide an interim solution until the faster data transfer capabilities under the W-CDMA standard become available to the market, the wireless telecommunications industry
is currently developing intermediate solutions referred to as "2.5 G". These intermediate solutions are based on existing technologies, including GPRS, CDMA 1xRTT and EDGE, which represents a faster
version of the GSM wireless service. GPRS, which was especially developed for packet data transmission on the GSM network, has been commercially available on most GSM networks since 2002. The CDMA
1xRTT standard was adopted in Asia and the United States in 2002. The EDGE standard is scheduled for introduction in the United States in 2004.

Characteristics of a wireless telecommunications terminal

A wireless telecommunications terminal such as a mobile phone incorporates both hardware, in the form of various electronic components, and software, which is
needed to manage the interface between the electronic components, the digital processing of the signal coming from or going to the network, and the interface between the terminal and the user. The
primary electronic components are related to the baseband, digital processor and radio frequency functions. The baseband components process analog signals, as well as converting analog signals into
digital signals and converting digital signals to analog. The components used for digital processing manage all of the terminal's circuits and send and receive information to and from the network via
the radio components. They also manage all the data circulating inside the terminal as well as information sent to, or intended for, the end user. The radio components amplify, transmit or receive the
high frequency analog signals that carry the information. The components and software required will differ according to the frequency band and transmission standard being used.

Before
any new wireless telecommunications device is released on the market for sale, it must undergo a series of tests to ensure its compliance with the technical specifications
established by the relevant regulatory authorities in the country where it is to be sold. Upon successful completion of this testing, the regulatory authority issues a certification of compliance.
This process can take up to six months, depending upon the experience of the company seeking approval of its products and the level of familiarity of the regulatory authority with the product being
evaluated.

In
addition to complying with applicable regulatory requirements, each new wireless telecommunications device must undergo a series of field tests prior to its launch to make sure it
works properly on each telecommunications network for which it is designed. The technical characteristics of these networks vary because each has a unique architecture and because each operator has
developed its own infrastructure differently. As a result, a wireless communications device may function on one network yet be incompatible with another.

Our markets

We have developed specific wireless technology solutions in order to target the market for mobile telephones as well as other markets for non-handset
products, which we call "vertical markets". Vertical markets include a wide range of sub-markets, such as the markets for machine-to-machine communication devices,
automotive products, wireless local loop (WLL) systems and laptops. Applications within these markets include, among others, navigation when combined with GPS (Global Positioning System), remote

12          Wavecom Annual Report Form 20-F 2003

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metering
devices, alarm systems, and connected personal electronic organizers (integrating wireless communication functions).

We
intend to focus our product efforts on the following markets, where we see the greatest potential demand.



The markets for mobile telephones and other handheld wireless devices are characterized by fast growth, open transmission standards and the constant introduction
of new applications and functionality. To remain competitive, manufacturers of these devices must continually modify or adapt their products to anticipate the demands of sophisticated consumers for
products with additional features, a wider range of
model designs and styles, reduced size and weight, increased battery life, greater reliability, and a lower price.

We
sell our PCD solutions to OEMs (Original Equipment Manufacturers) or ODMs (Original Design Manufacturers), primarily in Asia. Companies in the developing EMS (Electronic
Manufacturing Services) market, also principally in Asia, represent new potential customers for our PCD solutions. By utilizing our solutions, these companies can quickly develop and market their
products while minimizing their research and development costs. This allows them to focus their resources on the design, marketing and distribution of their products.

In
2003, direct sales of PCD solutions represented 52% of product sales.

Vertical applications (Machine to Machine communication or M2M, Wireless Local Loop and automotive):

We
sell our solutions to three principal vertical markets:



In
2003, sales to vertical market applications represented 48% of our revenues.

Vision and strategy

The development and design of software, silicon chips and other wireless communication technology requires special expertise. As the markets for wireless
communications products become increasingly complex, and customers become more demanding, manufacturers of wireless devices are finding it increasingly difficult to develop independently all of the
technologies and features demanded by the consumers of their wireless communication products. They have the added burdens of field-testing their products and ensuring that their products comply with
the technical specifications imposed by the regulatory authorities. Many companies that sell standard consumer products have neither the financial resources nor the technical skills required to
develop their own wireless telecommunications systems.

Wavecom Annual Report Form 20-F 2003          13

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Faced
with these technical, commercial and regulatory hurdles, many manufacturers of wireless telecommunications products choose not to develop the technology themselves, preferring to
call on external specialists to supply them with the most essential wireless telecommunications technology. This allows them to concentrate their expertise and resources on their core business of
marketing and selling products.

We
have positioned ourselves as a wireless core technology provider, thus meeting the market need described above. Furthermore, we have focused our efforts on two specific markets:
Personal Communication Devices and Vertical Applications. To more fully meet the needs of these two markets, we established two separate business units in January of 2004 which are vertically
integrated and include all of the direct disciplines from sales and marketing to engineering and customer care required to support the generation of business in these markets.



Our
business strategy is to:



14          Wavecom Annual Report Form 20-F 2003

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Products and services offered

We offer a wide array of market-specific solutions under our "Development Labs" banner. Each Development Lab comprises a series of software applications, embedded
in a hardware platform, as well as development tools and an extensive range of services.

Development
Labs enable our customers to proceed quickly from the initial product concept to the final integration of our solution into their products. Each Development Lab provides a
wide choice of software (features, wireless communication protocols, catalog of interfaces with operating systems and peripheral components), hardware platforms (WISMO Quik, WISMO Pac and, beginning
in the second half of 2004, WISMO Flex), development tools (Open AT, Advanced Open MMI and Open Stack) and services, all combined in an open, integrated environment. We currently have four families of
Development Labs, each dedicated to a specific market:



Software suites

We have developed an extensive range of software suites adapted to our various markets. The customer chooses from the software menu specifically which functions
and features will be embedded in the product.

For
the PCD market we offer the following software suites:



For
the M2M, automotive, and WLL applications we offer the following software suites:



Wavecom Annual Report Form 20-F 2003          15

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Hardware platforms

We currently offer four hardware platforms with a fifth to become commercially available in 2004:



WISMO-based
hardware platforms, which are marketed as components, are most often used by manufacturers with a view to integrating them into consumer products such as mobile phones,
connected PDAs and laptops or into automobiles and a variety of other machine-to-machine solutions. Our modems, which are marketed as finished products, are usually purchased
by customers who want ready-to-use, wireless communication solutions when a small size factor is not an issue. Modems provide more immediate access to wireless technology.

Development tools

We offer open software environment development tools, dubbed MUSE PLATFORM (Modular User Software Environment), with which customers can easily
develop and incorporate applications directly on hardware platforms.

Two
types of tools are available, each targeting its own market:

Open MMI(Man-Machine-Interface),dedicated to the mobile telephone market, to
which we offer three levels of tools:



OPEN AT, dedicated to vertical markets: M2M communication, automotive and wireless local loop. Open AT enables developers to embed
applications directly on to our WISMO hardware platforms, eliminating the need for any external processor and associated memory, and reducing both development costs and
time-to-market.

Services

We believe that the complete, personalized service that we provide to our customers is a determining factor in our customers' choosing us as a supplier, and one
of our principal competitive advantages. Our assistance and technical support services allow our customers to complete their product development and industrialization phases swiftly, allowing them to
move quickly to volume production.

16          Wavecom Annual Report Form 20-F 2003

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The
direct customer contact that comes from providing these services helps us to anticipate our customers' plans for future product development and enables us to better understand the
evolution of our various markets. We also provide our customers with an evaluation kit with which they can carry out technical feasibility studies for their future products.

Our
services include:



Sales and distribution

We use both direct and indirect sales channels to sell our various wireless technology solutions in our three primary geographic regions: EMEA (Europe
Middle-East and Africa), Americas (North America and South America) and APAC (Asia-Pacific).

We
also use a distributor network to sell into the highly segmented M2M markets. We have agreements with distributors who sell in 93 countries throughout Europe, Asia, North America and
South America. In 2003, we set up a network of independent sales representatives in both North and South America in order to increase marketing coverage for our solutions.

Manufacturing and assembly

We are a "fabless" manufacturer, which means we do not operate our own factories. We have chosen to outsource the entire production process to electronic
manufacturing specialists in order to benefit from high-performance factories and equipment without the need for massive capital investments. This allows us to focus our resources on R&D,
product design, quality control, marketing and providing services to our customers.

Under
our commercial relationships with our manufacturing partners, the responsibility for components supply lies with the subcontractor, although most major component prices are
negotiated directly by our purchasing department. If we should reduce or even discontinue the manufacture of our products or modify their design in terms of components, the contract manufacturer could
invoice us for the cost of the components which are no longer of use. The subcontractor issues purchase orders to component suppliers on the basis of orders for finished products received from us.
Usually the components are ordered two to four months before they enter into the production process.

We
take responsibility for the quality of our products and own and manage all the test devices and equipment used on site at the contract manufacturers to ensure the highest levels of
product quality.

Since
we do not operate any factories or production facilities, the environmental impact directly related to our activity is essentially limited to consumption of resources and disposal
of waste at our administrative and commercial offices, where we are in compliance with local laws and regulations relative to environmental protection. We have taken the initial steps toward receiving
our ISO 14000 certification and currently use sub-contractors that are ISO 14000 certified. We do not believe that, at this
time, we have any significant environmental risk related to activities directly managed by us. Therefore, we have not established any specialized departments to manage potential environmental risks
nor have we put in place any specific measures or established provisions for expenditures to avoid potential environmental risks.

Wavecom Annual Report Form 20-F 2003          17

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Component suppliers

Certain components used in our products are supplied by integrated circuit manufacturers.

All
of our main suppliers are ISO-certified according to standards ISO 9000 and ISO 14000. In 2003, we committed ourselves to an ISO/TS certification project specific to the
automotive industry, and expect to receive certification by 2005.

We
generally obligate our customers to place orders three to four months in advance (with firm orders placed one to two months in advance), and provide medium-term purchasing
forecasts (six to twelve months).. This process enables us to negotiate favorable terms with our suppliers and improve our sales forecasting. Given the market conditions during 2003, many customers
began the practice of placing orders just one or two months before delivery, which resulted in limited and short-term visibility.

In
2003, we developed, in conjunction with other semiconductor specialists, three of our own components: a baseband chipset, audio filters and a power management unit. These components
are now produced by a semiconductor foundry and are integrated in some of our products. These components represent our first steps into the area of silicon product development and design.

Contract manufacturers and foundries

Since 2002 the majority of our products have been produced by three contract manufacturers: Solectron (Romania), Elcoteq (China) and Thales (near Rennes, France).

In
an effort to achieve manufacturing efficiencies and enhance our competitive position, in October 2003 we made the decision to outsource the manufacturing of all of our module
and modem products and the provision of related services to Solectron, using its factory in Suzhou, China. We began the transition to concentrate manufacturing at a sole site in the first quarter of
2004 and we expect this transition to be completed within 2004.

The
establishment of a broader commercial relationship with Solectron as our sole manufacturing supplier has enabled us to work more closely in the development of key industrial
processes and in the provision of new customer services, such as logistics, maintenance, technical support, design services and the launch of new end-user products.

Although
we will utilize Solectron as the sole manufacturer of our module and modem products, we have the ability to add further suppliers on relatively short notice should Solectron be
unable to meet all of our product or capacity requirements.

Research and development

In order to remain at the forefront of the fast-paced technological developments and increasing customer requirements in each of our markets, we make
sizeable investments in research and development. The intellectual property developed by our R&D teams is integrated into our proprietary solutions.

We
offer our customers specialized expertise and more than ten years' experience in the wireless sector. Our technological know-how has enabled companies, in particular
certain Chinese and Korean handset companies, to successfully develop innovative products and penetrate the local and regional mobile telephone markets.

As
of December 31, 2003, our R&D team included more than 500 engineers (salaried employees and independent contractors), representing nearly 60% of our workforce. The majority of
our R&D teams are based at the company headquarters in Issy-les-Moulineaux, near Paris, with smaller, specialized teams in Rennes (France), Hong Kong, Beijing, Seoul and San
Diego. Through these local teams, we can react to our customers' specific development needs quickly and efficiently.

Our
R&D programs center on developing new products for each target market, expanding existing product ranges and integrating all of the latest telecommunications standards required by
our customers, including: GSM, GPRS, CDMA and, in the future, EDGE and W-CDMA.

18          Wavecom Annual Report Form 20-F 2003

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In
2003, we began to integrate chipsets designed by our own dedicated in-house R&D team into our products. We are working on the design of future generations of wireless
chipsets that will integrate all multimedia and mainstream features, including direct camera interface and enhanced wireless connectivity, and will support dual mode (GSM/GPRS/EDGE and 3G standards)
through our own W-CDMA chip. We expect to introduce a completely new core architecture in late 2006 that will integrate both the baseband and radio frequency into a single chipset.

We
continue to develop alliances with technology partners specializing in key areas whose expertise complements our own. These types of partnerships should continue to play a major role
in our future growth, specifically as our R&D teams work on advanced wireless technology, combining both software and hardware into more powerful and feature-rich solutions.

Our
total expenditure on research and development was €62.1 million in 2003 (22.5% of sales), €64.1 million in 2002 (11.6% of sales) and
€32.6 million in 2001 (10.1% of sales).

Competition

The markets we address have always been intensely competitive and are growing increasingly so.

In
the mobile telephone market, we compete mainly with component manufacturers. These component manufacturers include such companies as Texas Instruments, Infineon Technologies and
Analog Devices in partnership with TTP Communications, as well as Skyworks Solutions, Ericsson Mobile Platform and Motorola who sell "reference designs". The components offered by these competitors
are increasingly integrated and complex, and therefore compete more directly with our own solutions. Many of our competitors operate their own fabrication facilities and have longer operating
histories and presence in key markets, greater name recognition, a larger customer base and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other
resources than we do.

Over
the past several years we were very successful in providing Asian mobile telephone manufacturers (in both China and Korea) with the technology they required in order to penetrate
the Chinese consumer market for mobile phones. Until late 2002, there was relatively little competition to supply wireless solutions to manufacturers of handsets for the Chinese market. We were able
to compete successfully by
offering more complete solutions, personalized customer services and faster time-to-market for end-products. During 2003, the Chinese market for mobile phones
expanded very rapidly, attracting numerous new competitors. Some of these competitors aggressively cut prices and were able to take significant market share from us, resulting in a drop in our annual
revenues for the first time in our company's ten-year history. It will be critical for us to arrive at a competitive price level to effectively compete on a global scale.

In
the M2M, automotive and wireless local loop markets, we mainly compete with module producers such as Siemens, Sagem, Sony Ericsson, Motorola and more recent arrivals such as Kyocera
and Nokia. Our ten-year experience in these markets as a systems integrator positions us well to take advantage of the growth forecasted for the coming years.

We
believe that our capacity to confront these rivals successfully in the wireless communication sector depends on a number of factors, some of which are beyond our direct control. These
factors include the level of global consumer demand for portable telephones, the growth of vertical market applications, the wireless network availability of W-CDMA (3G) and the regulatory
impact on the telecommunications sector. Our competitive position also depends on the price, quality, availability and performance of our own solutions, as well as the product features we offer, the
timing of new hardware platform and software feature launches, customer services and technical support.

Intellectual property

The European Telecommunications Standards Institute ("ETSI") has a policy that allows third parties to disclose intellectual property rights which they believe
are essential to the use or operation of GSM/GPRS-based equipment. Once an owner of such a right gives notice to ETSI, it must grant irrevocable

Wavecom Annual Report Form 20-F 2003          19

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licenses
to third parties on fair, reasonable and non-discriminatory terms and conditions to allow the manufacture and sale of equipment. Some owners of GSM/GPRS-related
patents may not have notified them to ETSI.

In
order to produce and market our GSM/GPRS-based Wismo modules and wireless modems, we must assess whether licenses from third-party patent owners are required. Because of
the intense competition in our industry, there may be a substantial number of patents to consider and it is difficult to identify all those which may have an impact on our products. We believe that
most of the patents important to us are the GSM/GPRS patents covered by ETSI's policy. These include patents of Motorola, Siemens, Philips, Nokia, Ericsson, Mitsubishi, NEC, and Alcatel. At this time,
we have licenses (or equivalent arrangements) to use the GSM/GPRS-essential patents of Motorola, Siemens, Philips, NEC, Alcatel and Nokia and are currently negotiating licenses or other
arrangements with other patent holders. As we identify other potentially essential patents, we may need to enter into additional license agreements. Should we fail to identify all patents needed to
produce our products or to obtain the required license agreements, we could be found to have infringed the patent rights of third
parties. In addition, as new digital transmission standards develop, we will have to acquire additional licenses for new essential patents.

In
January 1999 we entered into a cross-license agreement with Motorola Inc. Under this agreement, we and Motorola each grant to the other a license to use the intellectual
property rights it owns or develops for the GSM standard. In addition, the agreement requires us to pay to Motorola a license fee for each GSM product we sell. The agreement remains effective as long
as both Motorola and we continue to manufacture products which use the GSM standard and as long as the licensed GSM/GPRS essential patents remain in force.

In
September 2001, we entered into a cross-license agreement with Philips N.V. whereby Philips has granted us a license to use GSM/GPRS essential patents that Philips owns or
develops for the GSM/GPRS standard in consideration for our payment to Philips of a fixed fee covering all past and future royalties due. In addition, under this agreement, we have granted Philips a
royalty-bearing license to use GSM/GPRS essential patents that we own or develop for the GSM/GPRS standard. The agreement remains in effect for so long as the licensed GSM/GPRS essential patents
remain in force.

In
January 2002, we entered into a cross-license agreement with Siemens AG whereby Siemens has granted us a license to use GSM/GPRS essential patents that Siemens owns or develops
for the GSM/GPRS standard in consideration for our payment to Siemens of a fixed fee covering past royalties due and a royalty percentage based on each GSM/GPRS product we sell in the future. In
addition, under this agreement, we have granted Siemens a royalty-free license to use GSM/GPRS essential patents that we own or develop for the GSM/GPRS standard. The agreement remains in
effect for so long as the licensed GSM/GPRS essential patents remain in force.

In
November 2002, we entered into a patent non-assertion agreement with NEC Corporation whereby NEC has agreed not to assert any NEC GSM/GPRS essential patent against
us, our affiliates, manufacturing partners or customers, in consideration for our payment to NEC of a fixed fee covering past royalties due and a royalty percentage based on each GSM/GPRS product we
sell in the future. In addition, under this agreement we agree not to assert any of our GSM/GPRS patents against NEC, its affiliates, manufacturing partners or customers, and to grant a nonexclusive,
royalty-free and worldwide license to NEC and its affiliates under three WAVECOM patents issued in relation to a current and/or future telecommunication standard selected by NEC within two
years from the effective date of the agreement. The agreement remains in effect until the expiration of the last patent subject to the agreement.

In
May 2003, we entered into a license agreement under which Thomson Licensing S.A., as exclusive agent for Alcatel, granted us a license to use GSM/GPRS essential patents that
Alcatel owns or develops for the GSM/GPRS standard in exchange for our payment to Thomson of a fixed fee covering all past and future royalties due up until December 31, 2008.

20          Wavecom Annual Report Form 20-F 2003

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In
December 2003, we entered into a cross-license agreement with Nokia Corporation, whereby Nokia has granted us a license to use GSM/GPRS essential patents that Nokia owns,
controls or develops for the GSM/GPRS standard in consideration for our payment to Nokia of a fixed fee covering past royalties due and a royalty percentage based on each GSM/GPRS product we sell in
the future. In addition, under this agreement, we have granted Nokia a royalty free license to use GSM/GPRS essential patents that we own or develop for the GSM/GPRS standard. The agreement remains in
effect for as long as the licensed GSM/GPRS essential patents remain in force.

In
order to produce and market CDMA-basedWISMOmodules and wireless modems, we entered into a cross-license agreement with
Qualcomm in May 2002. Under this agreement, Qualcomm has granted us a license to use CDMA essential patents that Qualcomm owns or is able to license for the CDMA standard in consideration for
our payment to Qualcomm of an up-front fee and a royalty percentage based on each CDMA product we sell in the future. In addition, under this agreement, we have granted Qualcomm a
royalty-free license to use CDMA essential patents that we own or develop for the CDMA standard. We have been granted an option to include WCDMA and/or TD-SCDMA at Qualcomm's
then-standard terms and conditions for a license to such standard.

All
of our employment agreements contain provisions that protect our trade secrets by forbidding the unauthorized disclosure of confidential information. Our independent contractors are
required to enter into confidentiality agreements that also assign us rights to inventions they make while engaged by us. We have also entered into non-disclosure agreements to protect our
confidential information delivered to third parties in conjunction with possible collaborations and for other purposes.

In
October 1999, we established an employee patent incentive program designed to recognize employee-inventors and to encourage employee-inventors to sponsor patent applications.
The patent incentive program provides employees who have developed an invention in the course of their employment with cash compensation if and when we file a patent application and a second
cash payment upon the effective commercial use of the patent within five years after the filing of the patent.

To
further promote a "patent spirit" and to encourage the development of patents within the company we created a patent committee in 2003. This committee is led by our Group VP Strategic
Technology and Marketing, Chief Technology Officer. Its activities include: assistance in the review and evaluation of invention proposals, recommendations on such issues as technical merit,
patentability and commercial potential of an invention, as well as support to assure that the patent or other intellectual property rights are adequately protected within Wavecom.

We
currently hold seventeen French patents and one U.S. patent expiring at various dates beginning in 2015. We also have fifty other patent applications currently undergoing evaluation
in France, 13 in the United States and 12 in China. We have begun proceedings for the extension of some of our patents to other jurisdictions including India, Mexico, Brazil, Russia and Hong Kong.

We
have registered trademarks or filed applications for such registration for "WAVECOM", "WISMO",
"WISMOWITHIN", "MUSE Platform" and other trademarks in France. We have also registered these
trademarks or filed applications for such registration in certain other jurisdictions. We have filed a trademark application for the name "Wavecom" in the United States. Another party has a registered
trademark for the name Wavecom in this country and we cannot assure you that our trademark application will be successful.

Backlog

At December 31, 2003 our product backlog was approximately €63 million. We include in our backlog all accepted product purchase
orders for which delivery has been specified within one year, however, we do not require customers to place firm orders more than four months in advance. Product orders in our backlog are subject to
changes in delivery schedules or to cancellations, at our option, considering the commercial relationship we have with the customer who seeks to cancel orders. Our backlog may vary significantly from
time to time depending upon the effect of seasonality on our customers' business and their levels of inventory, the availability of necessary components, and the capacity of our suppliers and our
subcontractors to satisfy

Wavecom Annual Report Form 20-F 2003          21

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our
orders. Accordingly, although useful for scheduling production, backlog as of any particular date may not be a reliable indicator of sales for any future period.

Capital Expenditures

Wavecom's capital expenditures relate primarily to the purchase of laboratory, testing and computer equipment, principally at our headquarters in France. Total
expenditures on property and equipment were €10.3 million in 2001, €27.3 million in 2002 and €11.2 in 2003. All capital expenditures in
2001 and 2002 were internally financed. In 2003, we also utilized long term capital leases to finance our computer infrastructure equipment.

Corporate Information

Wavecom S.A. is asociété anonyme, or limited liability company, organized under the
laws of France in 1993 with authorization to operate for a period of 99 years, which period may be extended by vote of the shareholders. Our registered offices are at 3 esplanade du Foncet,
92442 Issy-les-Moulineaux Cedex, France and our telephone number is +33 (0)1 46 29 08 00. Our principal offices in the United States are at
4810 Eastgate Mall, 2nd Floor, San Diego, CA 92121, and our telephone number at that address is +1 858 362 0101.

Wavecom
S.A. owns majority interests in six subsidiaries:



Property, Plant and Equipment

Our headquarters are located in Issy-les-Moulineaux, a suburb of Paris, France, where we occupy approximately 15,000 square meters of
leased facilities. We also have long-term leases covering a total of approximately 10,000 square meters in two other buildings in Issy-les-Moulineaux, where we had
our headquarters until early 2003. We are actively looking for subtenants for these premises. The leases for the former premises will terminate at various times through May 2008. Remaining
operating lease commitments for these vacated premises totaled approximately €13 million at December 31, 2003. We also currently lease office space in Rennes (France),
San Diego (United States), Tokyo (Japan), Hong Kong (China), Seoul (South Korea), Taipei (Taiwan), Darmstadt (Germany), Beijing (China) and Guilford (United Kingdom).

Risk Management and Insurance Coverage

We have put in place a risk management program whose objective is to protect our resources through the avoidance of risk of loss, while providing financial
indemnity to compensate our company if a loss occurs.

Although
we outsource our production, we encourage our contract manufacturers to put in place practices that safeguard the production processes. These practices include measures designed
both to prevent the occurence of loss and to minimize the losses should an adverse incident occur. Our objective is to transfer to our sub-contractors, to the greatest extent possible, all
exposure to loss in connection with the work they perform for us. The level of risk transferred to the sub-contractor is based upon a number of factors, including the following:



22          Wavecom Annual Report Form 20-F 2003

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When
we made our decision to work with a sole contract manufacturer in China, for example, we worked with the manufacturer to prepare a joint Business Continuity Plan that allocates
certain risk management obligations and risks to our company and others to the contract manufacturer.

When
major contracts are being negotiated, our Group Director of Legal Affairs is involved with the operational team in order to evaluate and limit the contractual risks to our company
and to confirm that the appropriate type and amount of insurance is in place.

We
determine the level of insurance coverage required by evaluating the major risks, coverage availability and cost. We use major international insurance providers, with coverage set by
year or by claim. Our insurance policies include the following coverage levels, subject to specified limitations:



In
order to minimize the costs of managing international insurance contracts, as well as to ensure that coverage is adapted to local needs, each subsidiary is responsible for negotiating
its own insurance covering its employees, property and equipment. However, certain insurance coverage is centralized, including:



Item 5. Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and the related notes, and the other financial information included elsewhere in this annual report. Our consolidated financial statements and our quarterly financial results
included in this discussion have been prepared in accordance with U.S. GAAP. This discussion includes forward-looking statements based on assumptions about our future business. Our actual results
could differ materially from those contained in the forward-looking statements.

Background

The wireless communication sector in which we operate is extremely fast-paced and dynamic, with many types of competitors, both large and small. We
address two main markets, the personal communication device (PCD) market for mobile telephones, connected personal digital assistants and smartphones, and the highly segmented market for vertical
applications which covers a wide variety of end-products that incorporate the wireless communication function, including automobile dashboards, wireless local loop for fixed-wireless
telephones, utility meters, vending machines, and payment and security systems.

In
2001 and 2002, our significant revenue growth was driven primarily by a rapidly expanding market for mobile telephones in China and the success of a small number of key customers. Our
technology was adopted by a major Chinese mobile telephone manufacturer as well as a number of other Chinese and Korean companies whose target market was China. At that time, most of these companies
had a small number of research and development engineers and therefore found that our solutions, which came in the form of modules, could be quickly and easily designed into mobile telephones.
Throughout 2001 and 2002, our solutions enabled these Asian manufacturers to rapidly take market share in the Chinese market, which previously had been dominated by foreign manufacturers. Because our
solutions include all the technology necessary for wireless communications in a pre-packaged form, our price points were generally higher than those of our competitors, who were selling
reference designs built around a few key components that were mainly used to design low-feature, low-cost telephones. As a consequence, our products were most often designed
into our customers' high-end feature-rich phones and not in low-end products. During 2003, the

Wavecom Annual Report Form 20-F 2003          23

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Chinese
market for mobile telephones began to expand and reach some of the inland regions where consumers' incomes are generally lower than in the more affluent coastal regions. From these new
consumers, there was increasing demand for the low-priced, entry-level products that our solutions did not address. In addition, our customers faced mounting competition from both Chinese
and foreign telephone manufacturers, and taking market share became increasingly difficult for them. The cost of our products was too high to be an optimal solution for our main Asian handset
customers, who had driven our sales growth during 2001 and 2002. As a result, they turned to other suppliers and our revenues from this market and overall profitability declined sharply compared to
2002.

In
response to requests from our Asian handset customers, we developed and introduced a new product line called the WISMO Flex. We believe that this solution, which will be priced in
line with our competitors' products, competes more directly with reference design chipset vendors who are the major suppliers to mobile phone manufacturers in both Europe and Asia. A number of our
existing customers have already allocated resources, including R&D teams, to design a variety of new phone models around this platform. The WISMO Flex is expected to be available in volume during the
second half of 2004 and is intended to address a large scope of handsets, with feature-rich multimedia functions at competitive prices.

We
saw our customer portfolio become more balanced, although on a smaller base, in 2003 compared to 2002 and 2001, when our revenues came mainly from a few Asian mobile telephone
manufacturers. For the full year 2003 our top ten customers represented 76% of revenues compared to 90% in 2002 and 88% in 2001. In addition, in 2003, no single customer represented more than 20% of
revenues while in 2002 one customer represented 67% and in 2001 one customer represented 35% and another represented 33% of total revenues. Our customer portfolio in 2003 was also more balanced in
terms of our target markets as sales for use in personal communication devices (PCD) represented 52% of our revenues (with 48% from vertical applications) while in 2002 and 2001 sales for use in PCD
applications represented 82% and 79%, respectively.

The
number and volume of products equipped with wireless connectivity in the vertical markets continue to grow and we believe we have been keeping pace with this overall market growth,
based on our internal estimates. Our revenues generated from the vertical markets totalled €130 million in
2003, marking 33% growth over 2002 when revenues from vertical markets totalled €98 million. Vertical markets revenues totalled €66 million in 2001.

Based
on current revenue forecasts as of the publication of this report, we expect vertical applications to contribute more than half of our revenues in 2004.

With
the ramp in volumes of our WISMO Flex solution (by mid-2004) we should see our average selling prices for use in PCD applications take a substantial step down as
compared to our WISMO Pac and WISMO Quik module solutions (average selling prices for our modules was €47 in the fourth quarter of 2003). However, from a margin perspective, we
continue to target an overall product gross margin of around 30%, which is the average of gross margins from our entire range of WISMO products: WISMO Pac, WISMO Quik and, in the future, WISMO Flex.

Our
customer base is predominantly international, with the majority of our revenues coming from Asia and from European customers outside of France, including Germany, Italy, Spain and
the United Kingdom. Revenues from Asia represented 69% of our sales in 2003, 82% of our sales in 2002 and 84% of sales in 2001. In order to better serve the Asian markets, we established subsidiaries
in Hong Kong, and Seoul; a branch office in Tokyo; and representative offices in Taipei, and Beijing. We also have subsidiaries based in San Diego, California; Darmstadt, Germany and Guilford, UK. As
Asia, and China specifically, is expected to remain the major manufacturing hub for most consumer electronics goods in the future, we expect that this region will remain the source of the majority of
our revenues in the short and long term.

To
better address our customers' needs from both a contact and product standpoint, we established a new organization structure in early 2004. The new organization is built around four
principal divisions. Two divisions serve as our face to the customer and include sales, business development, marketing, product

24          Wavecom Annual Report Form 20-F 2003

---

management,
engineering and customer support addressing our two key target markets: PCDs and Verticals. The other two principal divisions are focused on products and technology.

Critical Accounting Judgments and Estimates

We have identified the most critical accounting principles upon which our financial status depends and that involve the most complex or subjective judgments and
estimates. Our judgment used to determine the appropriate assumptions and to make estimates is based on our historical experience, terms of existing contracts, our observation of trends in the
industry, information provided by our customers and information available from other outside sources. We believe that our most critical accounting estimates are:



Both
of these provisions have an impact on the determination of cost of goods sold. Both are recorded in "other accrued expenses" on the balance sheet and are described more fully in the
footnotes to our annual consolidated financial statements.



Wavecom Annual Report Form 20-F 2003          25

---



International Financial Reporting Standards (IFRS)

In July 2002 the European Commission adopted a directive that will require European companies whose stocks are traded on the public market (Euronext, for
example) to publish their consolidated financial accounts under IFRS (International Financial Reporting Standards). In compliance with this regulation, which takes effect on January 1, 2005, we
will begin publishing our consolidated financial statements in IFRS, rather than in French GAAP. We will continue to publish our financial statements in accordance with U.S. GAAP as well.

Results of Operations

Fiscal year 2003 compared to fiscal year 2002



|                             |                   | Year ended December 31, 2002 |         | % Product
sales |       | Year ended December 31, 2003 |         | % Product
sales |       | Percentage change 2002/2003 |      
|---------------------------- | ----------------- | ---------------------------- | ------- | --------------- | ----- | ---------------------------- | ------- | --------------- | ----- | --------------------------- | -----
|
|Product sales                |                   |                              |         |                 |       |                              |         |                 |       |                             |      
|                             | Wismo             |                              | 513,405 |                 | 93.4  | %                            | 243,843 |                 | 89.7  | %                           | -52.5
|                             | Modem             |                              | 36,138  |                 | 6.6   | %                            | 27,930  |                 | 10.3  | %                           | -22.7
|                             | Total product     |                              | 549,543 |                 | 100.0 | %                            | 271,773 |                 | 100.0 | %                           | -50.5
|Percentage of total revenues |                   | 99.7                         | %       |                 |       | 98.6                         | %       |                 |       |                             |      
|Services                     |                   | 1,546                        |         |                 |       | 3,855                        |         |                 |       | 149.4                       | %    
|Percentage of total revenues |                   | 0.3                          | %       |                 |       | 1.4                          | %       |                 |       |                             |      
|Total Revenues               |                   | 551,089                      |         |                 |       | 275,628                      |         |                 |       | -50.0                       | %    
|Volumes (in 000 of units)    |                   |                              |         |                 |       |                              |         |                 |       |                             |      
|                             | Wismo             |                              | 8,496   |                 | 96.4  | %                            | 5,128   |                 | 94.7  | %                           | -39.6
|                             | Modem             |                              | 319     |                 | 3.6   | %                            | 287     |                 | 5.3   | %                           | -10.0
|                             | Total unit volume |                              | 8,815   |                 | 100.0 | %                            | 5,415   |                 | 100.0 | %                           | -38.6

The
decrease in product revenues in 2003 compared to 2002 was due to lower volumes (representing 76% of the decrease), lower average selling prices (representing 11% of the decrease),
and the decline of the U.S. dollar versus the euro compared to 2002 (representing 13% of the decrease). Nearly all of our sales from Asia-Pacific and the Americas are denominated in U.S.
dollars whereas our reporting currency is euros. Therefore movements between these two currencies impact our reported financial results, and accounted for a portion of the revenue decreases in these
two regions. As detailed in the preceding "Background" section, revenues in the Asia-Pacific region were adversely impacted by events in the Chinese handset market. The decrease in
revenues in the Americas reflected the absence of any single large customer, compared to 2002 when one large customer with a personal digital assistant product contributed significantly to 2002
revenues.

The
lower volumes in 2003 resulted primarily from lower sales to handset customers in the Asia-Pacific region, as our customers reduced orders in order to control their
inventory levels and as our largest customer began to diversify its sources of supply. The average selling price of Wismo modules continued to decline. It decreased by 20% year on year from the fourth
quarter of 2002 to the fourth quarter of 2003, in-line with our management's expectations. Much of this decline is attributed to the weakening of the United States dollar against the euro,
with an average exchange rate of $1.1287 for €1.00 in 2003 compared to an average of $0.9552 for €1.00 in 2002.

We
continued to diversify our customer portfolio in an effort to reduce our reliance on a small number of major customers. For the full year 2003, our top ten customers represented 76%
of total revenues, down from 90% for the full year 2002. No single customer represented more than 21% of revenues in 2003. We also

26          Wavecom Annual Report Form 20-F 2003

---

diversified
our sales by market, substantially increasing the percentage of total sales made to the vertical markets.

Sales
by markets:

As % of total revenues

2002

2003PCD (Personal Communication Devices)

82
%
51
%Vertical Markets:M2M (Machine to Machine)

4
%
5
%Distributors (selling mainly to M2M)

11
%
31
%Automotive

3
%
12
%Services

N/S

1
%


Sales
by geographic regions:

As % of total revenues

2002

2003Asia-Pacific

82
%
69
%Americas

5
%
3
%Europe, Middle East and Africa

13
%
28
%


Service
revenue is generated from the sale of technical support to our customers to assist them in the integration of our Wismo module into their products. We offer this service in order
to promote the sales of Wismo modules. We do not consider it to be a stand-alone business.



|                 |                        | Year ended December 31, 2002 |         | % Product sales |        | Year ended December 31, 2003 |         | % Product sales |       | Percentage change 2002/2003 |      
|---------------- | ---------------------- | ---------------------------- | ------- | --------------- | ------ | ---------------------------- | ------- | --------------- | ----- | --------------------------- | -----
|
|Cost of revenues |                        |                              |         |                 |        |                              |         |                 |       |                             |      
|                 | Cost of product        |                              | 371,919 |                 | 67.7   | %                            | 168,465 |                 | 62.0  | %                           | -54.7
|                 | Cost of services       |                              | 4,709   |                 | 304.6  | %                            | 4,704   |                 | 122.0 | %                           | -0.1 
|                 | Total cost of revenues |                              | 367,628 |                 | 68.3   | %                            | 173,169 |                 | 62.8  | %                           | -54.0
|Gross Profit     |                        |                              |         |                 |        |                              |         |                 |       |                             |      
|                 | On Products            |                              | 177,624 |                 | 32.3   | %                            | 103,308 |                 | 38.0  | %                           | -41.8
|                 | On Services            |                              | -3,163  |                 | -204.6 | %                            | -849    |                 | -22.0 | %                           | -73.2
|                 | Total Gross profit     |                              | 174,461 |                 | 31.7   | %                            | 102,459 |                 | 37.2  | %                           | -41.3

Cost of goods sold.Cost of goods sold consists primarily of the cost of components, our manufacturers' charges and
provisions for royalty and warranty expense.

Our
ability to improve gross margin levels on lower revenues and in the face of declining average selling prices reflects the following factors:



Wavecom Annual Report Form 20-F 2003          27

---







Cost of services.The variability in gross profit or loss on services reflects the fact that we expense all development
service costs as incurred, while we recognize service revenue only when the project is complete and the services have been accepted by the customer.



|                   |                            | Year ended
Dec. 31, 2002 |        | % of
revenues |      | Year ended
Dec. 31, 2003 |        | % of
revenues |      | Percentage
change
2002/2003 |      
|------------------ | -------------------------- | ------------------------ | ------ | ------------- | ---- | ------------------------ | ------ | ------------- | ---- | --------------------------- | -----
|
|Operating expenses |                            |                          |        |               |      |                          |        |               |      |                             |      
|                   | Research and development   |                          | 64,093 |               | 11.6 | %                        | 62,123 |               | 22.5 | %                           | -3.1 
|                   | Sales and marketing        |                          | 26,600 |               | 4.8  | %                        | 27,766 |               | 10,1 | %                           | 4.4  
|                   | General and administrative |                          | 26,163 |               | 4.7  | %                        | 39,141 |               | 14.2 | %                           | 49.6 
|                   | Goodwill impairment        |                          |        |               |      |                          | 4,244  |               | 1.5  | %                           | 100.0
|                   | Stock-based compensation   |                          | 1,587  |               | N/S  |                          | 205    |               | 0.1  | %                           | -98.4
|Total              |                            | 118,443                  |        | 21.5          | %    | 133,479                  |        | 48.4          | %    | 12.7                        | %    

Research and development.Our research and development spending reflects the development efforts related to
newWISMOproducts as we continued to expand our product line and improve software interfaces and development tools. 2003 spending also reflects costs
related to the development of our own baseband and
related components used in hardware platforms launched in the third quarter of 2003. We held R&D expenses to 3% below 2002 expenses.

Sales and marketing.The increase of sales and marketing expenses in 2003 reflects an increase in our presence in the
Asia-Pacific and U.S. markets through our local sales offices, increases in the level of spending at tradeshows and increases in sales commissions to outside agents following a change in
the channel structure in Asia in late 2002. Following a decision taken mid-2002 to take steps to increase our visibility in key markets, we launched our first major print advertising
campaign in the fourth quarter of 2002, which continued throughout the first half of 2003. These additional expenses were partly compensated by cost reductions in other areas.

General and administrative.The principle reason for the increase in G&A expense in 2003 was the costs associated with
consolidating our Paris-based employees into one building, moving from three separate sites. In addition to moving costs, higher rental costs for new facilities and depreciation on new leasehold
improvements, G&A expenses in 2003 included €10.3 million to cover double rent for the period before the moves and a provision for loss associated with the former premises. This
provision reflects management's estimate of the costs to be incurred in order to release us from these lease commitments, including rental costs until such release is obtained.

In
addition, in 2003 we recorded a net increase in the allowance for doubtful accounts of €1.6 million compared to 2002. The increase in the allowance for doubtful
accounts was related primarily to two European distributors, who were replaced during 2003 as we expanded our distribution network in the region. We are in litigation with one of these distributors in
an attempt to recover a total of €700,000 owed to us.

The
overall increase in personnel and in the volume of business over the course of 2002 led us to reinforce the finance and support teams. The increase in G&A spending, therefore,
reflects the strengthening of the finance and administrative team at headquarters and in the Asia-Pacific region, reinforcement of the information systems group and related capital
expenditures. The increase in administrative and financial costs occurred over the course of 2002 and we incurred the related salary and employee expenses and other costs for all of 2003.

28          Wavecom Annual Report Form 20-F 2003

---

Goodwill impairment.In 2000, we purchased a majority interest in a San Diego-based software development company,
Arguin, Inc., and in 2001 purchased the tangible and intangible assets of Iconn Wireless, a San Diego-based CDMA-technology company. Based on our management's estimate of probable
future cash flows related to these activities, which were used for the required annual impairment test under SFAS 142, we determined that it was necessary to write off the remaining goodwill
associated with these acquisitions.

Deferred compensation amortization.We recorded deferred compensation expense in connection with the issuance of founders'
warrants and stock options in September 1998 and February 1999. This deferred expense was amortized on a straight-line basis over the four-year vesting periods of
the warrants and options. Deferred compensation expense related to the September 1998 grants was completely amortized at the end of September 2002 and deferred compensation expense
related to the February 1999 grants was completely amortized in February 2003.

Other income (expense)

Interest income, net.We recorded net interest income of €2.8 million for 2003, compared to
€3.2 million in 2002. Although interest rates paid on our deposits were lower in 2003 compared to 2002, our average cash balances were roughly the same during the two comparable
periods.

Foreign exchange gain (loss).We had a net foreign exchange loss of €2,065,000 for 2003 compared a net loss
of €10,857,000 in 2002. In January 2003, we implemented a hedging program in order to reduce our exposure to movements in the value of the U.S. dollar against the euro. The
hedging program involves the use of forward contracts as well as put and call options to hedge estimated future cash flows.

Income tax expense (benefit).Our €4,400,000 net tax benefit in 2003 (versus expense of
€6,556,000 in 2002), represents principally French research tax credits and French tax carrybacks.

Fiscal year 2002 compared to fiscal year 2001



|                             |                   | Year ended December 31, 2001 |         | % Product sales |       | Year ended December 31, 2002 |         | % Product sales |       | Percentage change 2001/2002 |      
|---------------------------- | ----------------- | ---------------------------- | ------- | --------------- | ----- | ---------------------------- | ------- | --------------- | ----- | --------------------------- | -----
|
|Product sales                |                   |                              |         |                 |       |                              |         |                 |       |                             |      
|                             | Wismo             |                              | 285,787 |                 | 90.0  | %                            | 513,405 |                 | 93.4  | %                           | 79.6 
|                             | Modem             |                              | 31,784  |                 | 10,0  | %                            | 36,138  |                 | 6.6   | %                           | 13.7 
|                             | Total product     |                              | 317,571 |                 | 100.0 | %                            | 549,543 |                 | 100.0 | %                           | 73.0 
|Percentage of total revenues |                   | 98.4                         |         |                 |       | 99.7                         | %       |                 |       |                             |      
|Services                     |                   | 5,093                        |         |                 |       | 1,546                        |         |                 |       | -69.6                       | %    
|Percentage of total revenues |                   | 1.6                          | %       |                 |       | 0.3                          | %       |                 |       |                             |      
|Total Revenues               |                   | 322,664                      |         |                 |       | 551,089                      |         |                 |       | 70.8                        | %    
|Volumes (in 000 of units)    |                   |                              |         |                 |       |                              |         |                 |       |                             |      
|                             | Wismo             |                              | 3,739   |                 | 94.1  | %                            | 8,496   |                 | 96.4  | %                           | 127.2
|                             | Modem             |                              | 234     |                 | 5.9   | %                            | 319     |                 | 3.6   | %                           | 121.9
|                             | Total unit volume |                              | 3,973   |                 | 100.0 | %                            | 8,815   |                 | 100.0 | %                           | -38.6

The
increase in product revenues in 2002 was due principally to increased sales ofWISMOmodules for personal
communication device applications, but in absolute terms sales in all our target markets (automotive, machine to machine as well as personal communication devices) increased.

The
decrease of revenues from services reflects the Company's ongoing efforts to ease the process of integrating theWISMOmodule into
customers' products and therefore reduce the amount of services needed from Wavecom. We recognize service revenues for development work once all work is completed.

Wavecom Annual Report Form 20-F 2003          29

---

The
sales in term of markets and geographic regions are as follow:

Sales
by markets:

As % of total revenues

2001

2002PCD (Personal Communication Devices)

78
%
82
%Vertical Markets:M2M (Machine to Machine)

5
%
4
%Distributors (selling mainly to M2M)

13
%
11
%Automotive

2
%
3
%Services

2
%
N/S


Sales
by geographic regions:

As % of total revenues

2001

2002Asia-Pacific

84
%
82
%Americas

1
%
5
%Europe, Middle East and Africa

15
%
13
%




|                 |                        | Year ended December 31, 2001 |         | % Product sales |      | Year ended December 31, 2002 |         | % Product sales |        | Percentage change 2001/2002 |       
|---------------- | ---------------------- | ---------------------------- | ------- | --------------- | ---- | ---------------------------- | ------- | --------------- | ------ | --------------------------- | ------
|
|Cost of revenues |                        |                              |         |                 |      |                              |         |                 |        |                             |       
|                 | Cost of product        |                              | 254,658 |                 | 80.2 | %                            | 371,919 |                 | 67.7   | %                           | 46.0  
|                 | Cost of services       |                              | 4,718   |                 | 92.6 | %                            | 4,709   |                 | 304.6  | %                           | -0.2  
|                 | Total cost of revenues |                              | 259,376 |                 | 80.4 | %                            | 367,628 |                 | 68.3   | %                           | 45.2  
|Gross Profit     |                        |                              |         |                 |      |                              |         |                 |        |                             |       
|                 | On Products            |                              | 62,913  |                 | 19.8 | %                            | 177,624 |                 | 32.3   | %                           | 182.3 
|                 | On Services            |                              | 375     |                 | 7.4  | %                            | -3,163  |                 | -204.6 | %                           | -943.5
|                 | Total Gross profit     |                              | 63,288  |                 | 19.6 | %                            | 174,461 |                 | 31.7   | %                           | 175.7 

Cost of goods sold.In 2002, our product gross margin increased in each of the four quarters continuing the
trend of sequential quarterly improvements realized throughout 2001. The improvements in gross margin resulted principally from these factors:



Cost of services.The variability in gross profit or loss on services reflects the fact that we expense all development
service costs as incurred, while we recognize service revenue only when the project is complete and the services have been accepted by the customer.

30          Wavecom Annual Report Form 20-F 2003

---



|                   |                            | Year ended
Dec. 31, 2001 |        | % of
revenues |      | Year ended
Dec. 31, 2002 |        | % of
revenues |      | Percentage
change
2001/2002 |      
|------------------ | -------------------------- | ------------------------ | ------ | ------------- | ---- | ------------------------ | ------ | ------------- | ---- | --------------------------- | -----
|
|Operating expenses |                            |                          |        |               |      |                          |        |               |      |                             |      
|                   | Research and development   |                          | 32,634 |               | 10.1 | %                        | 64,093 |               | 11.6 | %                           | 96.4 
|                   | Sales and marketing        |                          | 12,416 |               | 3.8  | %                        | 26,600 |               | 4.8  | %                           | 114.2
|                   | General and administrative |                          | 13,297 |               | 4.1  | %                        | 26,163 |               | 4.7  | %                           | 96.8 
|                   | Goodwill impairment        |                          | 278    |               | 0.1  | %                        |        |               |      |                             |      
|                   | Stock-based compensation   |                          | 1,711  |               |      |                          | 1,587  |               | 0.3  | %                           |      
|Total              |                            | 60,336                   |        | 18.7          | %    | 118,443                  |        | 21.5          | %    | 96.3                        | %    

Research and development.The increase in our research and development spending reflects, in particular, the
development efforts related to newWISMOmodules as we expanded our product line with new modules based on CDMA as well as GSM/GPRS. Research and
development expenses also reflect the significant resources being used to adapt our existing products for new digital wireless standards, including GPRS and W-CDMA.

Sales and marketing.The increase of sales and marketing expenses in 2002 reflects an increase in headcount from 47 people in
2001 to 79 by the end of 2002, as well as increased promotional and advertising spending, particularly in the fourth quarter of 2002. As part of an effort to increase the visibility of Wavecom to
prospective customers, we sponsored a golf tournament in China and ran print advertising in major publications in our main target markets for the first time We also increased the amount of sales
commissions to sales personnel and to sales agents, reflecting the increased level of revenues.

General and administrative.We increased the number of personnel in our general and administrative services (including
finance, legal, corporate communications, human resources, and information systems departments) from 89 at December 31, 2001 to 130 at December 31, 2002. Rent expense increased following
the signing of a new office lease in Issy-les-Moulineaux in July 2002, with the objective of regrouping in 2003 personnel previously spread over three locations.
Insurance and information technology expenses also increased significantly. These increases reflect the growth of our business and the development of our subsidiaries in Asia and in the United States.
In addition, legal and patent attorney fees increased as we continued to negotiate licensing agreements with an increasing number of GSM, GPRS, CDMA and other patent and technology holders, as well as
increasing the number of registrations of our own patents.



Interest income, net.We recorded net interest income of €3,159,000 in 2002, compared to
€3,827,000 in 2001. The decrease in net interest income results from the decline in interest rates over the course of the year, partially offset by higher average cash balances
invested.

Foreign exchange gain (loss).We had a net foreign exchange loss of €10,857,000 in 2002 compared to a net
gain of €142,000 in 2001, due primarily to changes in the value of the U.S. dollar (the primary currency other than the euro in which we invoice sales and make purchases) compared to
the euro. Of the total 2002 loss, €8,415,000 was recognized during the second quarter of the year when the U.S. dollar declined significantly against the euro at the same time as we
began generating significant amounts of U.S. dollar-denominated cash. Foreign exchange losses were incurred on cash balances and accounts receivable denominated in dollars, offset partly by gains on
accounts payable in dollars.

Income tax expense (benefit).With the increased profitability of the group in 2002, we used all tax loss carryforwards
remaining in France during 2002 and recorded a net tax expense of €6,556,000 for the year. The net expense reflects tax expense recognized in all jurisdictions, except the United
States, net of French research tax credits totaling €449,000 in 2002. Our €2,299,000 net tax benefit in 2001 represents principally French research tax credits, offset
slightly by tax expense in certain jurisdictions. Research tax credits are

Wavecom Annual Report Form 20-F 2003          31

---

received
in cash in the fourth year after the period in which they are recorded, if they are not used to offset income taxes payable in France prior to that time.

Selected quarterly operating results

The following table sets forth a summary of Wavecom's unaudited quarterly operating results for each of the eight fiscal quarters in the period ended
December 31, 2003. We have derived this information from our unaudited interim consolidated financial statements which have been prepared on a basis consistent with our audited consolidated
financial statements. The results of operations for any quarter are not necessarily indicative of results for any future period.

|                                                             |                                           | Three months ended       |           
|------------------------------------------------------------ | ----------------------------------------- | ------------------------ | ----------
|
|
|Revenues:                                                    |                                           |                          |           
|                                                             | Product sales                             |                          | €         
|                                                             | Technology development and other services |                          |           
|                                                             |                                           |                          |           
|                                                             | Total revenues                            |                          |           
|Cost of revenues:                                            |                                           |                          |           
|                                                             | Cost of goods sold                        |                          |           
|                                                             | Cost of services                          |                          |           
|                                                             |                                           |                          |           
|                                                             |                                           | Total cost of revenues   |           
|                                                             |                                           |                          |           
|Gross profit                                                 |                                           |                          | 28,032    
|Operating expenses:                                          |                                           |                          |           
|                                                             | Research and development                  |                          |           
|                                                             | Sales and marketing                       |                          |           
|                                                             | General and administrative                |                          |           
|                                                             | Amortization and impairment of goodwill   |                          |           
|                                                             | Deferred compensation amortization        |                          |           
|                                                             |                                           |                          |           
|                                                             |                                           | Total operating expenses |           
|                                                             |                                           |                          |           
|Operating income (loss)                                      |                                           |                          | 6,291     
|Interest and other financial income (expense), net           |                                           |                          | 814       
|                                                             |                                           |                          |           
|Income (loss) before minority interests and income taxes     |                                           |                          | 7,105     
|Minority interests                                           |                                           |                          | 7         
|                                                             |                                           |                          |           
|Income (loss) before income taxes                            |                                           |                          | 7,112     
|Income tax expense (benefit)                                 |                                           |                          | (690      
|                                                             |                                           |                          |           
|Net income (loss)                                            |                                           | €                        | 7,802     
|                                                             |                                           |                          |           
|Basic net income (loss) per share                            |                                           | €                        | 0.53      
|Diluted net income (loss) per share                          |                                           | €                        | 0.51      
|Shares used in computing basic net income (loss) per share   |                                           |                          | 14,841,415
|Shares used in computing diluted net income (loss) per share |                                           |                          | 15,444,491

32          Wavecom Annual Report Form 20-F 2003

---



We believe that period-to-period comparisons of our operating results are not necessarily meaningful. Our quarterly and annual operating results have fluctuated
in the past and are likely to fluctuate significantly in the future. You should not rely on them to predict future performance. Our revenue may fluctuate due to the amount of new customer orders and
the timing in beginning production and delivery of these new orders. The amount and timing of our operating expenses may fluctuate significantly in the future as a result of the timing of these orders
and our development of new products and technologies. For a discussion of factors which may affect our quarterly and annual operating results, see "Item 3Key InformationRisk
FactorsOur quarterly revenues fluctuate significantly and may affect the price of our shares and ADSs."

Recent events

In October 2003 we announced a plan to consolidate all production with one contract manufacturer located in China as well as to reorganize our customer care unit.
Under the restructuring plan, we will terminate a number of employees resulting in an accounting impact which will be reflected in the 2004 financial statements because benefit arrangements were not
defined and announced to employees until January 2004.

On
January 23, 2004, we announced an additional plan to reduce headcount linked to the implementation of a new organizational structure based on our two primary sales markets and
on wireless silicon development. Once the plans are fully implemented, our worldwide headcount is expected to be reduced by about 300 positions. The restructuring will affect employees primarily in
France and in the United States. This plan is expected to cost approximately €10 to €15 million related primarily to headcount reduction and associated charges,
including severance and outplacement packages.

On
February 20, 2004, we signed a memorandum of understanding with the minority shareholders of Arguin Communications, Inc. for the purchase of their remaining minority interest
in Arguin for a total of
$2,135,625. As part of this agreement, certain of the former Arguin shareholders will enter into non-compete agreements for a period of two years.

On
March 23, 2004, our board of directors granted 38,000 founders' warrants to employees of Wavecom S.A. and 3,000 stock options to an employee of Wavecom Asia Pacific,
Ltd. The exercise price is €9.62.

Liquidity and capital resources

We had negative cash flow from operating activities of €5,735,000 for the year ended December 31, 2003 compared to a positive cash flow
from operating activities of €41,867,000 in 2002.

We
had working capital (defined as current assets less current liabilities) of €79,279,000 at December 31, 2003, down from €105,418,000 at
December 31, 2002.

At
December 31, 2003, our capital lease obligations (including the current portion) amounted to €1,280,000, compared to capital lease obligations of
€501,000 at the end of 2002.

We
had €110,705,000 in cash, cash equivalents and short-term investments at December 31, 2003 compared to €134,528,000 at
December 31, 2002. The decrease reflects primarily the impact of the operating loss and capital expenditures during the year.

At
December 31, 2003, we had bank guarantees for €15,978,000 to secure lease payments under office leases signed in December 2000 and July 2002.
These lines were secured by pledged certificates recorded as long-term assets, rather than as cash or short-term investments, because the guarantee has a term greater than one
year.

Based
on our current plans, and despite the cost of the restructuring plan in 2004, we believe that our available capital resources will be adequate to satisfy our cash requirements at
least for 12 months from the

Wavecom Annual Report Form 20-F 2003          33

---

date
of this report. If our plans change, or if we do not achieve profits or if our profits are significantly lower than anticipated, we may need additional funding to remain in business.

Our
contractual obligations consist principally of obligations under capital leases, operating leases, and other short-term obligations.

Payments due by period (amounts in millions)Contractual obligations

Total

Less than
1 year

1-3 years

4-5 years

After
5 yearsCapital lease obligations

€
1.3

€
0.9

€
0.4Operating leases


66.0


11.0


20.4

€
17.6

€
17.0Others


33.7


33.7Total contractual cash obligations

€
101.0

€
45.6

€
20.8

€
17.6

€
17.0


Our
contractual obligations under operating leasing as of December 31, 2003 include approximately €13 million related to leases, expiring in
March 2005, June 2006 and May 2008, for office space which we vacated in mid-2003 following the consolidation of all personnel in
Issy-les-Moulineaux in one building. A €5.8 million provision was recorded at December 31, 2003.

At
December 31, 2003, we had commitments outstanding to purchase approximately €1.2 million in fixed assets, which are expected to be placed in service
during the next
two quarters. Our future capital requirements, the timing and amount of expenditures, and the adequacy of funds available to us will depend on our success in developing and selling new and existing
products, as well as technological and market developments in the wireless communications industry and on other factors, such as headcount growth.

At
December 31, 2003, we had purchase commitments with our third-party manufacturers for future deliveries of products, principally during the first half of 2004. These purchase
commitments totaled approximately €32.5 million.

Interest rate risk

At December 31, 2003, we had €101,441,000 in cash and cash equivalents invested in short-term money-market accounts bearing
variable rates of interest. We had an additional €16 million of pledged securities invested in short-term money market accounts. We had no variable rate debt at
December 31, 2003.

Impact of currency fluctuations

We publish our consolidated financial statements in euro and the functional currency of Wavecom S.A. is the euro. In 2003, we recorded 72% of our total revenues
in U.S. dollars, with virtually all the rest in euro. We purchase many of our components for U.S. dollars and the operating expenses of our U.S. subsidiaries are in U.S. dollars. The operating
expenses of our Hong Kong subsidiary are primarily in Hong Kong dollars, which are closely tied to the U.S. dollar. Most of our other operating expenses are in euros. Dollar purchases and expenses
represented approximately 55% of our cost of revenues and operating expenses in 2003. A strengthening of the euro against the U.S. dollar and other currencies in which we receive revenues could reduce
our reported revenues and our reported operating and net results. We incurred a net foreign exchange loss of €2,065,000 in 2003, a net foreign exchange loss of
€10,857,000 in 2002 and a net foreign exchange gain of €142,000 in 2001.

If
the euro had appreciated by 10% compared to the U.S. Dollar during the year ended December 31, 2003, our revenues would have been €17.9 million lower and
our expenses would have been €15.1 million lower, resulting in an operating loss of €2.8 million greater than the published result. Our net foreign
exchange position is described in Note 5 to our consolidated financial statements.

34          Wavecom Annual Report Form 20-F 2003

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In
January 2003, we began to use a combination of options and forward exchange contracts in order to minimize the risk to our estimated net dollar cash flows over the coming
months. Because these financial instruments do not always hedge specific transactions, they may be accounted for as speculative transactions, with the fair market value of the instruments being
recorded on our balance sheet and their change in market value recognized in our profit and loss accounts at the end of each accounting period.

Item 6. Directors, Senior Management and Employees

Board of Directors and Executive Officers

Our business is managed by our Board of Directors(Conseil d'Administration)and by our Chief Executive Officer
(Directeur Général). French law governing asociété
anonymeand our By-Laws provide that the general management of the company is performed either by the chairman of the Board of Directors or by another individual,
elected by the Board of Directors and bearing the title of Chief Executive Officer. At its meeting held on October 21, 2002, the Board of Directors opted for a dual management structure and
appointed Mr. Michel Alard as Chairman of the Board of Directors and Mr. Aram Hékimian, who previously held the position of Deputy Chief Executive Officer and who is also
a member of the Board of Directors, as our Chief Executive Officer.

Mr. Hékimian
is vested with extensive powers to act under most circumstances on behalf of the company, within the limits set out by the corporate
By-Laws, and has capacity to act on the company's behalf. As the Chief Executive Officer, subject to the prior authorization of the Board of Directors for certain decisions, he therefore
has full authority to manage Wavecom's affairs. The Chief Executive Officer may be removed by the Board of Directors at any time. However, in case of removal without cause, he may be entitled to
damages.

The
chairman of the Board of Directors organizes the work of the Board of Directors. In addition, the chairman is responsible for the proper functioning of the company's managing bodies
and, in particular, has to verify the ability of the board members to perform their mission.

Under
our By-Laws, each director is elected by the shareholders at an ordinary general meeting for a maximum three-year term. Each director must own at least one
Wavecom share. Under French law, a director may be an individual or a corporation. Our board currently has six directors. Directors may resign at any time and their functions as members of the Board
of Directors may be terminated at any time by the shareholders at a general meeting. Directors must resign at the age of 65. A director does not need to be a French national and there is no limitation
on the number of terms that a director may serve. In case of removal without cause, members of the Board of Directors are not entitled to damages, except in certain circumstances.

Under
French law, our Board of Directors sets the guidelines of the company's activity and supervises their implementation. Within the limits set out by the corporate
By-Laws, and the powers expressly granted by law to the general shareholders meetings, the Board of Directors may make any decision with respect to the business of the company. In
addition, the Board of Directors is responsible, among other things, for presenting financial statements to our shareholders and convening shareholders' meetings.

Directors
are required to comply with applicable law and with our By-Laws. Our directors may be jointly and severally responsible for actions that they take contrary to
Wavecom's interests.

Under
French commercial law and our By-Laws, any transaction we enter into (either directly or indirectly or through an intermediary) in which a member of our Board of
Directors, or our Chief Executive Officer, or one of our shareholders holding more than 10% of the voting rights (or, if it is a company, the company controlling it) has a direct or indirect interest
and that is not in the ordinary course of business and/or is not at arm's-length is subject to the prior consent of our Board of Directors. The same applies for transactions between the company and
another company, whenever one of our directors or our Chief Executive Officer is the owner, a partner with unlimited liability, a manager, director, Chief Executive Officer, member of the directorate (directoire)or supervisory board(conseil de surveillance)of such company. Such transactions have to
be reported to the chairman by the concerned person unless when, due to their

Wavecom Annual Report Form 20-F 2003          35

---

subject
matter or their financial impact, they are significant for neither party. Furthermore, the types and the purposes of these transactions must be communicated by the chairman to the Board of
Directors and to the statutory auditors. The interested director is not taken into account for the quorum calculation and his or her vote is not taken into consideration for the calculation of whether
the transaction has been approved by the Board of Directors. Any such transaction concluded without the prior consent of our Board of Directors can be nullified if it causes prejudice to us. The
interested director, or Chief Executive Officer, can be held liable on this basis. Our statutory auditor must be informed of the transaction within one month following its conclusion and must prepare
a special report to be submitted to our shareholders for approval at their next meeting. In the event the transaction is not ratified by our shareholders at a shareholders' meeting, it will remain
enforceable by third parties against us, but we may in turn hold the interested director or Chief Executive Officer, as the case may be, and, in some circumstances, the other members of the Board of
Directors, liable for any damages we may suffer as a result. In addition, the transaction may be cancelled if it is fraudulent. Moreover, certain transactions between a corporation and a member of its
Board of Directors who is a natural person and/or its managing directors, Chief Executive Officer or deputy chief executive, if any, are prohibited under French commercial law. Such prohibition also
applies to natural persons representing a company acting as a board member.

The
following table sets forth the names of the directors of Wavecom, their current positions with Wavecom, the dates of their initial appointment as directors and the expiration dates
of their current term. Dates specified for directors representing corporations relate to the entity represented. Each director's term expires on the date of the annual general meeting of shareholders
that approves our accounts for the year indicated in the table below. Cumulative voting is not permitted.

|Name                                      |  | Age |  | Current position                   |  | Initially appointed |  | Term expires
|----------------------------------------- |  | --- |  | ---------------------------------- |  | ------------------- |  | ------------
|Michel Alard                              |  | 49  |  | Chairman of the Board of Directors |  | 1993                |  | 2004        
|Aram Hékimian                             |  | 48  |  | Director, Chief Executive Officer  |  | 1993                |  | 2004        
|Delphis S.A. represented by Marc Fourrier |  | 50  |  | Director                           |  | 1997                |  | 2006        
|Bernard Gilly                             |  | 47  |  | Director                           |  | 1999                |  | 2005        
|Stephen Imbler                            |  | 52  |  | Director                           |  | 2000                |  | 2005        
|Anthony Maher                             |  | 58  |  | Director                           |  | 2003                |  | 2006        

A
resolution will be submitted at the May 26, 2004 annual shareholders meeting proposing the appointment of Mr. André Chieng as an independent director to
the board and the reappointment of Mr. Michel Alard and Mr. Aram Hékimian. Eleven board meetings were held in 2003 with an average attendance rate of 78%.

36          Wavecom Annual Report Form 20-F 2003

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The
day-to-day operations of Wavecom are managed by our team of executive officers, managed by our Chief Executive Officer. The following table sets forth the
name and current position of each of our executive officers as of the date of this report:

|Name                 |  | Age |  | Current position                                                                                        |  | Current position
since |  | Year joined Wavecom
|-------------------- |  | --- |  | ------------------------------------------------------------------------------------------------------- |  | ---------------------- |  | -------------------
|Michel Alard         |  | 49  |  | Chairman of the Board of Directors                                                                      |  | 1993                   |  | 1993               
|Aram Hékimian        |  | 48  |  | Chief Executive Officer                                                                                 |  | 1993                   |  | 1993               
|Marc Cases           |  | 41  |  | Group VP, Solutions Product Division                                                                    |  | 2004                   |  | 2000               
|Deborah Choate       |  | 40  |  | Group VP, Finance and Administration, Chief Financial Officer                                           |  | 1998                   |  | 1998               
|Luc Degaudenzi       |  | 41  |  | Group VP, Systems & Silicon Product Division                                                            |  | 2004                   |  | 2004               
|Didier Dutronc       |  | 44  |  | Group VP, Personal Communication Devices Business Division, Managing Director Wavecom Asia Pacific Ltd. |  | 2004                   |  | 2003               
|Philippe Guillemette |  | 38  |  | Group VP Strategic Technology and Marketing, Chief Technology Officer                                   |  | 2004                   |  | 1993               
|Etienne Menut        |  | 53  |  | Group VP, Human Resources                                                                               |  | 2004                   |  | 2002               
|Pierre Piver         |  | 43  |  | Group VP, Vertical Markets Business Division                                                            |  | 2004                   |  | 2003               

There
are no family relationships between any of the directors or executive officers of Wavecom.

Directors

Michel Alardhas served as Chairman of the Board since he co-founded Wavecom in 1993. From 1988 to
1993, Mr. Alard was GSM project manager for Matra Communications, a telecommunications equipment company. Before joining Matra, Mr. Alard was joint head of research and development for
CCETT, a joint telecommunication research center of France Telecom and TéléDiffusion de France (TDF). From 1979 to 1982, Mr. Alard was a research
engineer at SFP (Société Française de Production) and TDF, and was involved in television broadcasting. Mr. Alard has engineering degrees from the
Ecole Polytechnique and the Ecole Nationale Supérieure des Télécommunications. Mr. Alard also serves on the Board of Directors of
ILOG, S.A., a French software company listed on Nasdaq and theEuronext Nouveau Marché. Other Wavecom Group directorships:
Wavecom Inc. (U.S.); Wavecom Asia Pacific Ltd. (Hong Kong); Arguin Communications Inc. (U.S.); and Wavecom Korea Co. Ltd. (South Korea).

Aram Hékimian, a co-founder of Wavecom, has served as a director since 1993 and is currently the Chief
Executive Officer (Directeur Général). He was head of the software department for Matra Communications from 1984 until
1993. Prior to joining Matra, he was a software engineer at Marben, a software engineering company, and CS Telecom, a company active in the field of telecommunications and railway signaling systems.
Mr. Hékimian has a masters degree in science and technology from the University of Paris XII. Other Wavecom group directorships: Wavecom Inc. (U.S.); Wavecom Asia
Pacific Ltd. (Hong Kong); Arguin Communications Inc. (U.S.); Wavecom Korea Co. Ltd (South Korea); Wavecom Northern Europe Ltd (U.K.); and Wavecom Deutschland GmbH
(Germany).

Marc Fourrierserved as a director of Wavecom individually from 1993 to 1997 and since 1997, on behalf of Delphis, a company that
specializes in the creation and development of high technology companies. Since 1988, Mr. Fourrier has served as President and Chief Executive Officer of Delphis. Mr. Fourrier received

Wavecom Annual Report Form 20-F 2003          37

---

engineering
degrees from the Ecole Polytechnique and the Ecole Nationale des Ponts et Chaussées, and an M.S. from the Massachusetts Institute of Technology. Mr. Fourrier also
serves on the Board of Directors of ILOG, S.A., a French software company listed on Nasdaq and theEuronext Nouveau Marché.Other outside
directorships include: High Deal, a privately-held French company, and, as representative of Delphis, Dexem, a privately-held French company; and Kiala, a
privately-held Belgian company.

Bernard Gillyhas served as a director of Wavecom since April 1999. He is a partner in the Life Sciences team of Sofinnova
Partners, a European venture capital fund, having joined them in December 2000. From 1992 to 2000, he served as Chief Executive Officer of Transgene, a French biotechnology company listed on
Nasdaq and theEuronext Nouveau Marché. From 1994 to June 1997, Dr. Gilly also served as Research Director of
bioMérieux. Prior to that, he served in various capacities at Pasteur Mérieux, including that of Vice President, Research and Development, from 1990 to 1994. He received
his doctoral degree in bioeconomics from the University of Rennes, and holds an AMP from INSEAD. Other outside directorships include: High Deal, a privately-held French company; Noxxon
Pharma, a privately-held German company; Web'Surg a privately-held French company; Carex, a privately-held French company; Faust Pharmaceuticals, a
privately-held French company; INSERM, a French public institute; CNRS, a French public institute; and ENS Lyon, a French school.

Stephen Imblerhas served as a director of Wavecom since March 2000. He served as President and Chief Financial Officer of Liquid
Audio Solutions until March 2003. He served as President and Chief Operating Officer of Hyperion Solutions through the end of 2001, and as Advisor to the company through August, 2002. Prior to
the 1998 merger between Arbor Software and Hyperion Software that created Hyperion Solutions, Mr. Imbler held the position of Senior Vice President and Chief Financial Officer at Arbor Software
for three years. Prior to joining Arbor Software in 1995, Mr. Imbler served as Senior Vice President of Finance and Operations and Chief Financial Officer for Gupta Corporation, a software
company. Mr. Imbler previously served as Vice President and Chief Financial Officer of Quick Response Services, Inc.; Vice President, U.S. Finance and Operations, and Vice President,
Finance (Oracle Corporate) at Oracle Corporation; and Senior Tax Manager at Peat Marwick, San Francisco. Mr. Imbler received a master's degree in public accounting from the University of Texas
and a bachelor's degree in piano performance from Wichita State University.

Anthony Maherjoined the Wavecom Board of Directors in May of 2003. Mr. Maher had a long professional career at Siemens, having
joined them in 1978. Throughout his career at Siemens, he held various positions in software development and integration, system engineering, architecture and processor design both in Germany and the
U.S. From October 1997 until February 2002, Mr. Maher served as a member of the Managing Board for Siemens Information and Communication Networks Group. In this role he was first
responsible for all ICN European business, then later the U.S. operations. He was the founding chairman of Mustang Ventures, a venture capital unit at Siemens for wireless and wireline business. He
also served as Chairman of the board of Unisphere Networks, Inc. (a Siemens-owned company), which was later acquired by Juniper Networks. He has been a member of Star Ventures, a venture
capital firm since March of 2002. He currently is a director of Cube Optics, Alvarion Ltd., Adva Optical AG and Broadlight. He began his professional career with Bell Telephone Laboratories in
Naperville, Illinois, contributing to hardware and software design as well as system engineering on 4ESS. He graduated cum laude with a Masters degree in Electrical Engineering and Physics from the
University of Illinois in 1969.

Executive officers

Marc Caseshas served as Wavecom's Group VP for the Solutions Product Division since January 2004 and
previously as Group VP of Operations since January 2003 and Group VP of Manufacturing since December 2000. He is a member of the Executive Committee of Wavecom group. Prior to joining
Wavecom, Mr. Cases was Manager of Corporate Sourcing at the research and development headquarters in Italy of Magneti Marelli, a Fiat subsidiary, from 1995 to 2000. From 1992 to 1995, he was an
electronic components purchasing manager for Magneti Marelli. His experience prior to Magneti Marelli included various positions

38          Wavecom Annual Report Form 20-F 2003

---

at
Sextant Avionique in France. Mr. Cases has an engineering degree from the Conservatoire National des Arts et Métiers and a business degree from the Institut d'Administration
des Entreprises.

Deborah Choatehas served as Wavecom's Group VP Finance and Administration and Chief Financial Officer since August 1998. She is a
member of the Executive Committee of the Wavecom group. Prior to joining Wavecom, Ms. Choate was a partner of Ernst & Young Audit in Paris. From 1984 until she joined the Paris office in
1991, Ms. Choate worked in Ernst & Young's San Francisco office and its national headquarters in Cleveland, Ohio. Ms. Choate has a B.S. in business administration from the
University of California at Berkeley. Wavecom Group directorships: Arguin Communications Inc. (U.S.); Wavecom Korea Co. Ltd (South Korea); and Wavecom Northern Europe Ltd (U.K.).

Luc Degaudenzijoined Wavecom in January of 2004 as Director of Research and Development. In our new organization, he has been named Group
VP for the Systems & Silicon Product Division and is a member of the Executive Committee. Immediately prior to joining Wavecom, he served as head of Research and Development for Sony Digital
Telecom Europe then called Sony Ericsson Mobile. From 1997 to 2000 he worked for Alcatel Mobile phones in France as a Projects Department manager. Mr. Degaudenzi also previously worked for AEG
Mobile Communications in Germany, and The Boston Consulting Group in Paris. He has a degree from ENST, Paris and his MBA from INSEAD.

Didier Dutronc,Group VP of the Personal Communications Device Business Division and Managing Director of Wavecom Asia Pacific Ltd,
joined Wavecom in March 2003. He is a member of the Executive Committee of the Wavecom group. Prior to joining Wavecom, he served as Worldwide VP Sales and Marketing for Alcatel Optronics
(1997June 2000) and served as President and CEO of Alcatel Optronics, Inc., in Dallas, Texas (from June 2000 to February 2003 as President and CEO). Prior to
joining Alcatel he also worked for Analog Devices and Texas Instruments. Mr. Dutronc has a degree in electrical engineering from ESME in Paris and received his MBA from IAE in Paris. Wavecom
Group directorships: Wavecom Asia Pacific Ltd. (Hong Kong) and Wavecom Korea Co. Ltd (South Korea).

Philippe Guillemette, has been Group VP of Strategic Technology and Marketing since January 2004. He also serves as Chief
Technology Officer. Prior to assuming his current position, he had served as Group VP of Technology and Chief Technology Officer since January, 2003. From December 2000 to December 2002,
Mr. Guillemette was Group VP of Research and Development. Mr. Guillemette was Assistant Director of Research and Development during 2000, and from June 1995 until
December 1999 he was Director of Software Development. He is a member of the Executive Committee of the Wavecom Group. Prior to joining Wavecom in 1993, Mr. Guillemette was a software
engineer at Nortel Networks. He has an engineering degree from the Ecole d'Ingenieurs en Electronique et Electrotechnique.

Etienne Menut, Group VP for Human Resources joined Wavecom in July 2002 as a consultant and was appointed to his current position
in January 2003. He is a member of the Executive Committee of Wavecom Group. Prior to joining Wavecom, Mr. Menut worked as an independent human resources consultant in France from 1999
to 2002. From 1992 to 1999, he was Human Resources Director of Microsoft France. Mr. Menut also has worked with companies such as Cogema and Matra from 1977 to 1990. He has a master's degree in
Business Law from the University of Angers (France).

Pierre Piverhas served as Wavecom Group's V.P. for the Vertical Markets Business Division since January 2004. Prior to this role,
he was Group VP Europe, Middle East and Africa Region, a position he held from January 2003 when he joined Wavecom. He serves on the Executive Committee of Wavecom Group. Before joining
Wavecom, Mr. Piver was the Managing Director of Infineon Technologies France, which he joined in September 1996 when it was the Semiconductor division of Siemens in France. Previously,
Mr. Piver had occupied various positions in sales and in product marketing from 1985 to 1989 at RTC Compelec (Philips) in Caen (France) and, from 1989 to 1996, at Texas Instruments in
Vélizy (France) and Freising (Germany). Mr. Piver has a degree in Electronic Engineering from ESME (Ecole Spéciale de Mécanique et
d'ElectricitéParis) and a Master in Business Administration from EM Lyon. Wavecom Group directorships: Wavecom Northern Europe Ltd, (UK).

Wavecom Annual Report Form 20-F 2003          39

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Since
the beginning of 2004, three executive officers have left Wavecom: Hervé Gagnard, former Group VP for Corporate Development, Marketing and Communications; Hany
Neoman, former Group VP, Wavecom, Inc.; and Vincent Mouret, former Group VP of Research & Development.

Committees of the Board of Directors

The Board of Directors has established the following committees with a view to assisting the directors in their duties and ensuring that the company acts at all
times in accordance with the highest standards of conduct and transparency:

Audit Committee

The Audit Committee provides assistance to the Board of Directors in fulfilling its oversight responsibility to the Wavecom shareholders, potential shareholders,
the investment community, and others relating to: the integrity of Wavecom's financial statements; the financial reporting process; the systems of internal accounting and financial controls; the
selection and evaluation of the performance of the independent auditors; the independent auditors' qualifications and independence; and the Company's compliance with ethics policies and legal and
regulatory requirements.

The
Audit Committee is directly responsible for the appointment (subject to shareholder ratification) and termination (subject to the limitations of French law regarding the
six-year mandates of statutory auditors), compensation and oversight of the work of the independent auditors, including resolution of disagreements between management and the auditors
regarding financial reporting. The Committee must pre-approve all audit and permitted non-audit services provided by the independent auditors. The Committee is also responsible
for reviewing the audit firms' internal quality control procedures and for assuring, in consultation with management and the Company's independent auditors, the adequacy and effectiveness of the
Company's accounting and financial controls, including Wavecom's policies and procedures to assess, monitor and manage business risk, and legal and ethical compliance programs.

The
Audit Committee must comprise at least three members, all of whom must be independent members of the Company's Board of Directors. The members are appointed by (and may be removed,
with or without cause, by) the Board of Directors. The current members of the Audit Committee are Anthony Maher, Bernard Gilly and Stephen Imbler (Chairman). During 2003 the audit committee met five
times with 100% average attendance.

Nomination and Compensation Committee

The Nomination and Compensation Committee proposes the appointment of independent directors, determines the compensation of the chairman of the board and the
Chief Executive Officer, and advises on managers' and senior officers' compensation. The Committee is also responsible for proposing the level of directors' fees. The current members of the Nomination
and Compensation Committee are Bernard Gilly (Chairman), Anthony Maher and Delphis SA (represented by Marc Fourrier). During 2003 the nomination and compensation committee met six times with an
average attendance of 90%.

Strategic Studies Committee

The Strategic Studies Committee, which includes all members of the board as well as external experts, has the task of sharing information and strategic points of
view on Wavecom's business and activities. Mr. Hékimian is the Chairman of the committee. During 2003 the strategic studies committee met eight times with an average attendance
of 90%.

40          Wavecom Annual Report Form 20-F 2003

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Corporate Governance Committee

The mission of the Corporate governance committee is to assist the Board with the development and implementation of the Company's corporate governance principles,
to determine the composition of Board committees, and to monitor a process to assess Board effectiveness. The Committee is instructed to:



The
Company's Corporate Governance Committee was created by the Board of Directors' on of December 19, 2003. The current members of the Corporate Governance Committee are Michel
Alard, Stephen Imbler and Delphis S.A., Chairman (represented by Marc Fourrier). There were no meetings of this committee during 2003.

Compliance Committee

The Compliance Committee assists the chairman of the board and the Chief Executive Officer in ensuring that the Company complies at all time with all applicable
laws and with all provisions of its internal Code of Ethics and Business Conduct. The members of the Compliance Committee, who are appointed by the Board of Directors, comprise the following members
of management: Deborah Choate (Chief Financial Officer), Claire Oliver (Quality Assurance), Alain Chilot (Risk Management Director) and Etienne Menut (Group VP, Human Resources). Pierre Cosnier (Legal
Affairs Director) is the Chairman of the Compliance Committee. During 2003 the compliance committee met eight times with an average attendance of 77%.

Risk Committee

The Risk Committee provides assistance to the CEO and the Chairman of the Board of Directors in fulfilling their overall responsibility to monitor the risk of the
company. The members of the Risk Committee, who are appointed by the Board of Directors, comprise the following members of management: Chantal Bourgeat, Corporate Finance and Administration Director
(Chairman); Alain Chilot, Risk Management Director; Jean-François Schwebel, Business Operations Director; Pierre Cosnier, Legal Affairs Director.

Corporate Governance Activities

The Board of Directors has adopted the following internal rules and code of business ethics, which formalize and codify the Company's existing policies and
guidelines.

Board of Directors internal rules / Corporate governance code

The internal rules of the Board of Directors, also called Corporate Governance Code (the "Code"), sets out the mission and objectives of the Board of Directors as
well as its functioning rules. The Code also incorporates guidelines relating to the duties of directors with respect to the shares they own in the company. The Code requires that at least a majority
of the members of the Board of Directors be independent, and sets

Wavecom Annual Report Form 20-F 2003          41

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out
the rules for determining independence. Among the criteria for independence, a director would not be considered independent if: he or she is, or has been during the past five years, a salaried
employee or a corporate officer(mandataire social)of the company or of a company's subsidiary; he or she is related to any corporate officer (mandataire social)of the company; he or she is a client, supplier, or a bank playing a significant role for the company; he or she is a statutory
auditor or non-statutory auditor of the company; or he or she holds 10% or more of the company share capital.

We
currently have three independent directors and an additional independent board member will be voted on at the May 26, 2004 Annual Shareholders Meeting.

Code of Ethics and Business Conduct

The Wavecom group Code of Ethics and Business Conduct (the "Code of Conduct") applies to all company directors, officers and employees, regardless of job
function. The aim of the Code of Conduct is to enable the company employees and officers to decide how to proceed when faced with concretesometimes complexsituations by
reference to clear and precise principles. It applies to conduct both within the group and with clients, suppliers and intermediaries. The Code of Conduct also incorporates an internal
"whistle-blowing" procedure and defines the Compliance Committee's role and powers.

Code of Ethics for Senior Financial Management

The Wavecom Group Code of Ethics for Senior Financial Management (the "Code of Ethics") sets forth the basic principles by which Wavecom financial management must
fulfill its responsibilities for accurate, complete and timely financial reporting while at the same time safeguarding Wavecom's assets. The Code of Ethics applies to all members of "senior financial
management," defined as all those with responsibility for financial statement presentation, or for decisions on key accounting policies or judgments, as well as those managers with overall
responsibility for a legal or reporting entity. Senior financial management also includes those with responsibility for communicating financial information to the investment community.
The Code of Ethics incorporates compliance monitoring procedures and provides for the application of sanctions in the event of any violation of its provisions.

Internal controls and procedures for financial reporting

Recently adopted French and U.S. laws and regulations will require us to undertake an ongoing review of the effectiveness of our internal controls and procedures
for financial reporting.

We
began this process in 2002, at which time our external auditors advised our management to:



During
2003 we put a plan in place to monitor progress on the goals set out above. An evaluation of our internal controls and procedures for financial reporting was provided to
management and the Audit Committee.

42          Wavecom Annual Report Form 20-F 2003

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Compensation of Directors and Officers

We paid a total of €2,359,394 in compensation to our directors and executive officers (12 persons) during the year ended December 31, 2003.
Non-salaried board members earn fees based on their attendance at board meetings and committees; €100,104 in such board fees was earned by non-salaried board
members during 2003. Under French law, the aggregate amount of attendance fees to be paid to our board members must be approved by our shareholders at a general meeting and such aggregate amount is
allocated among board members by decision of the board.

In
addition to cash compensation, each of our executive officers (except Mr. Alard and Mr. Hékimian) has received stock options or founders' warrants, and
three non-salaried board members have received warrants. During 2003, we granted stock options and founders' warrants to non-salaried board members to purchase a total of
40,000 shares, with an exercise price of €11.18 per share and an expiration date of May 2008. We also granted stock options and founders warrants to executive officers to
purchase a total of 65,000 shares, with an exercise price of €8.07 per share and an expiration date of March 24, 2013, 10,000 shares, with an exercise price of
€11.18 per share and an expiration date of May 21, 2013 and 62,000 shares, with an exercise price of €11.40 per share and an expiration date of August 26,
2013.

Michel
Alard, Chairman of the Board, received €135,000 in base salary in 2003 (€135,000 in 2002), and was awarded a performance-based bonus of
€33,750 in early 2003 (for 2002 performance). Aram Hékimian, Chief Executive Officer, received €135,000 in base salary in 2003 (€135,000
for 2002), and was awarded a performance-based bonus of €45,000 in early 2003 (for 2002 performance). No performance-based bonus shall be paid in 2004 to either Mr. Alard or
Mr. Hékimian for 2003 performance. In addition, Messrs. Alard and Hékimian have accepted a 20% reduction of their salary for 2004. Both Mr. Alard and
Mr. Hékimian are entitled to the use of company cars or the maintenance of one vehicle in lieu of a company car. Compensation paid to our Chairman and to our Chief Executive
Officer is monitored by the Compensation and Nomination Committee and is set by our Board of Directors. Messrs. Alard and Hékimian do not participate in such decisions and both
are excluded for purposes of the quorum and majority calculations.Performance-based bonuses for Mr. Alard and Mr. Hékimian
are decided by the Board of Directors based on the achievement of personal and company objectives. No salaries or other compensation were paid by any group companies other than Wavecom S.A. Neither
Mr. Alard nor Mr. Hékimian receive any fees related to their positions as members of the Board of Directors, nor are they granted warrants, stock options or founders'
warrants.

Share Ownership and Option and Warrant Information

Except as described in Item 7 below, as of March 31, 2004, each of our directors and executive officers beneficially owns less than 1% of the share capital
of Wavecom S.A (and none of whom has voting rights which are different from those of our other shareholders).

On
September 21, 1998, our shareholders authorized the creation of a stock option plan and a founders' warrant plan for employees. This plan was modified at a shareholders'
meeting on December 19, 2001. As of December 31, 2003, there were outstanding options, founders warrants (BCEs) and warrants (BSAs) to purchase a total of 2,864,529 shares, of which
options, founders warrants and warrants to purchase 278,809 shares were held by our current directors and executive officers. As of December 31, 2003, a total of 100,447 shares were available
for grant pursuant to the stock options, founders' warrants and warrants under the plan.

On
March 23, 2004, the Board of Directors granted options to purchase a total of 41,000 stock options and founders' warrants at an exercise price of €9.62 and with
an expiration date of March 22, 2014.

Wavecom Annual Report Form 20-F 2003          43

---

During
2003, the following ten employees were granted the largest number of stock options or founders' warrants:

|Name             |  | Position                                                         |  | No. of
stock options or
warrants granted |  | Exercise price
per share |                  | Final expiration date
|---------------- |  | ---------------------------------------------------------------- |  | ---------------------------------------- |  | ------------------------ | ---------------- | ---------------------
|Didier Dutronc*  |  | Group VP, Personal Communication Devices Business Division       |  | 25,000
6,000                             |  | €€                       | 8.07
11.40       |                      
|Etienne Menut*   |  | Group VP, Human Resources                                        |  | 20,000
5,000
6,000                       |  | €€€                      | 8.07
11.18
11.40 |                      
|Pierre Piver*    |  | Group VP, Vertical Applications Business Division                |  | 20,000
5,000
6,000                       |  | €€€                      | 8.07
11.18
11.40 |                      
|Marc Cases*      |  | Group VP Solutions Product Division                              |  | 20,000                                   |  | €                        | 11.40            |                      
|Hany Neoman      |  | Group VP for Wavecom, Inc.                                       |  | 20,000                                   |  | €                        | 11.40            |                      
|Vincent Mouret   |  | Group VP Silicon & Systems Product Div.                          |  | 16,000                                   |  | €                        | 11.40            |                      
|Chantal Bourgeat |  | Director, Finance and Administration, Wavecom S.A.               |  | 10,000
5,000                             |  | €€                       | 8.07
11.40       |                      
|Dominique Cyne   |  | Director, Engineering, Wavecom Asia Pacific, Ltd.                |  | 10,000
5,000                             |  | €€                       | 8.07
11.40       |                      
|David McCartney  |  | Director, Sales and Marketing, Wavecom, Inc.                     |  | 10,000
5,000                             |  | €€                       | 8.07
11.40       |                      
|Deborah Choate*  |  | Group VP, Finance and Administration and Chief Financial Officer |  | 12,000                                   |  | €                        | 11.40            |                      

---

44          Wavecom Annual Report Form 20-F 2003

---

During 2003, the following ten employees exercised the largest number of stock options or founders' warrants:

|Name                  |  | Position                                                               |  | No. of
stock options or
founders' warrants
exercised in 2003 |  | Exercise price per
stock option or
founders' warrants
|--------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------------ |  | -----------------------------------------------------
|Philippe Guillemette  |  | Group VP, Technology and Strategic Marketing, Chief Technology Officer |  | 33,336                                                       |  | €                                                    
|Eric Bureau           |  | Director, Systems Software, Wavecom, SA                                |  | 19,000
10,500                                                |  | €€                                                   
|Pierre-Jean Severin   |  | Director, Product Development, Wavecom SA                              |  | 15,211                                                       |  | €                                                    
|François Dambre       |  | Manager, Information Systems, Wavecom, SA                              |  | 4,307
3,417                                                  |  | €€                                                   
|Christophe Boyavalle  |  | Studies Engineer, Wavecom SA                                           |  | 1,902
5,204                                                  |  | €€                                                   
|Christophe Seveau     |  | Deputy Director of Engineering, Wavecom Asia Pacific, Ltd.             |  | 3,100
3,800                                                  |  | €€                                                   
|Jean-Charles Andréani |  | General Manager, Wavecom Asia Pacific Ltd.                             |  | 1,500
5,250                                                  |  | €€                                                   
|Deborah Choate        |  | Group VP Finance and Administration and Chief Financial Officer        |  | 6,000                                                        |  | €                                                    
|Romuald Dorey         |  | Project Manager, Software, Wavecom, SA                                 |  | 5,800                                                        |  | €                                                    
|Thierry Lapousterle   |  | Director, Radio Frequency Department, Wavecom, SA                      |  | 5,800                                                        |  | €                                                    

Options expire ten years after the grant date. Founders' warrants, which were issued to our French tax resident employees, expire after five
years, as is required by French law. Any founders' warrants remaining unexercised at the expiration date automatically convert to stock options with a five-year term remaining. Employees
leaving the company have up to three months following their date of termination of employment to exercise eligible founders' warrants or options; any remaining unvested or unexercised founders'
warrants or options are then forfeited. Founders' warrants were issued to French employees to take advantage of favorable tax treatment for both employees and Wavecom. These tax benefits are not
available for stock options in France. Other than the expiration dates, the terms of the founders' warrants are identical to the stock options.

Employees and independent contractors

The number of employees and independent contractors as of the end of each of the past three years is as follows:

Year ended

Employees

Independent contractors and temporary employees

TotalDecember 31, 2003

692

171

863December 31, 2002

666

236

902December 31, 2001

421

163

584


Wavecom Annual Report Form 20-F 2003          45

---



As is common practice for French companies operating in technology sectors, a fairly significant number (approximately 20%) of the staff at our company are independent contractors and
temporary employees. We have, however, reduced our dependence on independent contractors from year-end 2001 when they represented approximately 38%, to approximately 24% at the end of
2003.

We
have, over the past several years experienced a relatively low employee turnover rate: 2.6% in 2003 and 3.4% in 2002.

We
employ a large number of engineers (both as salaried employees and independent contractors) most of whom are based in France. As of December 31, 2003 the breakdown of staff
(salaried and independent contractors) by functional areas and geography was as follows:

|Function                          |  | % of total
|--------------------------------- |  | ----------
|Research and Development          |  | 60        
|Production, logistics and quality |  | 17        
|Sales and Marketing               |  | 10        
|Finance and Administration        |  | 13        
|
|Europe, Middle-East, Africa       |  | 77        
|Asia-Pacific                      |  | 14        
|Americas                          |  | 9         

Employment
contracts with all French employees are subject to the provisions of theconvention collective SYNTEC, the collective
bargaining agreement applicable to employees in our industry. In addition, as is required by French law, the Company management holds periodic meetings with employee representatives of the workers'
council (comité d'entreprise). Since the beginning of 2004, a Wavecom employee has decided to become a French trade union
(UGICT-CGT) representative within our company.

The
average salary for employees of Wavecom S.A. increased in 2003 to €53,464 from €51,131 in 2002 and €49,668 in 2001. Stock options and
founders warrants awarded to employees represent a potential of 19% of current outstanding shares.

In
an effort to optimize our manufacturing capacity and efficiency, in October 2003 we announced a plan to consolidate all production with one contract manufacturer located in
China as well as to realign our customer care unit, resulting in some headcount reductions. In January 2004, we announced another restructuring plan, which included a new organizational
structure designed to increase our focus on our principal target markets and our customers. In addition, as a cost reduction measure, a number contracts for independent workers will not be renewed
once they expire. Once social and legal obligations (and the review of independent contracts) are complete, we are targeting a worldwide headcount including independent contractors, of approximately
560 as compared to 860 as of December 31, 2003.

46          Wavecom Annual Report Form 20-F 2003

---

Item 7. Major Shareholders and Related Party Transactions

Major Shareholders

The following table sets forth certain information regarding beneficial ownership of our shares (including ADSs) by each person known by us to own beneficially
more than 5% of our outstanding shares (none of whom has voting rights which are different from our other shareholders) as of March 31, 2004, based on our legal share capital of 15,342,789
shares as of that date. To our knowledge, we are not directly or indirectly owned or controlled by any corporation or by any foreign government.

Shares beneficially ownedName of beneficial ownerNumber

PercentMichel Alard(1)

1,909,533

12.4Aram Hékimian(2)

2,250,381

14.7Delphis

1,061,961

6.9David J. Greene and Company LLC(3)

823,409

5.4


---

Major changes in ownership

Several of our directors and executive officers sold shares in our initial public offering in June 1999, in our follow-on public offering in
June 2000 and during the course of 2001, 2002 and 2003. The following table sets forth the related changes in these holdings as a percentage of our legal capital as of the given date:

Name

Percentage at
December 31, 2001

Percentage at
December 31, 2002

Percentage at
December 31, 2003Michel Alard

15.5

13.8

12.6Aram Hékimian

15.8

15.2

14.9Delphis

7.3

7.2

7.0Legal share capital used in calculation

14,717,710

14,810,614

15,107,890


Distribution of Shareholdings

There were thirteen holders of record of our ADSs and approximately 1860 beneficial holders as of March 15, 2004. ADSs held in the U.S. represented
approximately 16% of our issued and outstanding shares as of March 15, 2004. Our ADSs are issued by The Bank of New York, as depositary. Each ADS evidences one share.

Wavecom Annual Report Form 20-F 2003          47

---

Related Party Transactions

In December 2000, we entered into a consulting agreement with Delphis, a major shareholder and member of our Board of Directors. The agreement calls for
Marc Fourrier, who represents Delphis, to provide consulting services in the areas of corporate organization, information systems and general management from time to time, for a maximum of two days
per week. Such services are compensated at the rate of €1,448 per day. During the year ended December 31, 2003, Delphis invoiced €20,031
(€26,157 in 2002 and €17,303 in 2001).

We
were not a party to any other related-party transactions during 2003.

Item 8. Financial Information

Financial Statements

See Item 18 and the financial statements beginning on page F-1 of this annual report.

Legal Proceedings

We were not a party to any material legal proceedings during 2003 and are not currently party to any material legal proceedings, nor are we aware of any
threatened or potential material legal proceedings involving Wavecom, except as described below.

In
April 2003, we received a letter from the French company Novatec SA stating that one of the processes we use to manufacture our WISMOPAC modules violates French and European patents owned by Novatec. The
letter demanded that we cease manufacturing these modules until we have
obtained a patent license from Novatec. We believe the claims made by Novatec in its letter to be without merit and intend to vigorously defend any action that might be brought by Novatec. We filed a
petition of opposition with the "Office European des Brevets", the European patent office for the European patent of Novatec and have initiated a lawsuit in the Paris courts against Novatec, seeking
to nullify their French and European patents, and Novatec replied before the court by submitting written pleadings claiming that we were infringing their patent.

In
December 2003, we filed a lawsuit in the Paris courts against the French company Sagem for counterfeiting the Wavecom brand as well as for unfair competition on the basis of
imitating the look and design of our Integra modem.

Dividends

Wavecom did not declare any dividends in 2001, in 2002 or in 2003. We intend to retain any future earnings for investment in the development and expansion of our
business and do not expect to pay any cash dividends on our shares in the foreseeable future.

48          Wavecom Annual Report Form 20-F 2003

---

Item 9. The Offer and Listing

Price Range of Shares and ADSs

Our shares have been listed on theEuronext Nouveau Marché(7306) of the Paris Bourse since
June 14, 1999 and our ADSs have been quoted on the NASDAQ National Market under the symbol "WVCM" since June 9, 1999. The following table sets forth the range of high and low closing
sale prices of our shares and ADSs for the periods indicated:

Per Share

Per ADSHigh

Low

High

LowYear ended December 31, 1999

€
99.00

€
11.40

$
94.75

$
11.75Year ended December 31, 2000

€
166.90

€
53.00

$
168.87

$
44.00Year ended December 31, 2001

€
67.00

€
16.06

$
67.13

$
15.00Year ended December 31, 2002

€
48.28

€
10.91

$
44.65

$
11.34Year ended December 31, 2003

€
18.66

€
6.59

$
21.65

$
7.42Year ended December 31, 2002First Quarter 2002

€
46.50

€
28.75

$
41.56

$
24.81Second Quarter 2002

€
48.28

€
27.90

$
44.56

$
24.10Third Quarter 2002

€
45.00

€
32.75

$
44.65

$
31.88Fourth Quarter 2002

€
43.00

€
10.91

$
43.09

$
11.34Year ended December 31, 2003First Quarter 2003

€
14.73

€
6.59

$
15.51

$
7.42Second Quarter 2003

€
13.01

€
8.10

$
14.67

$
8.55Third Quarter 2003

€
16.88

€
9.68

$
19.18

$
11.09Fourth Quarter 2003

€
18.66

€
10.15

$
21.65

$
12.98Most recent six monthsSeptember, 2003

€
16.88

€
11.38

$
19.18

$
13.10October, 2003

€
18.66

€
14.70

$
21.65

$
17.40November, 2003

€
16.23

€
14.55

$
18.98

$
17.38December, 2003

€
15.39

€
10.15

$
18.50

$
12.98January, 2004

€
11.45

€
9.92

$
14.78

$
12.54February, 2004

€
10.51

€
8.78

$
13.55

$
11.51March, 2004

€
10.33

€
8.30

$
12.80

$
10.36


On
April 13, 2004, the last reported sale price for our ADSs on The NASDAQ National Market was $11.31 per ADS and the last reported sale price for our shares on the Euronext Nouveau Marchéwas
€9.62 per share.

Item 10. Additional Information

Memorandum and articles of association

General

This section summarizes the material rights of holders of our shares under French law and the material provisions of our By-Laws or statuts. The description of our share capital is only a summary and does not describe everything that our By-Laws contain. Copies of our
By-Laws are publicly available from theregistre du commerce et des sociétésin Nanterre, France, and an
English translation of our By-Laws is attached as exhibit 1 to this annual report. A description of certain limitations affecting shareholders of a French company and the material
rights of holders of our ADSs may be found in Amendment No. 1 to our registration statement on Form F-1, registration number 333-11764, dated and filed with the
Securities and

Wavecom Annual Report Form 20-F 2003          49

---

Exchange
Commission on June 6, 2000, under the headings "Limitations Affecting Shareholders of a French Company" and "Descriptions of American Depositary Receipts," respectively.

Objects and purposes

Our objects and purposes, as specified in Article 3 of our By-Laws, are, in France and abroad: fundamental and applied research, and the
development of systems and products in the areas of radio-transmission, radio-communication, telecommunications, electronics and data processing markets; and, within these sectors: the design,
manufacturing and commercialization of components, products and software; any provision of services; the registration and exploitation of patterns, patents, trademarks, and manufacturing processes;
the establishment, organization, and delivery of lectures, seminars, debates, conferences and more generally of any activity relating to training schemes; the publishing of books, newspapers,
information bulletins, articles and the distribution of any audio-visual aids; the direct or indirect holding of shares within any existing companies or companies to be set up, the business purposes
of which is linked, related or similar to that of the company; and more generally, any industrial, commercial, financial, civil, personal property or real estate operations directly or indirectly
linked to the business purposes stated above or related or similar to business purposes or likely to facilitate the performance or development thereof.

Directors

For additional information regarding our Board of Directors, please see "Item 6Directors, Senior Management and EmployeesBoard of
Directors and executive officers" and "Compensation of Directors and Officers."

Composition of share capital

We have only one class of shares. As of December 31, 2003, this class consisted of 15,342,789 authorized ordinary shares all of which shares were
outstanding as of such date, with a nominal value €1 per share, resulting in a share capital of €15,342,789 in nominal value, as approved by the Board of Directors on
February 6, 2004. This number includes 156,345 shares that are held in treasury and are deemed to be outstanding under French law but have no voting or dividend rights. All of our outstanding
shares are fully paid. Each share is entitled to one vote on all matters submitted to our shareholders.

Dividend and liquidation rights

We may make dividend distributions to our shareholders from net income in each fiscal year (after deductions for depreciation and reserves), as increased or
reduced by any profit or loss carried forward from prior years, and less any contributions to reserves. These distributions are also subject to the requirements of French law and our
By-Laws.

Under
French law, we must allocate 5% of our net profits in each fiscal year to a legal reserve fund until the amount in that fund is equal to 10% of the nominal amount of our share
capital. The legal reserve is distributable only upon our liquidation.

Upon
recommendation of our Board of Directors, our shareholders may decide to allocate all or a part of any distributable profits among special or general reserves, to carry them forward
to the next fiscal year as retained earnings, or to allocate them to the shareholders as dividends. Shareholders holding a certain percentage (according to a formula relating to the Company's share
capital) of our shares or a duly authorized association of shareholders holding their shares in registered form for at least two years and holding a certain percentage (1%) of our voting rights may
require our Board of Directors to propose the declaration of a dividend at an ordinary general meeting of shareholders. If shareholders at this meeting approve the proposal, dividends are declared.

50          Wavecom Annual Report Form 20-F 2003

---

Our
By-Laws provide that reserves that are available for distribution under French law and our By-Laws may be distributed as dividends, subject to shareholder
approval and other limitations. We may distribute dividends in shares instead of paying cash dividends.

If
our interim income statement certified by our auditors shows that we have made distributable profits since the end of the preceding fiscal year, our Board of Directors may, subject to
French law and
regulations, distribute interim dividends without the approval of shareholders. An interim dividend may not exceed distributed profits.

Under
French law, we must distribute dividends to our shareholders pro rata according to their share holdings. Dividends are payable to holders of shares outstanding on the date of the
shareholders' meeting approving the distribution of dividends or, in the case of interim dividends, on the date our Board of Directors meets and approves the distribution of interim dividends. The
actual dividend payment date is decided by our shareholders at an ordinary general meeting, or by our Board of Directors, if no decision is taken by our shareholders. The payment of the dividends must
occur within nine months of the end of our fiscal year. Under French law, dividends not claimed within five years of the date of payment revert to the French State.

In
the event that Wavecom is liquidated, our assets remaining after payment of our debts, liquidation expenses and all of our other remaining obligations will be distributed first to
repay the nominal value of our shares. After these payments have been made, any surplus will be distributed pro rata among the holders of shares based on the nominal value of their shareholdings.

Changes in share capital

We may increase our share capital only with approval of our shareholders at an extraordinary general meeting. There are two methods to increase share capital: the
issuance of additional shares (including the creation of a new class of shares) and the increase in the nominal value of existing shares. We may issue additional shares for cash or for assets
contributed in kind, upon the conversion of debt securities that we may have issued, by capitalization of our reserves or, subject to certain conditions, in satisfaction of our indebtedness. Although
currently we have only one class of shares, French law permits different classes of shares to have different liquidation, voting and dividend rights.

We
may decrease our share capital only with the approval of our shareholders at an extraordinary general meeting. There are two methods to reduce our share capital: the reduction of the
number of shares outstanding and the decrease in the nominal value of our shares. The conditions under which the share capital may be reduced will vary depending upon whether the reduction is
attributable to losses. We may reduce the number of outstanding shares either by an exchange of shares or by the repurchase and cancellation of our shares. Any decrease must meet the requirements of
French company law, which states that all the holders of shares in each class of shares must be treated equally unless the affected shareholders otherwise agree.

Attendance and voting at shareholders' meetings

French companies may hold either ordinary or extraordinary general meetings of shareholders. Ordinary general meetings are required for matters that are not
specifically reserved by law to the extraordinary general meetings: the election of the members of the Board of Directors, the appointment of statutory auditors, the approval of a management report
prepared by the Board of Directors, the approval of the annual accounts, the declaration of dividends and the issuance of bonds. Extraordinary general meetings are required for approval of amendments
to our By-Laws, modification of shareholders' rights, mergers, increases or decreases in share capital (including a waiver of preferential subscription rights), the creation of a new class
of shares, the authorization of the issuance of investment certificates or securities convertible or exchangeable into shares and for the sale or transfer of substantially all of our assets.

Wavecom Annual Report Form 20-F 2003          51

---



Our Board of Directors is required to convene an annual general meeting of shareholders for approval of the annual accounts. This meeting must be held within six months of the end of our
fiscal year. However, the president of thetribunal de commerce, the French commercial court, may order an extension of this six-month
period. We may convene other ordinary and extraordinary meetings at any time during the year. Meetings of shareholders may be convened by our Board of Directors or, if it fails to call a meeting, by
our statutory auditors or by a court-appointed agent. A shareholder or shareholders holding at least 5% of our share capital, a duly authorized association of shareholders holding their shares in
registered form for at least two years and holding a certain percentage (1%) of our voting rights, or the Workers Council or another interested party under certain circumstances, may request that the
court appoint an agent. The notice of a meeting must state the agenda for the meeting.

French
law requires that a preliminary notice of a listed company's general shareholders' meeting be published in theBulletin des Annonces Légales
Obligatoires("BALO") at least 30 days prior to the meeting. The preliminary notice must first be sent to the French securities authority, the Authorité des Marchés
Financiers("AMF") with an indication of the date it is to be published in the BALO. The AMF also
recommends that such preliminary notice be published in a newspaper of national circulation in France. The preliminary notice must include the agenda of the meeting and a draft of the resolutions that
will be submitted to a shareholders' vote. Within 10 days of publication, one or more shareholders holding a certain percentage (according to a formula relating to the Company's share capital)
of our share capital, a duly authorized association of shareholders holding their shares in registered form for at least two years and holding a certain percentage of our voting rights (1%), or the
Employee Committee may propose additional resolutions.

Notice
of a general shareholders' meeting must be sent by mail at least 15 days before the meeting to all holders of registered shares who have held their shares for more than one
month. However, in the case where quorum was not met and the original meeting was adjourned, this time period is reduced to six days. Notice of the meeting must also be published in BALO, after having
first been sent to the AMF. The notice must include the agenda of the meeting and a draft of the resolutions that will be submitted to a shareholders' vote.

Attendance
and the exercise of voting rights at both ordinary and extraordinary general meetings of shareholders are subject to certain conditions. Under our By-Laws, in
order to participate
in any general meeting, a holder of registered shares must have the shares registered in its name in a shareholder account maintained by or on behalf of Wavecom at least one day prior to the meeting.
Similarly, a holder of bearer shares must obtain a certificate (certificat d'immobilisation) from the accredited financial intermediary
(intermédiaire financier habilité) with whom the holder has deposited its shares. This certificate must indicate the
number of bearer shares held and evidence the holding of such shares in its account until the date of the meeting. The certificate must be deposited at a place specified in the notice of the meeting
at least one day before the meeting.

Subject
to the above restrictions, all of our shareholders have the right to participate in our general meetings, either in person or by proxy. Shareholders may vote, either in person,
by proxy or by mail, and their votes are counted in proportion to the number of shares they hold. A shareholder may grant a proxy to his or her spouse, to another shareholder or, if the shareholder is
a corporation, to a legal representative. A shareholder may grant a proxy to us by returning a blank proxy form. In this last case, the chairman of the shareholders' meeting will vote the shares in
favor of all resolutions proposed by the Board of Directors and against all others. Proxy forms will be sent to shareholders upon request. In order to be counted, proxies must be received prior to the
general shareholders' meeting at our registered office or at another address indicated in the notice convening the meeting. We must send our shareholders forms to vote by mail and these forms must be
received by us at least three days prior to the date of a meeting in order to be valid. Under French law, our shares held by entities controlled directly or indirectly by Wavecom are not entitled to
voting rights. There is no requirement that a shareholder have a minimum number of shares in order to be able to attend or be represented at an extraordinary general meeting.

52          Wavecom Annual Report Form 20-F 2003

---

Under
French law, a quorum requires the presence, in person or by proxy (including those voting by mail) of shareholders having at least (1) 25% of the shares entitled to vote in
the case of an ordinary general shareholders' meeting or at an extraordinary general meeting where shareholders are voting on a capital increase by capitalization of reserves, profits or share
premium, or (2) 33.3% of the shares entitled to vote in the case of any other extraordinary general shareholders' meeting. If a quorum is not present at any meeting, the meeting is adjourned.
There is no quorum requirement when an ordinary general meeting is reconvened, but the reconvened meeting may consider only questions which were on the agenda of the adjourned meeting. When an
extraordinary general meeting is reconvened, the quorum required is 25% of the shares entitled to vote, except where the reconvened meeting is considering capital increases through capitalization of
reserves, profits or share premium. For these matters, no quorum is required at the reconvened meeting. If a quorum is not present at a reconvened meeting requiring a quorum, then the meeting may be
adjourned for a maximum of two months. French law regarding quorum requirements as described above do not meet Nasdaq's quorum requirement of Rule 4350(f) of the rules of the Nasdaq stock
market. While Wavecom has received an exemption to this rule from Nasdaq, it makes every effort to encourage shareholder participation at shareholders' meetings, including holding the meetings at
easily accessible sites in central Paris.

At
an ordinary general meeting, approval of any resolution requires the affirmative vote of a simple majority of the votes of the shareholders present or represented by proxy. The
approval of any resolution at an extraordinary general meeting requires the affirmative vote of a two-thirds majority of the votes cast, except that any resolution to approve a capital
increase by capitalization of reserves only requires the affirmative vote of a simple majority of the votes cast. Notwithstanding these rules, a
unanimous vote is required to increase shareholders' liabilities. Abstention from voting by those present or represented by proxy is counted as a vote against any resolution submitted to a vote.

In
addition to the right to obtain certain information regarding Wavecom, any shareholder may, during the two-week period preceding a shareholders' meeting, submit written
questions relating to the agenda for the meeting to our Board of Directors. Our Board of Directors is required to respond to these questions during the meeting.

As
set forth in our By-Laws, shareholders' meetings are held at our registered office or at any other location specified in the written notice.

Preferential subscription rights

Holders of our shares have preferential rights to subscribe on a pro rata basis for an additional number of our shares or any of our other equity securities or
other securities giving a right, directly or indirectly, to equity securities issued by us for cash. Shareholders may waive their preferential rights, either individually or, under certain
circumstances, as a group at an extraordinary general meeting. During the subscription period relating to a particular offering of shares, shareholders may transfer their preferential subscription
rights that they have not previously waived. To the extent permitted under French law, we intend to seek shareholder approval to waive preferential subscription rights at each annual general meeting
of shareholders.

Form and holding of shares

Form of shares

Our By-Laws provide that our shares may be held in either registered or bearer form at the option of the shareholder. Shares traded on the Euronext Nouveau
Marchéare cleared and settled through Euroclear, a continuous net settlement system. We may use the procedure known as titres au porteur identifiableaccording to which
Euroclear will, upon our request, disclose to us the name, nationality, address and number of shares
held by each shareholder. This information may be requested only by us and may not be communicated to third parties.

Wavecom Annual Report Form 20-F 2003          53

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Holding of shares

In accordance with French law concerning the "dematerialization" of securities, the ownership rights of shareholders are represented by book entries instead of
share certificates. Registered shares are entered into an account maintained by us or by a representative that we have nominated, while shares in bearer form must be held in an account maintained by
an accredited financial intermediary on the shareholder's behalf.

With
respect to all shares in registered form we maintain a share account with Euroclear which is administered by BNP Paribas Group, acting through Paribas. In addition, we maintain
accounts in the name of each shareholder either directly or, at a shareholder's request, through such shareholder's accredited intermediary, in separate accounts maintained by BNP Paribas Group,
acting through Paribas on our behalf. Each shareholder's account shows the name and number of shares held and, in the case of shares registered through an accredited financial intermediary, the fact
that they are so held. BNP Paribas Group, acting through Paribas, as a matter of course, issues confirmations to each registered shareholder as to shares registered in a shareholder's account, but
these confirmations do not constitute documents of title.

Shares
held in bearer form are held and registered on the shareholder's behalf in an account maintained by an accredited financial intermediary and are credited to an account at
Euroclear maintained by the intermediary. Each accredited financial intermediary maintains a record of shares held through it and will issue certificates of inscription for the shares that it holds.
Transfers of shares held in bearer form only may be made through accredited financial intermediaries and Euroclear.

Repurchase and redemption of shares

Under French law, we may not acquire our shares except:



The
amounts repurchased under (2) and (3) may not, in either case, result in us holding more than 10% of our issued shares. In the event that such repurchases result in us
holding more than 10% of our issued shares, we are required to transfer any shares in excess of the 10% threshold within one year. French law requires that we cancel any shares in excess of this 10%
limit that have not been transferred within the one-year period. Shares repurchased under (3) may be cancelled by an extraordinary general shareholders' meeting, although no more
than 10% of our registered capital may be cancelled in any 24-month period.

At
a general meeting of shareholders held on June 17, 2002, our shareholders extended until December 16, 2003 our authorization to acquire shares for the purpose of making
purchases or sales according to the market situation, making purchases or sales with a view to adjusting the market price by going against market trends, having at its disposal shares to be used in
the context of the implementation of share purchase programs intended for employees, having at its disposal shares intended to be handed over in the context of an acquisition or exchange, minimizing
the dilution effect in the case of issue of transferable securities, and/or, using the cash surplus. On May 22, 2003, our shareholders renewed this authorization for an additional
18 month period. A resolution will be put forth at the general shareholders meeting of May 26, 2004 to approve a new share repurchase program to replace the current one. We are required
to notify the AMF (French stock market authority) on a monthly basis of our trading program in our own shares.

When
we purchase our own shares, they must be held in registered form and be fully paid. These shares are deemed to be outstanding under French law, but are not entitled to any dividends
or voting rights, and we

54          Wavecom Annual Report Form 20-F 2003

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may
not exercise preferential subscription rights. Our shareholders, at an extraordinary general meeting, may decide not to take such shares into account in determining the preferential subscription
rights attached to the other shares. In the absence of such a decision, the rights attached to any shares held by us must either be sold on the market before the end of the subscription period or
distributed to other shareholders on a pro rata basis.

As
of December 31, 2003, we held 156,345 shares at prices ranging from €7.94 to €8.69. All transactions took place during the month of
March 2003.

Cross-shareholdings and holding of our shares by our subsidiaries

French law prohibits a company from holding our shares if we hold more than 10% of that company's share capital, and we may not own any interest in a French
company holding more than 10% of our share capital. In the event that a cross-shareholding violates this rule, the company owning the smaller percentage of shares in the other company must sell its
interest. Until sold, these shares are deprived of their voting rights. Failure by the officers and directors of a company to sell these shares is a criminal offense.

In
the event that one of our subsidiaries holds our shares, these shares are deprived of their voting rights. However, French law does not require the subsidiary to sell the shares.

Requirement for holdings exceeding certain percentages

French law provides that any individual or entity, acting alone or in concert with others, that holds, directly or indirectly, more than 5%, 10%, 20%,
332/3%, 50% or 662/3% of our outstanding voting shares (including a holder of ADS) or the voting rights attached to our shares, or that increases or decreases its
shareholding or voting rights thereof by any such percentage, must notify us by registered letter (with return receipt) within 5 trading days of crossing such thresholds either above or below. A
resolution relative to this time limit will we brought before the next annual shareholders meeting on May 26, 2004 in order to conform to the most recent regulations concerning financial
safety, amended in article L. 233-7 of the French commercial code. The new time limit specifies that declarations must be made "within five trading days, inclusive, from the date
that the threshold is crossed by virtue of ownership of the total number of shares held". Such individual or entity must also notify the AMF by registered letter (with return receipt) within five
trading days of crossing such threshold, either above or below. A filing fee, determined by the AMF, may be assessed at the time a declaration is made. Information regarding the passing of thresholds
of ownership is made public by the AMF. Failure to comply with the above stated stipulations and at the request of one our several shareholder owing at least 5% of share capital or the voting rights
attached to those shares, may result in the suspension of voting rights at all shareholders meetings which could be held up until the expiration of a time limit of two years, inclusive, from the date
that a corrective declaration is made. In case of the crossing of the 10% and 20% thresholds, the individual acting alone or in concert with others, must notify the AMF by registered letter (with
return receipt) within ten trading days of his intentions as to the objectives he is pursuing.

To
permit holders to give the required notice, we are required to publish in the BALO (the official journal for legal notifications in France) no later than 15 calendar days after the
annual ordinary general meeting of shareholders information with respect to the total number of voting rights outstanding as of the date of such meeting. In addition, if the number of outstanding
voting rights changes by 5% or more between two annual ordinary general meetings, we are required to publish in the BALO, within 15 calendar days of such change, the number of voting rights
outstanding and provide the AMF with written notice of such information. The AMF publishes the total number of voting rights so notified by all listed companies in a weekly notice
(avis), indicating the date that each such number was last updated.

Wavecom Annual Report Form 20-F 2003          55

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Material Contracts

This section provides a summary of all material contracts to which we are a party and that are to be performed in whole or in part after the date hereof or that
have otherwise been entered into during the two immediately preceding financial years. We have filed each of the agreements with the U.S. Securities and Exchange Commission, and copies of the
agreements are in some case available on the SEC's website (www.sec.gov) or, if not, then they may be obtained from the SEC itself.

In
June 1999, we entered into a contract for manufacturing and related services with Solectron-France S.A. Pursuant to this agreement, Solectron manufactures, assembles and tests
ourWISMOmodule lines. We are required to provide Solectron with certain specified components necessary for the manufacturing of WISMOmodules and Solectron provides
other specified components. The agreement was set to expire on June 30, 2002 but was extended by an
amendment. We are currently in the process of renegotiating the terms of the extended agreement.

In
January 1999, October 2001, January 2002, May 2002, November 2002, May 2003, and December 2003, we entered into cross-license
agreements or similar agreements with Motorola Inc., Philips N.V., Siemens A.G., Qualcomm Inc., NEC, Alcatel and Nokia, respectively. For a summary of each of these agreements, please
see "Item 4Information on the CompanyIntellectual Property".

In
October 2003, we entered into an agreement with TCL Mobile Communication Co., Ltd. to supply our Compact Phones Development Lab solution for use in several of
TCL's mobile telephones. The agreement calls for the delivery of 2.5 million hardware units (WISMO Quik, Pac or Flex) within 18 months from the first CTA (China Type
Approval) of a TCL device under this agreement.

Exchange Controls

See "Limitations Affecting Shareholders of a French Company" in Amendment No. 1 to our registration statement on Form F-1, registration
number 333-11764, dated and filed with the Securities and Exchange Commission on June 6, 2000.

Taxation

General

The following discussion generally summarizes the material French tax consequences and the material U.S. federal tax consequences of the purchase, ownership and
disposition of shares or ADSs by U.S. holders. U.S. holders are holders who are for United States federal income tax purposes:



and,
solely for purposes of the discussion of French tax consequences below, only the above-described holders:



56          Wavecom Annual Report Form 20-F 2003

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This
discussion may not describe all of the tax considerations related to the purchase, ownership and disposition of shares or ADSs that may be relevant to a holder in light of that
holder's particular tax situation. In particular, this discussion deals with holders that hold shares or ADSs as capital assets, as that term is defined in the U.S. Internal Revenue Code, and does not
address special tax rules applicable to special classes of taxpayers, such as U.S. expatriates, regulated investment companies, financial institutions, insurance companies, holders that own, directly,
indirectly or by attribution, 10% or more of our outstanding voting share capital, tax-exempt organizations, securities dealers, persons subject to the alternative minimum tax, persons who
are owners of an interest in a partnership or other pass-through entity that is a holder of shares or ADSs, persons that will hold shares or ADSs as part of an integrated investment,
including a straddle, hedging or conversion transaction, comprised of shares or ADSs and one or more other positions for tax purposes and persons that have a functional currency other than the U.S.
dollar. The following summaries also do not discuss the tax consequences of the exchange or other disposition of foreign currency in connection with the purchase or disposition of shares.

The
statements on United States tax law are based on the tax laws and practice of the United States, and the statements on French tax law are based upon the tax laws and practice of
France, in effect on the date of this annual report, as well as on the current U.S.-French income tax convention, all of which are subject to change. In addition, the statements are based in part upon
the representations of the Bank of New York and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

This
discussion is intended to be a general summary and shall not constitute a complete and in depth analysis of all potential tax effects that may affect ownership or disposition of the
shares or ADS and shall not encompass all individual particularities. Owners and prospective purchasers of shares or ADSs are urged to consult their own advisors as to the tax consequences of the
purchase, ownership and disposition of shares or ADSs in light of their particular circumstances, including the effect of any state or local and other foreign tax laws.

French Taxation of U.S. Holders

The following discussion generally summarizes the material French tax consequences to U.S. holders of the acquisition, ownership and disposition of shares or
ADSs.

Holders of ADSs deemed to be owners of shares.For purposes of the U.S.-France income tax convention, owners of ADSs will be
treated as the owners of the shares represented by such ADSs. Exchanges, deposits and withdrawals of shares for ADSs or ADSs for shares by a holder will not result in the imposition of French tax.

Wavecom Annual Report Form 20-F 2003          57

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Dividends.Under French law, a French resident is generally entitled to a tax credit (called the avoir
fiscal)equal to a percentage of the dividends received from French companies such as ours. This percentage is:



The
U.S.-France income tax convention generally provides that a resident of the United States shall be entitled to theavoir fiscal(or a portion
thereof), subject to deduction for French withholding tax, for dividends received to the extent that a resident of France would have been entitled to theavoir
fiscalfor such dividends. Under the U.S.-France income tax convention, dividends and theavoir fiscalare subject to French
withholding tax rate at a reduced rate of 15%. To claim the reduced French withholding tax rate of 15% and to claim theavoir fiscal, a U.S. holder must
satisfy certain certification and filing requirements. Amounts distributed as dividends by French companies out of profits which have not been taxed at the ordinary corporate income tax rate, or which
have been earned and taxed more than five years before the distribution, are subject to an additional equalization tax (calledprécompte)
equal to 50% of the net amount distributed.

Non-individual
shareholders will no longer be entitled to theavoir fiscalas of January 1, 2005. In addition, U.S.
holders of shares or ADSs should be aware that the French Budget Law for 2004 (No. 2003-1311 dated December 30, 2003) provides for the elimination of both the avoir fiscaland theprécomptewith respect to all dividends paid on or after
January 1, 2005. The French Budget Law for 2004, however, provides for the implementation of a temporary equalization tax that will be levied at the rate of 25% (assessed on the net dividends
before French withholding tax) on dividends paid in 2005 from profits that have not been taxed at the ordinary corporate income tax rate or that have been earned and taxed more than five years before
the distribution.

We
do not expect to pay dividends in the foreseeable future. If we do pay a dividend, U.S. holders are urged to consult their own tax advisors as to the application of the U.S.-France
income tax convention and the tax law of France to their particular circumstances.

Sale, exchange or other disposition of shares or ADSs.Under the U.S.-France income tax convention, no French tax is levied
on any capital gain derived from the sale, exchange or other disposition of shares or ADSs by a U.S. holder.

Estate and gift tax.Under the estate and gift tax convention between the United States and France dated November 24,
1978, a transfer of shares or ADSs by gift or by reason of the death of a U.S. holder entitled to benefits under that convention will not be subject to French gift or inheritance tax, unless the donor
or the decedent was domiciled in France at the time of making the gift, or of his or her death, or the shares or ADSs were used or held for use in the conduct of a business or profession through a
permanent establishment or fixed base in France.

Wealth tax.The French Wealth Tax(impôt de solidarité sur la
fortune)does not apply to a U.S. holder, provided that the holder does not own, individually or with related persons, directly or indirectly, shares or ADSs which collectively
represent the right to at least 10% of the corporate earnings and the shares or ADSs are not part of the assets of a permanent establishment or a fixed base located in France.

Transfer taxes.Transfers of a listed company's shares will not be subject to French registration or transfer taxes, unless
the transfer is effected by means of a written agreement that is executed within France. Should such written agreement be executed within France, it would be subject to transfer taxes at the rate of
1% to a maximum of €3,049 per transaction. A stock exchange stamp tax may be due in some cases.

58          Wavecom Annual Report Form 20-F 2003

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U.S. Taxation of U.S. Holders

The following discussion generally summarizes the material U.S. federal tax consequences to U.S. holders of the purchase, ownership and disposition of shares or
ADSs.

Holders of ADSs deemed to be owners of shares.For purposes of the U.S. Internal Revenue Code, a U.S. holder of ADSs will be
treated as the owner of the underlying shares represented by such ADSs. Exchanges, deposits and withdrawals of shares for ADSs or ADSs for shares by a U.S. holder will not result in recognition of
gain or loss for U.S. federal income tax purposes.

Dividends.Subject to the discussion below under the heading "Passive Foreign Investment Company", the gross amount of a cash
distribution (including the amount of foreign taxes, if any, withheld therefrom) paid on a share or ADS will be a dividend for U.S. federal income tax purposes to the extent paid out of our current
and accumulated earnings and profits (as determined for U.S. federal income tax purposes).Avoir fiscaland précomptepayments will be considered
dividends to the same extent. To the extent that a distribution exceeds our earnings and profits,
it will be treated as a non-taxable return of capital to the extent of the U.S. holder's adjusted tax basis in such share or ADS and thereafter as capital gain. Dividends paid by us
generally will be treated as foreign source income and will not be eligible for the dividends-received deduction generally allowed to corporate shareholders under the U.S. federal income tax law.

Dividends
paid in euro will be includable in income in a U.S. dollar amount based on the prevailing U.S. dollar-euro exchange rate on the date of receipt by the depositary,
in the case of ADSs, or the date of receipt by the U.S. holder of shares, whether or not the payment is converted into U.S. dollars at that time. A U.S. holder will have a tax basis in any euro
distributed equal to such U.S. dollar amount. Any gain or loss recognized upon a subsequent sale or conversion of the euro generally will be U.S. source ordinary income or loss. A U.S. holder may also
recognize foreign currency gain or loss, which will be U.S. source ordinary income or loss, on a subsequent conversion or other disposition of the refund of the excess withholding tax initially
withheld from a dividend payment if the refund is converted into U.S. dollars at an exchange rate different than the rate used to translate the U.S. holder's dividend income.

Dividend
income is generally taxed as ordinary income. However, as a result of recent U.S. tax legislation, a maximum U.S. federal income tax rate of 15% will apply to "qualified
dividend income" received by
individuals (as well as certain trusts and estates) in taxable years beginning after December 31, 2002 and before January 1, 2009, provided that certain holding period requirements are
met. "Qualified dividend income" includes dividends paid on shares of U.S. corporations as well as dividends paid on shares of "qualified foreign corporations" if, among other things: (i) the
shares of the foreign corporation are readily tradable on an established securities market in the U.S. or (ii) the foreign corporation is eligible with respect to substantially all of its
income for the benefits of a comprehensive income tax treaty with the U.S. which contains an exchange of information program (a "qualifying treaty"). ADRs backed by our shares are readily tradable on
the NASDAQ National Market. In addition, the U.S.-France income tax convention is a qualifying treaty. Accordingly, we believe that dividends paid by us with respect to our shares or ADSs should
constitute "qualified dividend income" for U.S. federal income tax purposes, provided that the holding period requirements are satisfied and none of the other special exceptions apply.

The
amount of foreign income taxes that may be claimed as a credit against U.S. federal income tax in any year is subject to certain complex limitations and restrictions, which must be
determined on an individual basis by each U.S. holder. The limitations include, among others, rules that may limit foreign tax credits allowable with respect to specific classes of income to the U.S.
federal income taxes otherwise payable with respect to each such class of income. Dividends paid by us generally will be foreign source "passive income" or "financial services income" for U.S. foreign
tax credit purposes.

We
do not expect to pay dividends in the foreseeable future. If we do pay a dividend, U.S. holders are urged to consult their own tax advisors as to the application of the U.S.-France
income tax convention and the Jobs and Growth Tax Relief Reconciliation Act of 2003 to their particular circumstances.

Wavecom Annual Report Form 20-F 2003          59

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Sale, exchange or other disposition of shares or ADSs.Unless a nonrecognition provision applies, upon a sale, exchange or
other disposition of shares or ADSs, a U.S. holder will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the amount realized (determined in U.S. dollars)
upon the disposition and such U.S. holder's adjusted tax basis in the shares or ADSs. Subject to the discussion below under the heading "Passive Foreign Investment Company", such gain or loss
generally will be a capital gain or loss. Such capital gain or loss will be long-term capital gain or loss if the U.S. holder has held the share or ADS for more than one year at the time
of the disposition. If the U.S. holder is an individual, trust or estate, long-term capital gain realized upon a disposition of a share or ADS after May 5, 2003 and before the end
of a taxable year which begins before January 1, 2009 generally will be subject to a maximum U.S. federal income tax rate of 15%. Gains on the sale of shares or ADSs held for one year or less
will be treated as short-term capital gain and taxed as ordinary income at the U.S. holder's marginal income tax rate. Capital losses may only be used to offset capital gains, except that
U.S. individuals may deduct up to $3,000 of net capital losses against ordinary income. U.S. holders should consult their own tax advisors regarding the availability of this offset.

No
French tax is imposed on the capital gains of a U.S. holder arising from the sale, exchange or other disposition of shares or ADSs provided that certain requirements of the
U.S.-France income tax are satisfied. See "French Taxation of U.S. HoldersSale, Exchange or Other Disposition of Shares or ADSs". In the event that French tax is imposed on capital gains
from the sale, exchange or
other disposition of shares or ADSs, U.S. holders should consult their own tax advisors with respect to their ability based on their particular circumstances to credit such tax against their U.S.
federal income.

The
surrender of ADSs in exchange for shares and the surrender of shares in exchange for ADSs will not be a taxable event for U.S. federal income tax purposes. Accordingly, a U.S. holder
will not recognize any gain or loss upon such surrender.

Passive Foreign Investment Company.We believe that we will not be treated as a passive foreign investment company, or PFIC,
for U.S. federal income tax purposes for our current taxable year ending December 31, 2004, or for future taxable years. However, a company's status as a PFIC is a factual determination made on
a year to year basis and depends on, among other things, a valuation of the company's assets, including goodwill and other intangible assets. We intend to use reasonable efforts to avoid PFIC status,
but can give no assurance that we will be successful.

We
will be classified as a PFIC in a particular taxable year if either:



If
we are classified as a PFIC, generally any gain recognized by a U.S. holder upon the sale or disposition of our shares or ADSs, or the receipt of certain distributions, would be treated as ordinary
income. In this case, this income would be allocated over the U.S. holder's holding period for the holder's shares or ADSs, would be taxed at the highest applicable tax rate in effect for the year to
which it is allocated, and an interest charge would be imposed on the amount of deferred tax attributable to the income allocated to prior taxable years.

If
we were determined to be a PFIC, however, a U.S. holder could elect to treat the shares or ADSs as an interest in a qualified electing fund, by making a "QEF Election," in which case,
the holder would be required to include in income the holder's proportionate share of our income and net capital gain in years in which we were a PFIC, but any gain subsequently recognized upon the
sale by the holder of the shares or ADSs would generally be taxed as a capital gain. Alternatively, if our stock were treated as marketable stock for PFIC purposes, a U.S. holder could make a
"Mark-to-Market Election", pursuant to which the holder would be required to include as ordinary income annually the excess of the fair market value of the shares or ADSs

60          Wavecom Annual Report Form 20-F 2003

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over
the holder's tax basis therein. Any gain subsequently recognized upon the disposition by the holder of the shares or ADSs would also be taxed as ordinary income in the year of the disposition.
The holder's basis in the shares or ADSs would be adjusted to reflect any such income amounts.

We
will continue to monitor our status in relation to our being considered a PFIC, and we will take reasonable steps to notify U.S. holders if we believe we are properly classified as a
PFIC to enable U.S. holders to consider whether or not to make a QEF Election or make a Mark-to-Market Election. In addition, we intend to comply with the applicable
information reporting requirements so that U.S. holders are able to make a QEF Election.

U.S.
holders are urged to consult their own tax advisors concerning the potential application of the PFIC rules to their ownership and disposition of shares or ADSs. U.S. holders also
should consult with their own tax advisors regarding the eligibility, manner and advisability of making the QEF Election or Mark-to-Market Election if we are treated as a PFIC.

Information reporting and backup withholding.Dividend payments with respect to shares or ADSs and proceeds from the sale,
exchange or other disposition of shares or ADSs may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding (currently at a 28% rate). Backup
withholding will not apply to a U.S. holder, however, if the holder furnishes a correct taxpayer identification number and makes any other required certification or if the holder is otherwise exempt
from backup withholding. If the U.S. holder is required to establish the holder's exempt status or provide other certifications, the holder generally must provide such certifications on U.S. Internal
Revenue Service Form W-9.

Backup
withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder's U.S. federal income tax liability, and the holder may obtain a
refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information.

Documents on Display

We are subject to the reporting requirements of the U.S. Securities Exchange Act of 1934 (the "Exchange Act") applicable to foreign private issuers. In connection
with the Exchange Act, we file reports, including this annual report on Form 20-F, and other information with the Securities and Exchange Commission. Such reports and other
information are available on the SEC's Edgar website at www.sec.gov, and may also be inspected and copied at prescribed rates at the public reference facilities maintained by the SEC at its Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports and other information may be obtained, upon written request, from The Bank of New York, as depositary, at its office
located at 101 Barclay Street, New York, NY 10286.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

The following discusses our exposure to market risk related to changes in interest rates, equity prices and foreign currency exchange rates. This discussion
contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors, including those set forth in the Risk Factors
section.

As
of December 31, 2003, all of our cash and cash equivalents were classified as available-for-sale. The principal portion of our investments are not
subject to interest rate risk; however, declines in interest rates over time will reduce our interest income. A hypothetical 10% move in interest rates would have an insignificant effect on our
financial position, results of operations and cash flows. We do not have any investments in equity or debt securities traded in the public markets, nor do we currently use interest rate derivative
financial instruments. Therefore, we do not currently have any direct equity price risk.

Wavecom Annual Report Form 20-F 2003          61

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We
publish our consolidated financial statements in euro and the functional currency of Wavecom S.A. is the euro. In 2003, we recorded 72% of our total revenues in U.S. dollars, with
virtually all the rest in euro. We purchase many of our components for U.S. dollars and the operating expenses of our U.S. subsidiaries are in U.S. dollars. The operating expenses of our Hong Kong
subsidiary are primarily in Hong Kong dollars, which are closely tied to the U.S. dollar. Most of our other operating expenses are in euros. Dollar purchases and expenses represented approximately 55%
of our cost of revenues and operating expenses in 2003. A strengthening of the euro against the U.S. dollar and other currencies in which we receive revenues could reduce our reported revenues and our
reported operating and net results. We incurred a net foreign exchange loss of €2,065,000 in 2003, a net foreign exchange loss of €10,857,000 in 2002 and a net foreign
exchange gain of €142,000 in 2001.

In
January 2003, we began to use a combination of options and forward exchange contracts in order to minimize the risk to our estimated net dollar cash flows over the coming
months. Because these financial instruments do not always hedge specific transactions, they may be accounted for as speculative transactions, with the fair market value of the instruments being
recorded on our balance sheet and their changes in market value recognized in our profit and loss accounts at the end of each accounting period.

See
also Item 5: "Operating and Financial Review and ProspectImpact of currency fluctuations" and note 5 to our Consolidated Financial Statements.

Item 12. Description of Securities other than Equity Securities

Not applicable

62          Wavecom Annual Report Form 20-F 2003

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Not applicable

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Use of Proceeds

We successfully completed a public offering of our securities in June 2000, with net proceeds to Wavecom of €96.5 million.

In
2001, we used approximately €4.9 million to purchase property and equipment. In 2002, we used approximately €27.3 million to purchase
property and equipment. In 2003, we used approximately €11.2 million to purchase property and equipment. At December 31, 2003, €52.9 million of the
offering proceeds remained available.

Item 15. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2003. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31, 2003, our disclosure controls and procedures were (1) designed to ensure that material information
relating to Wavecom, including its consolidated subsidiaries, is made known to our Chief Executive Officer and Chief Financial Officer by others within those entities, particularly during the period
in which this Annual Report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

No
change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
year ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16a. Audit Committee Financial Expert

Our Board of Directors has determined that we have at least one audit committee financial expert, Stephen Imbler, serving on our audit committee.

Item 16b. Code of Ethics

We have adopted a written code of ethics that applies to senior members of our financial management team, including our principal executive officer, principal
financial officer and principal accounting officer.

You
may request a copy of our code of ethics, at no cost, by writing to or telephoning us as follows:



Wavecom Annual Report Form 20-F 2003          63

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Item 16c. Principal Accountant Fees and Services

During each of the last two fiscal years, Ernst & Young Audit has acted as our independent auditors and Rouer, Bernard, Bretout has acted as our French
statutory auditor.

Audit Fees

Ernst & Young Audit billed us approximately €356,000 for audit services for fiscal 2003, including fees associated with the annual audit
and reviews of our quarterly financial results submitted on Form 6-K. Ernst & Young Audit billed us approximately €413,000 for audit services for fiscal 2002.

Rouer,
Bernard, Bretout, our co-auditor for French statutory purposes, billed us approximately €133,000 for statutory audit services for fiscal 2003. Rouer,
Bernard, Bretout billed us approximately €108,000 for audit services for fiscal 2002.

Audit-Related Fees

Ernst & Young Audit billed us approximately €22,000 for audit-related services for fiscal 2003. Audit-related services principally include
reports required to be issued for French statutory purposes. Ernst & Young Audit billed us approximately €5,000 audit-related services for fiscal 2002.

Rouer,
Bernard, Bretout billed us approximately €20,000 for audit-related services for fiscal 2003. Audit-related services principally include reports required to be
issued for French statutory purposes. Rouer, Bernard, Bretout billed us approximately €34,000 for audit-related services for fiscal 2002.

Tax Fees

Ernst & Young member firms billed us approximately €7,000 for tax services, including principally fees associated with tax compliance
services at foreign subsidiaries for fiscal 2003. Ernst & Young member firms billed us approximately €19,000 for tax services in fiscal 2002.

All Other Fees

Ernst & Young member firms billed us approximately €16,000 for services other than Audit Fees, Audit-Related Fees and Tax Fees described
above for fiscal 2003. In fiscal 2003, such other services included legal fees. Ernst & Young member firms billed us approximately €11,000 for services other than Audit Fees,
Audit-Related Fees and Tax Fees described above for fiscal 2002. In fiscal 2002, such other services included legal fees.

Pre-Approval Policies for Non-Audit Services

Prior to the engagement of Ernst & Young Audit and Rouer, Bernard, Bretout each year, the engagements are approved by our Board of Directors and by vote of
our shareholders at our annual general meeting. Our audit committee has also adopted its own rules of procedure. The audit committee's rules of
procedure provide for a process with respect to the prior approval of all non-audit services to be performed by our independent auditors or our statutory auditors. Our Board of Directors
also reviews the internal control, disclosure and audit processes.

In
fiscal 2003, our audit committee approved all of the audit services provided by Ernst & Young Audit and Rouer, Bernard, Bretout, and all of the audit-related services or tax
consulting services provided by Ernst & Young Audit and Rouer, Bernard, Bretout and all of the other services provided by Ernst & Young Audit and Rouer, Bernard, Bretout.

Item 16d. Exemption from the Listing Standards for Audit Committees

Not applicable.

64          Wavecom Annual Report Form 20-F 2003

---



Glossary

2G, 2,5G:Intermediary generations (2nd generation and 2.5 generation) for wireless
network standards that precede the third generation (3G or Wideband CDMA) standard. Included are: GSM for 2G, GPRS for 2.5G).

3G:Wireless network standards for 3rd generation. These networks will allow access to a large array
of new services, including fast internet access made possible because of the introduction of "packet radio" technology to the wireless communication networks.

Analog standard:Transmission standard traditionally used as an alternative to the digital standard
with which information (sound, text or images) are codified and transformed into series of numbers.

CDMACode Division Multiple Access:A wireless network standard which is competitive with
the GSM standard and used primarily in the United Sates and some Asian countries, including Korea.

EDGEEnhanced Data GSM Environment:A faster version of the GSM standard. It represents
an interim step between GSM and 3G (Wideband-CDMA).

EMSElectronic Manufacturing Services:Production outsourcing specialists for the
electronics industry.

Wireless terminals:Any device used to transmit and receive voice and data via wireless networks
including(mobile telephones, fax machines, modems, etc.).

GPRSGeneral Packet Radio Services:A system for transmitting data via packets with
improved data flow on GSM networks.

GSMGlobal System for Mobile communications:Digital transmission standard used by
wireless networks. GSM is the main wireless network standard in Europe.

Interconnectivity:The mechanism for establishing a connection between networks using different
standards where the goal is to give all subscribers of one operator network the possibility to communicate with subscribers of other operators' networks.

ISOInternational Standard Organisation:International organisation charged with
establishing worldwide standards in a variety of areas.

MMSMulti-media Messaging System:Electronic messaging system including electronic mail
or e-mail.

PCDPersonal communication device:Any number of wireless terminals used by individuals
to communicate via wireless networks including: mobile telephones, connected personal digital assistants and "smartphones";

PDAPersonal Digital AssistantAlso known as an electronic organizer that include
personal address books and daily calendar in an electronic device.

SIMSubscriber Identity Module:Subscriber identification card allowing access to
services on the GSM network. In order to function, the card is inserted into a mobile telephone or other wireless terminal.

SMSShort Message Service:Short written messages which are transmitted via data channels
on the GSM mobile network. The maximum length of any message is 160 characters. Transmission on the GSM network is standardized. A short message server which is integrated into the mobile network
ensures an interface between the mobile and fixed environments.

Quad-band:Ability to operate on four different frequency bands.

Wavecom Annual Report Form 20-F 2003          G-1

---

WAPWireless Application Protocol:Standard that adapts the Internet for use in mobile
telephones, specifically appropriate size and format. This communication protocol involves the formatting of a migration process between the GSM network and the internet.

W-CDMAWideband Code Division Multiple Access:The first standard of the
third generation which was commercially available in Japan in a specific limited geographic area in 2001 and should be available in Europe and the rest of Asia by 2005.

WLLWireless Local Loop:A communication network covering a narrowly defined physical
area using radio transmission for voice and data communication. These networks can functionally substitute fixed-line networks in areas where no infrastructure currently exists.

WISMO:Wavecom trademark abbreviation standing for "Wireless Standard Module". These highly
integrated modules contain all of the hardware and software required to make wireless devices that work on the GSM/GPRS and CDMA standards.

G-2          Wavecom Annual Report Form 20-F 2003

---



PART III

Item 18: Financial Statements

WAVECOM S.A.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                              
|--------------------------------------------------------------------------------------------------------------
|Report of Independent Auditors                                                                                
|Consolidated Statements of Operations for the years ended December 31, 2001, 2002 and 2003                    
|Consolidated Balance Sheets at December 31, 2001, 2002 and 2003                                               
|Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 2001, 2002 and 2003
|Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003                    
|Notes to Consolidated Financial Statements                                                                    

Wavecom Annual Report Form 20-F 2003          F-1

---



REPORT OF INDEPENDENT AUDITORS

The
Board of Directors and Shareholders
Wavecom S.A.

We
have audited the accompanying consolidated balance sheets of Wavecom S.A. as of December 31, 2001, 2002 and 2003, and the related consolidated statements of operations, changes
in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2003. These consolidated financial statements are the responsibility of Wavecom's management.
Our responsibility is to express an opinion on these consolidated financial statements 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wavecom, S.A. at December 31, 2001,
2002 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States.

ERNST &
YOUNG Audit

represented
by
Jean-Yves Jégourel

Courbevoie,
France
February 7, 2004

F-2          Wavecom Annual Report Form 20-F 2003

---



WAVECOM S.A.        CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except share and per share data)

|                                                        |                                           | Years ended December 31,        |       
|------------------------------------------------------- | ----------------------------------------- | ------------------------------- | ------
|
|Revenues:                                               |                                           |                                 |       
|                                                        | Product sales                             |                                 | €     
|                                                        | Technology development and other services |                                 |       
|                                                        |                                           |                                 |       
|                                                        | Total revenues                            |                                 |       
|Cost of revenues:                                       |                                           |                                 |       
|                                                        | Product sales:                            |                                 |       
|                                                        |                                           | Cost of goods sold              |       
|                                                        |                                           | Adjustment of royalty provision |       
|                                                        |                                           |                                 |       
|                                                        | Total cost of product sales               |                                 |       
|                                                        | Cost of services                          |                                 |       
|                                                        |                                           |                                 |       
|                                                        | Total cost of revenues                    |                                 |       
|                                                        |                                           |                                 |       
|Gross profit                                            |                                           |                                 | 63,288
|Operating expenses:                                     |                                           |                                 |       
|                                                        | Research and development                  |                                 |       
|                                                        | Sales and marketing                       |                                 |       
|                                                        | General and administrative                |                                 |       
|                                                        | Deferred compensation amortization        |                                 |       
|                                                        | Amortization and impairment of goodwill   |                                 |       
|                                                        |                                           |                                 |       
|                                                        | Total operating expenses                  |                                 |       
|                                                        |                                           |                                 |       
|Operating income (loss)                                 |                                           |                                 | 2,952 
|Interest expense                                        |                                           |                                 | (523  
|Interest income                                         |                                           |                                 | 4,350 
|Foreign exchange gain (loss)                            |                                           |                                 | 142   
|Provision for loss on long-term investments             |                                           |                                 | (716  
|                                                        |                                           |                                 |       
|Income (loss) before minority interest and income taxes |                                           |                                 | 6,205 
|Minority interest.                                      |                                           |                                 | (804  
|                                                        |                                           |                                 |       
|Income (loss) before income taxes                       |                                           |                                 | 7,009 
|Income tax expense (benefit)                            |                                           |                                 | (2,299
|                                                        |                                           |                                 |       
|Net income (loss)                                       |                                           | €                               | 9,308 
|                                                        |                                           |                                 |       
|Basic net income (loss) per share                       |                                           | €                               | 0.63  
|                                                        |                                           |                                 |       
|Diluted net income (loss) per share                     |                                           | €                               | 0.61  
|                                                        |                                           |                                 |       
|Number of shares used for computing:                    |                                           |                                 |       
|                                                        | basic net income (loss) per share        |                                 |       
|                                                        | diluted net income (loss) per share      |                                 |       

See
notes to financial statements

Wavecom Annual Report Form 20-F 2003          F-3

---



WAVECOM S.A.        CONSOLIDATED BALANCE SHEETS        (in thousands, except share data)

|                                                                                |                                                                                                                                                                                                       | December 31,                               |        
|------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------
|
|ASSETS                                                                          |                                                                                                                                                                                                       |                                            |        
|Current assets:                                                                 |                                                                                                                                                                                                       |                                            |        
|                                                                                | Cash and cash equivalents                                                                                                                                                                             |                                            | €      
|                                                                                | Short-term investments                                                                                                                                                                                |                                            |        
|                                                                                | Accounts receivable (less allowance for doubtful accounts of €328, €243 and €1,866 at December 31, 2001, 2002 and 2003, respectively)                                                                 |                                            |        
|                                                                                | Inventory, net                                                                                                                                                                                        |                                            |        
|                                                                                | Value added tax recoverable                                                                                                                                                                           |                                            |        
|                                                                                | Prepaid expenses and other current assets                                                                                                                                                             |                                            |        
|                                                                                | Recoverable taxes                                                                                                                                                                                     |                                            |        
|                                                                                | Deferred tax assets, current portion                                                                                                                                                                  |                                            |        
|                                                                                |                                                                                                                                                                                                       |                                            |        
|                                                                                |                                                                                                                                                                                                       | Total current assets                       |        
|Property and equipment, net                                                     |                                                                                                                                                                                                       |                                            | 15,666 
|Goodwill, net of accumulated amortization of €326 at December 31, 2001 and 2002 |                                                                                                                                                                                                       |                                            | 5,716  
|Long-term investments                                                           |                                                                                                                                                                                                       |                                            | 3,476  
|Other assets                                                                    |                                                                                                                                                                                                       |                                            | 8,061  
|Recoverable tax loss carryback and research tax credit                          |                                                                                                                                                                                                       |                                            |       
|Deferred tax assets                                                             |                                                                                                                                                                                                       |                                            |       
|                                                                                |                                                                                                                                                                                                       |                                            |        
|                                                                                |                                                                                                                                                                                                       | Total assets                               |        
|                                                                                |                                                                                                                                                                                                       |                                            |        
|LIABILITIES AND SHAREHOLDERS' EQUITY                                            |                                                                                                                                                                                                       |                                            |        
|Current liabilities:                                                            |                                                                                                                                                                                                       |                                            |        
|                                                                                | Accounts payable                                                                                                                                                                                      |                                            | €      
|                                                                                | Accrued compensation                                                                                                                                                                                  |                                            |        
|                                                                                | Other accrued expenses                                                                                                                                                                                |                                            |        
|                                                                                | Current portion of loans                                                                                                                                                                              |                                            |        
|                                                                                | Current portion of capitalized lease obligations                                                                                                                                                      |                                            |        
|                                                                                | Deferred revenue and advances received from customers                                                                                                                                                 |                                            |        
|                                                                                | Income tax payable                                                                                                                                                                                    |                                            |        
|                                                                                | Other liabilities                                                                                                                                                                                     |                                            |        
|                                                                                |                                                                                                                                                                                                       |                                            |        
|                                                                                |                                                                                                                                                                                                       | Total current liabilities                  |        
|Long-term portion of capitalized lease obligations                              |                                                                                                                                                                                                       |                                            | 228    
|Other long-term liabilities                                                     |                                                                                                                                                                                                       |                                            | 410    
|                                                                                |                                                                                                                                                                                                       |                                            |        
|                                                                                |                                                                                                                                                                                                       | Total long-term liabilities                |        
|                                                                                |                                                                                                                                                                                                       |                                            |        
|Minority interest                                                               |                                                                                                                                                                                                       |                                            | 361    
|Commitments and contingencies                                                   |                                                                                                                                                                                                       |                                            |        
|Shareholders' equity:                                                           |                                                                                                                                                                                                       |                                            |        
|                                                                                | Shares, €1 nominal value; 14,810,614 shares issued and outstanding at December 31, 2001; 15,107,890 shares issued and outstanding at December 31, 2002; 15,342,789 shares issued at December 31,
2003 |                                            |        
|Additional paid in capital                                                      |                                                                                                                                                                                                       |                                            | 135,013
|Treasury stock (156,345 shares at December 31, 2003)                            |                                                                                                                                                                                                       |                                            |       
|Deferred compensation                                                           |                                                                                                                                                                                                       |                                            | (2,991 
|Retained earnings (deficit)                                                     |                                                                                                                                                                                                       |                                            | (25,671
|Accumulated other comprehensive income                                          |                                                                                                                                                                                                       |                                            | 722    
|                                                                                |                                                                                                                                                                                                       |                                            |        
|                                                                                |                                                                                                                                                                                                       | Total shareholders' equity                 |        
|                                                                                |                                                                                                                                                                                                       |                                            |        
|                                                                                |                                                                                                                                                                                                       | Total liabilities and shareholders' equity |        
|                                                                                |                                                                                                                                                                                                       |                                            |        

See notes to financial statements

F-4          Wavecom Annual Report Form 20-F 2003

---



WAVECOM S.A        CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY        (in thousands of euro, except share data)

|                             |                                                                                                                                   | Shares                            |         |   |        |     |   |         |       |   |        |        |   |        |       
|---------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------- | - | ------ | --- | - | ------- | ----- | - | ------ | ------ | - | ------ | ------
|
|
|Balance at December 31, 2000 |                                                                                                                                   | 14,682,281                        |         | € | 14,682 |     | € | 132,993 |       | € |       |        | € | (3,606 | )     
|                             | Forfeiture of options and founders' warrants                                                                                      |                                   |         |   |        |     |   |         | (99   | ) |        |        |   |        | 99    
|                             | Deferred compensation arising from shares of Arguin Communications issued to minority shareholders                                |                                   |         |   |        |     |   |         | 1,862 |   |        |        |   |        | (1,862
|                             | Amortization of deferred compensation                                                                                             |                                   |         |   |        |     |   |         |       |   |        |        |   |        | 2,378 
|                             | Issuance of shares in connection with the exercise of 75,557 founders' warrants and 12,480 options at an exercise price of €2.29  |                                   | 88,037  |   |        | 88  |   |         | 113   |   |        |        |   |        |       
|                             | Issuance of shares in connection with the exercise of 36,743 founders' warrants and 3,553 options at an exercise price of €4.57   |                                   | 40,296  |   |        | 41  |   |         | 144   |   |        |        |   |        |       
|                             | Comprehensive income:                                                                                                             |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Net income                                                                                                                        |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Foreign currency translation                                                                                                      |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   | Total comprehensive income        |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|Balance at December 31, 2001 |                                                                                                                                   | 14,810,614                        |         |   | 14,811 |     |   | 135,013 |       |   |       |        |   | (2,991 | )     
|                             | Forfeiture of options and founders' warrants                                                                                      |                                   |         |   |        |     |   |         | (5    | ) |        |        |   |        | 5     
|                             | Deferred compensation arising from shares of Arguin Communications issued to minority shareholders                                |                                   |         |   |        |     |   |         | 190   |   |        |        |   |        | (190  
|                             | Amortization of deferred compensation                                                                                             |                                   |         |   |        |     |   |         |       |   |        |        |   |        | 2,201 
|                             | Issuance of shares in connection with the exercise of 154,075 founders' warrants and 25,026 options at an exercise price of €2.29 |                                   | 179,101 |   |        | 179 |   |         | 231   |   |        |        |   |        |       
|                             | Issuance of shares in connection with the exercise of 98,173 founders' warrants and 15,318 options at an exercise price of €4.57  |                                   | 113,491 |   |        | 113 |   |         | 405   |   |        |        |   |        |       
|                             | Issuance of shares in connection with the exercise of 4,684 options at an exercise price of €26.68                                |                                   | 4,684   |   |        | 5   |   |         | 120   |   |        |        |   |        |       
|                             | Comprehensive income:                                                                                                             |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Net income                                                                                                                        |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Foreign currency translation                                                                                                      |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   | Total comprehensive income        |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|Balance at December 31, 2002 |                                                                                                                                   | 15,107,890                        |         | € | 15,108 |     | € | 135,954 |       | € |       |        | € | (975   | )     
|                             | Purchase of treasury stock                                                                                                        |                                   |         |   |        |     |   |         |       |   |        | (1,312 | ) |        |       
|                             | Repurchase of minority interest                                                                                                   |                                   |         |   |        |     |   |         | (249  | ) |        |        |   |        |       
|                             | Forfeiture of options and founders' warrants                                                                                      |                                   |         |   |        |     |   |         | (116  | ) |        |        |   |        | 116   
|                             | Deferred compensation arising from shares of Arguin Communications issued to minority shareholders                                |                                   |         |   |        |     |   |         | 315   |   |        |        |   |        | (315  
|                             | Amortization of deferred compensation                                                                                             |                                   |         |   |        |     |   |         |       |   |        |        |   |        | 756   
|                             | Issuance of shares in connection with the exercise of 123,979 founders' warrants at an exercise price of €2.29                    |                                   | 123,979 |   |        | 124 |   |         | 160   |   |        |        |   |        |       
|                             | Issuance of shares in connection with the exercise of 101,096 founders' warrants and 9,824 options at an exercise price of €4.57  |                                   | 110,920 |   |        | 111 |   |         | 396   |   |        |        |   |        |       
|                             | Comprehensive income:                                                                                                             |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Net loss                                                                                                                          |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Unrealized gain on financial instruments                                                                                          |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             | Foreign currency translation                                                                                                      |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   | Total comprehensive income (loss) |         |   |        |     |   |         |       |   |        |        |   |        |       
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       
|Balance at December 31, 2003 |                                                                                                                                   | 15,342,789                        |         | € | 15,343 |     | € | 136,460 |       | € | (1,312 | )      | € | (323   | )     
|                             |                                                                                                                                   |                                   |         |   |        |     |   |         |       |   |        |        |   |        |       

See notes to financial statements

Wavecom Annual Report Form 20-F 2003          F-5

---



WAVECOM S.A.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands, except share data)

|                                                             |                                                                                                 | Years ended December 31,                              |                                                 
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------------------
|
|Cash flows from operating activities:                        |                                                                                                 |                                                       |                                                 
|Net income (loss)                                            |                                                                                                 | €                                                     | 9,308                                           
|                                                             | Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: |                                                       |                                                 
|                                                             | Depreciation and amortization of property and equipment                                         |                                                       |                                                 
|                                                             | Provision for loss on long-term investments                                                     |                                                       |                                                 
|                                                             | Amortization of goodwill                                                                        |                                                       |                                                 
|                                                             | Goodwill impairment                                                                             |                                                       |                                                 
|                                                             | Amortization of deferred stock compensation                                                     |                                                       |                                                 
|                                                             | Minority interest                                                                               |                                                       |                                                 
|                                                             | Deferred taxes                                                                                  |                                                       |                                                 
|                                                             | Increase (decrease) in cash from:                                                               |                                                       |                                                 
|                                                             |                                                                                                 | Accounts receivable                                   |                                                 
|                                                             |                                                                                                 | Inventory                                             |                                                 
|                                                             |                                                                                                 | Value added tax recoverable                           |                                                 
|                                                             |                                                                                                 | Research tax credit reimbursed                        |                                                 
|                                                             |                                                                                                 | Prepaid expenses and other current assets             |                                                 
|                                                             |                                                                                                 | Recoverable taxes                                     |                                                 
|                                                             |                                                                                                 | Accounts payable and other accrued expenses           |                                                 
|                                                             |                                                                                                 | Accrued compensation                                  |                                                 
|                                                             |                                                                                                 | Deferred revenue and advances received from customers |                                                 
|                                                             |                                                                                                 | Income tax payable                                    |                                                 
|                                                             |                                                                                                 | Other payables                                        |                                                 
|                                                             |                                                                                                 | Other                                                 |                                                 
|                                                             |                                                                                                 |                                                       |                                                 
|                                                             |                                                                                                 |                                                       | Net cash provided (used) by operating activities
|                                                             |                                                                                                 |                                                       |                                                 
|Cash flows from investing activities:                        |                                                                                                 |                                                       |                                                 
|                                                             | Acquisition of Iconn Wireless                                                                   |                                                       |                                                 
|                                                             | Arguin acquisition, net of cash acquired                                                        |                                                       |                                                 
|                                                             | Disposal (acquisition) of short-term investments                                                |                                                       |                                                 
|                                                             | Acquisition of long-term investments                                                            |                                                       |                                                 
|                                                             | Repurchase of minority interest in Arguin                                                       |                                                       |                                                 
|                                                             | Purchases of property and equipment                                                             |                                                       |                                                 
|                                                             | Proceeds from sale of property and equipment                                                    |                                                       |                                                 
|                                                             |                                                                                                 |                                                       |                                                 
|                                                             |                                                                                                 |                                                       | Net cash provided (used) by investing activities
|                                                             |                                                                                                 |                                                       |                                                 
|Cash flows from financing activities:                        |                                                                                                 |                                                       |                                                 
|                                                             | Net increase (decrease) in overdrafts and lines of credit                                       |                                                       |                                                 
|                                                             | Repayment of loans                                                                              |                                                       |                                                 
|                                                             | Principal payments on capital lease obligations                                                 |                                                       |                                                 
|                                                             | Purchases of treasury stock                                                                     |                                                       |                                                 
|                                                             | Proceeds from exercise of stock options and founders' warrants                                  |                                                       |                                                 
|                                                             |                                                                                                 |                                                       |                                                 
|                                                             |                                                                                                 |                                                       | Net cash provided (used) by financing activities
|                                                             |                                                                                                 |                                                       |                                                 
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                 |                                                       | 1,755                                           
|Net increase (decrease) in cash and cash equivalents         |                                                                                                 |                                                       | 59,748                                          
|Cash and cash equivalents, beginning of period               |                                                                                                 |                                                       | 69,224                                          
|                                                             |                                                                                                 |                                                       |                                                 
|Cash and cash equivalents, end of period                     |                                                                                                 | €                                                     | 128,972                                         
|                                                             |                                                                                                 |                                                       |                                                 

See notes to financial statements

F-6          Wavecom Annual Report Form 20-F 2003

---



WAVECOM S.A        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Nature of business and summary of significant accounting policies



Wavecom is organized as asociété anonyme, or limited liability company, under the
laws of the Republic of France. Wavecom was founded in 1993 and is publicly traded on Euronext Paris (Nouveau Marché) in France and on the Nasdaq (National Market) exchange in the U.S.
It provides the wireless market with complete technology solutions for vertical applications (including machine-to-machine, automobiles and wireless local loop) and personal
communications devices (PCDs, including telephone handsets and smartphones). Wavecom's complete solutions are based on GSM, GPRS and CDMA mobile communications standards and include products called
the Wismo (Wireless Standard Module) which are compact standardized devices that contains substantially all of the software, hardware and other technology (including memory) needed to enable wireless
communications targeting vertical applications. Wavecom also manufactures a line of wireless
modems which also addresses vertical applications. Wavecom's complete wireless solutions are sold via its direct sales force and a network of value added distributors and manufacturers
representatives.



The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial
statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from those
estimates. The consolidated financial statements include the accounts of Wavecom S.A., its wholly-owned subsidiaries Wavecom, Inc. (a Delaware corporation) and Wavecom Asia Pacific Ltd.
(a Hong Kong corporation), both of which commenced operations in 1998; Wavecom Korea Co. Ltd and Wavecom Deutschland GmbH, branches transformed into subsidiaries in 2002; Wavecom Northern
Europe Ltd (an English company) created in 2003 and Arguin Communications Inc. (61.88% controlling interest purchased in October 2000). Inter-company accounts and transactions
have been eliminated in consolidation. Certain prior year amounts may have been reclassified to conform to current year presentation.



The reporting currency of Wavecom, for all years presented, is the euro (€).

The
functional currency of each subsidiary is its local currency. In accordance with Statement of Financial Accounting Standards No. 52, all accounts in the financial statements
are translated into euro from the functional currency at exchange rates as follows: (1) asset and liability accounts at year-end rates, (2) income statement accounts at
weighted average exchange rates for the year, and (3) shareholders' equity accounts at historical exchange rates. Translation differences are recorded in shareholders' equity.

Realized
and unrealized foreign currency transaction gains and losses are reflected in net income.



Wavecom operates internationally, giving rise to exposure to changes in foreign currency exchanges rates, the U.S. dollar in particular.

Wavecom
uses financial instruments, including derivatives such as foreign currency forward and options contracts, to reduce the foreign exchange risk on cash flows from transactions with
subsidiaries denominated in U.S. dollar. The Company complies with the Financial Accounting Standards Board issued Statement

Wavecom Annual Report Form 20-F 2003          F-7

---

No 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), as amended by SFAS 137 and 138. SFAS 133 requires the recognition of all
derivatives at fair value. Changes in fair value are recorded in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedging transaction and
the type of hedge transaction. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. Fair value is determined by reference to published exchange rates.



Revenue is recognized when all of the following circumstances are satisfied: persuasive evidence of an agreement exists, the price is fixed or determinable,
collection is reasonably assured and delivery has occurred.

Revenue
from product sales is recognized at the time the units are shipped and the risk of ownership is transferred.

Revenue
from technical support and product development services and other service revenue is recognized when the service is performed, there is no material continuing performance
obligation and collection is probable. Under certain technology development agreements, where significant technological risk factors exist, costs are expensed as incurred and revenues are recognized
when all obligations under the agreement have been met.



Shipping and handling costs incurred by the Company are reflected in cost of goods sold.



Wavecom charges all research and development costs to expense as incurred.



The Company expenses advertising costs as incurred. Advertising expenses totaled €6,699,000 and €1,715,000 for the years ended
2003 and 2002, respectively. Amounts in 2003 are linked to Wavecom's first press campaign, started at the end of 2002 and finished during the first half of 2003. Amounts in 2001 were not significant.



Net income (loss) per share amounts are computed using the weighted average number of shares outstanding.

In
accordance with SFAS 128Earnings per Share,basic and diluted earnings per share are presented. Basic earnings per share
excludes the dilutive effects of options and warrants, and reflects only the actual ordinary shares outstanding. The effect of options and warrants outstanding in 2003 have been excluded from the 2003
calculation of diluted earnings per share as Wavecom reported a net loss in the year ended December 31, 2003, and their effect is anti-dilutive. In 2001 and 2002, diluted earnings
per share includes the effects of dilutive options and warrants as if they had been exercised.



Financial instruments that potentially subject Wavecom to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables.

F-8          Wavecom Annual Report Form 20-F 2003

---

Wavecom
has cash investment policies that limit investments to short-term low-risk instruments. Wavecom's cash is held principally in euros and United States
dollars and concentrated primarily in five major banks and financial institutes in Paris and three major banks in Hong Kong.

As
of December 31, 2003, Wavecom sub-contracts the manufacturing and assembly of its products to three suppliers located in France, Romania and China. Wavecom believes
that alternate sub-contractors can be identified if the current manufacturers are unable to meet Wavecom's requirements. During the fourth quarter of 2003, Wavecom decided to consolidate
all production with one sub-contractor located in China. The transfer should be effective during the course of2004.

Wavecom
sells its products to customers in a variety of industries principally in Asia/Pacific, Europe, North America and Africa. Wavecom performs ongoing credit evaluations of its
customers and maintains allowances for potential credit losses. To date, such losses have been within management's expectations. Wavecom generally requires no collateral, but does request advance
payments or letters of credit in order to secure payment in certain circumstances.

Accounts
receivable (before allowance for doubtful accounts) at December 2001, 2002 and 2003 totaled €46,547,000, €86,164,000 and
€46,488,000, respectively.

A
summary of the activity in the allowance for doubtful accounts is as follows (amounts in thousands):

Year ended
December 31,

Beginning balance

Additions charged
to expenses

Recovered receivables

Ending balance2001

€
477

€
164

€
313

€
3282002


328


119


204


2432003


243


1,622





1,865


The
increase in the allowance for doubtful accounts was related primarily to two European distributors, who were replaced during 2003 as Wavecom expanded it distribution network in the
region. Wavecom is in litigation with one of these distributors in an attempt to recover a total of €700,000 owed to Wavecom.

For
the years ended December 31, 2001, 2002 and 2003, certain customers represented revenues in excess of 10% of Wavecom's total consolidated revenues. The amounts of annual
revenues, and corresponding outstanding accounts receivable at December 31, from these customers were as follows (in thousands):

2001

2002

2003Revenues

Receivable

Revenues

Receivable

Revenues

ReceivableCustomer A

€
106,162

€
15,817

€
368,402

€
56,633

€
53,505

€
4,618Customer B








12,249


3,925


50,493


5,711Customer C


14,411


5,444


13,790


3,309


33,284


9,353Customer D


114,130


12,780


42,047


594


5,674





Wavecom Annual Report Form 20-F 2003          F-9

---

Sales
to customers by geographic region are summarized as follows (in thousands):

Years ended December 31,2001

2002

2003China

€
126,860

€
396,030

€
159,339South Korea


114,180


47,835


17,069Rest of Asia


28,662


8,294


14,712France


6,028


9,401


9,226Rest of Europe


37,793


51,613


57,667Americas


3,509


25,082


7,604Rest of world


5,632


12,834


10,011€
322,664

€
551,089

€
275,628


Geographic
region is determined by the customer's invoice address and may not indicate the final destination of product usage.

Substantially
all of the Company's long-lived assets are located in France.



Wavecom considers all highly liquid investments with insignificant interest risk, and purchased with an original maturity of three months or less, to be cash
equivalents. At December 31, 2001, 2002 and 2003, Wavecom had amounts of €83,680,000 (of which €12,794,000 was denominated in U.S. dollars),
€92,826,000 and €101,441,000 respectively, invested in money market accounts with no fixed maturity, earning interest at short-term variable rates. At
December 31, 2001, 2002 and 2003, the book value of these cash equivalents approximated their market value.



As of December 31, 2001 and 2002, the Company held deposit certificates of €2,994,000 and €15,112,000, respectively. These
investments were classified as available-for-sale and were carried at cost which approximated market value at December 31, 2001 and 2002. These certificates matured
during 2003.



Inventories are valued at the lower of cost or market.



Value added tax recoverable consists of value added tax paid by Wavecom to vendors and suppliers located in the European Union and recoverable from the tax
authorities. Value added tax recoverable is collected on a monthly basis. As of December 2001, 2002 and 2003, the Company had value added tax credits, immediately recoverable, of
€20,600,000, €2,350,000 and €750,000, respectively.

F-10          Wavecom Annual Report Form 20-F 2003

---



Property and equipment is stated at cost. Leases are capitalized in accordance with Financial Accounting Standards Board Statement No 13 Accounting for
leases(SFAS 13). Depreciation and amortization is computed using the straight-line method over the following
estimated useful lives:

Laboratory equipment

2-5 yearsComputer equipment and purchased software

1-4 yearsFurniture and office equipment

3-5 yearsLeasehold improvements

10 years, or lease term if less


Amortization
of capitalized leased equipment is included in depreciation expense.

Wavecom
reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If
factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the undiscounted net cash flow over the remaining life of the
long-lived assets in measuring whether the carrying value is recoverable. An impairment loss would be measured by reducing the carrying value to fair value, based on a discounted cash flow
analysis.



Goodwill represents the excess purchase price of net tangible and intangible assets acquired in business combinations over their estimated fair value. In
accordance with Financial Accounting Standards Board statement No 142,Goodwill and Other Intangible Assets (SFAS 142), the Company ceased
amortizing goodwill on a straight-line basis as of January 1, 2002. Goodwill is tested for impairment on an annual basis and whenever indicators of impairment arise. During 2002,
the Company performed the first of the required impairment tests of goodwill, as well as the annual test in the fourth quarter, which resulted in a finding that no impairment to goodwill existed.
Impairment of goodwill recorded during 2003 is described in note 6.



In October 2000, the Company purchased convertible preferred shares representing less than 1% of the capital of Cambridge Silicon Radio (C.S.R.), a British
company, for €1,197,000. The cost method is used to account for this investment because the Company does not have the ability to exercise significant influence over the investee's
operating and financial policies. During 2001 the Company recorded a provision for €716,000 to reflect the estimated decline in value of the investment. The estimated loss was
determined based on a valuation used in recent financing rounds for C.S.R. No additional impairment charges were considered necessary during the years ended December 31, 2002 and 2003.

Bank
guarantees of €2,868,000 and €13,110,000 were issued in December 2000 and in July 2002 in favor of the owners of leased office space,
in order to secure annual lease payments. At December 31, 2001, 2002 and 2003, these guarantees were secured by the pledge of certificates of deposit and mutual funds for
€2,994,000, €13,671,000 and €16,021,000 respectively. These pledged investments have been classified as long-term assets in the balance
sheet.



Other assets included primarily security deposits.



Wavecom's products are designed to conform to certain wireless industry standards. Certain essential technologies are patented and Wavecom uses these essential
technologies under licensing agreements for which Wavecom pays royalties. Wavecom has concluded licensing agreements with six patent holders for

Wavecom Annual Report Form 20-F 2003          F-11

---

technologies
deemed to be essential for Wavecom's products. Two contracts were signed in 2003 and Wavecom is in the process of negotiating with other patent holders. Wavecom's management considers
that it is probable that these other patent holders may claim that the technology covered by their patents is essential to Wavecom's products.

The
estimated cost of royalties, which may be due to other patent holders in connection with their technologies as well as yet unasserted claims, have been accrued in the financial
statements, based on a percentage of consolidated product revenues. The ultimate royalty paid by the company may differ from the amounts accrued.



The Company offers a warranty for all its products. The specific terms and conditions of those warranties vary depending upon the product sold and the customer.
Wavecom accrues for the costs of providing warranty service at the time the product is shipped and the sale recorded. The provision is calculated based on a statistical rate which is continually
revised for specific warranty issues and actual experience. This provision is reversed according to the following calculation: 20% after 3 months, an additional 30% after 6 months,
another 30% after 8 months and 100% after 18 months. An additional accrual is recorded to cover known repair risks not included in the statistical provision.

Factors
that affect Wavecom's warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. Wavecom periodically assesses
the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.



Deferred revenue includes amounts invoiced to customers in accordance with the terms of technology development contracts, but deferred by the Company as the
corresponding work has not yet been completed. Advances include cash received in advance of product shipments.



At December 31, 2001, 2002 and 2003, the carrying values of current financial instruments such as cash equivalents, accounts receivable, accounts payable,
other receivables and accrued liabilities approximated their market values, based on the short-term maturities of these instruments. There was no long-term debt at
December 31, 2001, 2002 or 2003.



As of December 31, 2003, other long term liabilities include a lease incentive payment received from one office landlord which is being amortized over the
lease term.

Other
long-term liabilities at December 31, 2001 and 2002 are not material.



In accordance with Statement of Financial Accounting Standards No. 109, the liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. A valuation allowance is established if, based on the weight of available evidence, it is more likely than not that some portion or all
of the deferred tax asset will not be realized.

F-12          Wavecom Annual Report Form 20-F 2003

---



Wavecom accounts for stock options and warrants granted to employees in accordance with the provisions of Accounting Principles Board Statement No. 25, Accounting for Stock Issued to Employees. Under APB 25, no compensation expense is recognized for stock options and warrants issued to employees with an
exercise price equal to the fair value of the underlying shares on the grant date Options and warrants issued with an exercise price less than the fair value result in deferred compensation which is
amortized to expense over the vesting period.

Statement
of Financial Accounting Standards No. 123,Accounting for Stock Based Compensation, provides an alternative to APB 25 in
accounting for stock-based compensation issued to employees. SFAS 123 provides for a fair-value-based method of accounting for employee stock options and similar equity instruments.
Companies that elect to continue to account for stock-based compensation arrangements under APB 25 are required by SFAS 123 to disclose the pro forma effect on net income and net income per
share as if the fair-value-based method proposed by SFAS 123 had been adopted. The table below illustrates the effect on net income and earnings per share if the Company had applied
the fair value recognition provisions of FASB Statement No. 123,Accounting for Stock-Based Compensation,to stock-based employee compensation.

The
fair value for these options and founders' warrants was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions for the years ended
December 31, 2001, 2002 and 2003: risk-free interest rates of 4.94% for 2001, 4.00% for 2002 and 3.00% for 2003, no expected dividends, volatility factors of 1.17 for 2002, 0.74 for
2002 and 0.97 for 2003, and a weighted average expected life of the options and founders' warrants of 5 years.

|                                                                                                                                            |                     | Years ended December 31 |        
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ----------------------- | -------
|
|
|Net income (loss), as reported                                                                                                              |                     | €                       | 9,308  
|Add: Stock-based employee compensation expense included in reported net income (loss), net of related tax effects                           |                     |                         | 2,378  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |                     |                         | (27,600
|                                                                                                                                            |                     |                         |        
|Pro forma net income (loss)                                                                                                                 |                     | €                       | (15,914
|                                                                                                                                            |                     |                         |        
|Earnings per share:                                                                                                                         |                     |                         |        
|                                                                                                                                            | Basicas reported   |                         | €      
|                                                                                                                                            | Basicpro forma     |                         | €      
|                                                                                                                                            | Dilutedas reported |                         | €      
|                                                                                                                                            | Dilutedpro forma   |                         | €      



Wavecom reports comprehensive income and its components in accordance with Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income. SFAS 130 requires foreign currency translation adjustments, to be included in other comprehensive income
(€(2,383,000) at December 31, 2003).

Other
comprehensive income also includes realized and unrealized gains and losses on financial instruments deferred in accumulated other comprehensive income until the underlying
transaction is recognized in earnings in accordance with SFAS 133 (€4,135,000 at December 31, 2003).

Wavecom Annual Report Form 20-F 2003          F-13

---





In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information, which established standards for the way public companies report information about
operating segments in annual financial statements and required that those companies report selected information about operating segments in interim financial reports issued to shareholders. It also
established standards for related disclosures about products and services, geographic areas and major customers. Management has determined that Wavecom operates as a single segment, as management
internally evaluates the performance of the enterprise as a whole and not on the basis of separate business units.



In January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51"(FIN 46). In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen. FIN
46 addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. FIN 46 requires consolidation of a variable interest entity if the
reporting entity is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the variable interest entity's residual returns or
both. FIN 46 was effective immediately for variable interest entities created after January 31, 2003. The Company will apply FIN 46, as revised, to variable interest entities created before
February 1, 2003 as follows: (i) beginning January 1, 2004 for structures commonly referred to as special purpose entities as a cumulative effect of the accounting change as of
that date; and (ii) at the end of the first reporting period in 2004 for other than special-purpose entities.

The
adoption of FIN 46 is not expected to have a significant impact on the Company's earnings or financial position.

On
May 15, 2003, the FASB issued Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. Statement 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. Statement 150 represents a significant change in practice in the accounting for a number of financial instruments, including mandatorily redeemable
equity instruments and certain equity derivatives that frequently are used in connection with share repurchase programs. We do not use such instruments. Statement 150 is effective for all financial
instruments created or modified after May 31, 2003, and to other instruments as of September 1, 2003. The adoption of Statement 150 on June 1, 2003 did not have any material
impact on our financial position, results of operations or cash flows.

2.     Acquisitions



In December 2001, the subsidiary Wavecom Inc acquired Iconn Wireless, a company based in San Diego, California, enabling Wavecom to acquire technology and
know-how for Code Division Multiple Access (CDMA) technology. Wavecom purchased Iconn Wireless for €5,270,000 including €625,000 in tangible and intangible
assets. The difference between the purchase price and the amount of identifiable assets (€4,645,000) was allocated to goodwill but was not amortized, in accordance with
SFAS 142. In connection with the acquisition, €1,339,000 in cash was placed in escrow by Wavecom. The cash was paid to the employees as certain technology milestones were
achieved in 2002, and the company recognized the related charges as research and development expenses.

F-14          Wavecom Annual Report Form 20-F 2003

---



In October 2000, Wavecom purchased a majority interest of 51% of the voting rights in Arguin Communications Inc., headquartered in San Diego,
California, increased to 61.88% in January 2001, which
enabled Wavecom to have strategic control over the future technology to be developed by Arguin Communications Inc.

The
Company purchased Arguin Communications Inc. for €3,454,000 in cash including €691,000 for the purchase of existing shares
(€229,000 paid in October 2000 and €462,000 paid in January 2001) and €2,763,000 to subscribe to a share capital increase. The total
amount of this share capital increase, including minority interests, was €3,109,000. The net assets purchased included €270,000 in cash. The purchase price exceeded the
fair value of the net tangible assets by €1,323,000, which was allocated to goodwill and previously was being amortized over 5 years. In accordance with the provisions of
SFAS 142, amortization of goodwill ceased as of December 31, 2001. Deferred compensation of €1,862,000, €190,000 and €199,000 was
recognized in 2001, 2002 and 2003, respectively, in connection with the issuance of shares of Arguin Communications to the majority shareholders and adjusted with the employee resignation.
Amortization related to these shares amounted to €667,000, €613,000 and €648,000 in the years ended December 31, 2001, 2002 and 2003,
respectively.

Results
of operations of Arguin Communications Inc. and Iconn Wireless are included in Wavecom's operating results from their respective dates of acquisition. Pro Forma results of
operations reflecting these acquisitions have not been presented because the results of operations of the acquired companies, either individually or collectively, are not material to Wavecom's results
of operations.

3.     Inventory

Components of inventory are:

December 31,2001

2002

2003(in thousands)Purchased components and raw materials

€
70

€
17,890

€
16,791Finished goods


15,785


19,708


30,824€
15,855

€
37,598

€
47,615Provision for obsolete inventory


1,997


7,393


13,806€
13,858

€
30,205

€
33,809


In
June 2002, Wavecom amended contracts with two of its contract manufacturer to reflect its increased role in negotiating terms and conditions directly with component suppliers,
as well as the overall evolution of Wavecom' s industrial and purchasing organization. As a result of the changes in the contract terms, Wavecom believes that it bears the risk of ownership of the
components to be used for the products, although these components continue to be legally owned by the contract manufacturer. Therefore, at December 31, 2002 and 2003, inventory includes these
components, with a corresponding liability due to the contract manufacturer.

At
December 31, 2002 and 2003, the inventory of finished goods also includes €4,440,000 and €3,335,000, respectively, held by contract
manufacturers for which Wavecom bears the risk of ownership.

Wavecom Annual Report Form 20-F 2003          F-15

---

4.     Property and equipment

Property and equipment includes:

December 31,2001

2002

2003(in thousands)Laboratory and testing equipment

€
15,203

€
29,309

€
33,102Computer equipment and software


7,835


17,604


21,233Furniture and office equipment


2,288


2,801


2,977Leasehold improvements


2,445


4,998


5,217Other


1,288


1,363


1,88329,059


56,075


64,412Accumulated depreciation and amortization


13,393


26,451


36,550€
15,666

€
29,624

€
27,862


Depreciation
expense in the years ended December 2001, 2002 and 2003 totaled €5,068,000, €13,365,000 and €13,769,000, respectively.

Equipment
purchased under capital leases in the years ended December 31, 2001, 2002 and 2003 totaled €291,000, €321,000 and
€1,597,000, respectively. The cost of such equipment included in property and equipment at December 31, 2001, 2002 and 2003 totaled €4,755,000,
€4,937,000 and €6,325,000,
respectively. Accumulated amortization of this equipment totaled €4,343,000, €4,433,000 and €5,079,000 at December 31, 2001, 2002 and 2003,
respectively.

5.     Prepaid expenses and other current assets

Prepaid expenses and other current assets include:

December 31,2001

2002

2003(in thousands)Research tax credit: current portion

€
813





Suppliers' credit note accruals


5,717




€
267Prepaid expenses


4,245

€
8,023


6,100Iconn Wireless amounts held in escrow


1,339


Financial instruments








4,646Other current assets


606


1,312


429Total prepaid expenses and other current assets

€
12,720

€
9,335

€
11,442


Credit
notes from suppliers are accrued at the end of each period, based on amounts which have been negotiated and accepted by Wavecom's contract manufacturers. These amounts are
recorded as reductions of cost of goods sold.

Prepaid
expenses consist primarily of prepaid rent and other operating expenses. At December 31, 2002, the amount also included €2,009,000 in prepaid advertising
expenses.

F-16          Wavecom Annual Report Form 20-F 2003

---

The
following table presents the fair value of financial instruments at December 31, 2003:

Notional Amount

Fair value(in $ thousands)

(in € thousands)Fair Value hedges of net receivables invoiced in U.S. dollars and to be collected within 2 months:Forward and option contracts selling U.S. dollars against euros

$
14,500

€
383Cash Flow hedges of net receivables transactions to be invoiced and collected within 1 year:Forward and option contracts selling U.S. dollars against euros


34,000


4,263Total

$
48,500

€
4,646


The
net foreign currency exposure, presented in the table below, relates to Group transactions as of December 31, 2003. The assets and liabilities are the sum of all items
denominated in foreign currencies
within the Group converted into euros. The only significant amounts which have been hedged are those denominated in U.S. dollars.

USD

Other Currencies(in thousands of euros)Assets

41,755

1,442Liabilities

344

1,477Net assets

41,441

(35
)Hedging of net assets in foreign currencies (balance sheet)

11,552

0Net assets after hedging

29,889

(35
)


The
company enters into foreign exchange derivative financial instruments to reduce the foreign exchange rate risk of anticipated cash flows from transactions denominated in US dollars.
The fair value of foreign currency related derivatives are included in the balance sheet in other assets. The earnings impact of cash flow hedges relating to forecasted transactions is reported in
foreign exchange gain or loss. Realized and unrealized gains and losses on these instruments are deferred in accumulated other comprehensive income until the underlying transaction is recognized in
earnings.

During
the year ended December 31, 2003, the Company recorded €4,135,000 in other comprehensive income related to the effective portion of its cash flow hedges.

During
the year ended December 31, 2003, the Company recognized a net loss of €56,000 related to the portion of the hedging instrument the Company excluded from
its assessment of hedge effectiveness.

The
financial instruments have maturity dates of less than 12 months. Management believes counter-party risk on financial instruments is minimal since the Company deals with major
banks and financial institutions.

6.     Goodwill and intangible assets

Goodwill was €5,716,000 and €4,807,000 as of December 31, 2001 and 2002 respectively, net of accumulated amortization of
€326,000 and €274,000 at December 31, 2001 and 2002, respectively.

All
goodwill is denominated in U.S. dollars and translated into euros at the exchange rate at each balance sheet date.

Wavecom Annual Report Form 20-F 2003          F-17

---

During
the fourth quarter of 2003 the Company performed the required annual impairment test of goodwill, which resulted in a determination that impairment of goodwill existed related to
the Iconn and Arguin acquisitions. This resulting charge of €4,244,000 is included in "amortization and impairment of goodwill" in the Company's statement of operations. The resulting
impairment is primarily attributable to changes in the Company's strategy and evolution of its target markets. This test consisted of a comparison of the fair value of the reporting unit with its
carrying amount, including the goodwill. The fair value of the reporting unit was determined based on the income approach, which estimates the fair value based on the future discounted cash flows.

The
changes in the carrying amount of goodwill from December 31, 2001 through December 31, 2003, are as follows (in thousands):

December 31,2001

2002

2003Balance as of the beginning of the year

€
1,279

€
5,716

€
4,807Add: Goodwill acquired during the year


4,645





Less: Amortization of goodwill


(279
)




Less: Impairment of goodwill








(4,244
)Impact of foreign currency fluctuations on goodwill


71


(909
)

(563
)Balance as of the end of the year

€
5,716

€
4,807





The
following table sets forth net income per share and ADS adjusted to exclude goodwill amortization recognized prior to the adoption of FAS 142 on January 1, 2002 (in
thousands, except for per share and ADS amounts):

Year Ended December 31, 2001Reported net income (loss)

€
9,308Adjusted net income

€
9,586Net income (loss) per sharebasic:Reported

€
0.63Add back: goodwill amortization


0.02Adjusted

€
0.65Net income (loss) per sharediluted:Reported

€
0.61Add back: goodwill amortization


0.02Adjusted

€
0.63


Other
intangible assets are not material to the financial statements.

F-18          Wavecom Annual Report Form 20-F 2003

---

7.     Debt

The following table presents a summary of indebtedness as of:

December 31,2001

2002

2003(in thousands)Short-term debt:Interest-free loan from government agency

€
488





Current portion of capital lease obligation


201

€
214

€
855Total short-term debt and current portion of long-term debt

€
689

€
214

€
855Long-term debt:Long-term portion of capital lease obligation

€
228

€
287

€
425Total long-term debt, less current portion

€
228

€
287

€
425




Wavecom received an interest-free loan from Coface (€294,000 at December 31, 1999, increased by €340,000 in
2000), an export credit agency of the French government. Timing of repayment of the loan was based upon the actual sales generated by Wavecom's United States subsidiary. Wavecom repaid
€146,000 of the loan in the year ended December 31, 2001 and the remaining €488,000 during the year ended December 31, 2002.



Future minimum lease payments under capitalized lease obligations for the years ending December 31 are as follows (in thousands):

2004

€
9252005


3412006


792007


152008


9Total minimum lease payments


1,369Less amount representing interest


(88
)Present value of net minimum lease payments


1,281Less current portion


856Long-term portion

€
425




Interest paid during the years ended December 31, 2001, 2002 and 2003 totaled approximately €447,000, €515,000 and
€668,000 respectively.

Wavecom Annual Report Form 20-F 2003          F-19

---

8.     Other accrued expenses

Other accrued expenses consist principally of accruals for royalties, warranty costs and various other tax and general expense.

December 31,2001

2002

2003(in thousands)Accrued royalties

€
9,375

€
29,214

€
20,648Warranty accrual


2,392


3,810


3,780Other accrued expenses


3,758


3,343


11,227Total

€
15,525

€
36,367

€
35,655


Changes
of accrued royalties, warranty accrual and other accrued expenses during the period are as follows (in thousands):

|                       |  | Balance at
December 31,
2002 |        | Accruals made
during the period |   | Settlements made
during the period |  | Changes in liability for
pre-existing accruals
during the period,
including expirations |        | Balance at
December 31,
2003
|---------------------- |  | ---------------------------- | ------ | ------------------------------- | - | ---------------------------------- |  | --------------------------------------------------------------------------------------- | ------ | ----------------------------
|Accrued royalties      |  | €                            | 29,214 |                                 | € | 9,791                              |  | €                                                                                       | 9,281  |                             
|Warranty accrual       |  |                              | 3,810  |                                 |   | 6,678                              |  |                                                                                         | 6,708  |                             
|Other accrued expenses |  |                              | 3,343  |                                 |   | 10,666                             |  |                                                                                         | 2,540  |                             
|                       |  |                              |        |                                 |   |                                    |  |                                                                                         |        |                             
|Total                  |  | €                            | 36,367 |                                 | € | 27,135                             |  | €                                                                                       | 18,529 |                             
|                       |  |                              |        |                                 |   |                                    |  |                                                                                         |        |                             

Changes
in accrued royalties during the year ended December 31, 2003 included primarily accruals related to patent holders with whom Wavecom concluded licensing agreement with
during the year. The terms of the agreements signed resulted in an adjustment of estimates.

Other
accrued expenses include a provision of €5,834,000 for costs associated with an anticipated exiting from leases on three properties. This provision is based on the
Company's estimates for all potential costs, including rent payments. This line item also includes a provision for €2,900,000 of production expenses. See note 11 "Retirement
Accrual".

9.     Shareholders' equity

At December 31, 2003, 15,342,789 shares were issued, each with a nominal value of €1 per share. After taking into consideration the 156,345
shares repurchased during 2003 and held in treasury, 15,186,444 shares are outstanding at December 31, 2003.



On February 12, 2003, Wavecom initiated a share buyback program covering a maximum of 1,400,000 ordinary shares, representing 9.45% of the capital. At
December 31, 2003, Wavecom held 156,345 shares pursuant to this program purchased for a total amount of €1,312,215.



Shareholders have preemptive rights to subscribe on a pro rata basis for additional shares issued by Wavecom for cash. Shareholders may waive such preemptive
subscription rights at an extraordinary general meeting under certain circumstances. Preemptive subscription rights, if not previously waived, are transferable during the subscription period relating
to a particular offering of shares.

F-20          Wavecom Annual Report Form 20-F 2003

---



Dividends may be distributed from the statutory retained earnings and additional paid in capital, subject to the requirements of French law and Wavecom's
by-laws. There were no distributable retained earnings at December 31, 2003. Dividend distributions by Wavecom, if any, will be made in euro.



The shareholders of Wavecom authorized the board of directors to grant founders' warrants to employees of the French parent company, stock options to employees of
subsidiaries and warrants to members of the board of directors. Under the terms of the plans, the options and warrants give the right to purchase one share per option or warrant at an exercise price
to be based on the stock market price of Wavecom shares on the grant date.

Options
and founders' warrants granted in 2001, 2002 and 2003 vest 25% per year over 4 years. The rights to exercise the warrants granted to Board members vest
331/3% per year over 3 years.

Options
expire 10 years after the grant date. Founders' warrants, which were issued to employees of the French parent company, expire after five years, as required by law. Any
founders' warrants remaining unexercised at the expiration date automatically convert to stock options with a five-year term remaining. Founders' warrants were issued to French employees
due to the existence of certain tax advantages (for both the employee and Wavecom) available in connection with the issuance of founders' warrants which are not available for stock option holders in
France. Other than the expiration dates, the terms of the founders' warrants are identical to the stock options. Warrants granted to Board members expire after five years. Any unvested or unexercised
options and founders' warrants are cancelled upon termination of employment.

Wavecom Annual Report Form 20-F 2003          F-21

---

A summary of the founders' warrants and warrants to Board members is as follows:

|                                                                 |  | Founders' warrants to employees of the French parent company |  | Warrants to members of the
board of directors
|---------------------------------------------------------------- |  | ------------------------------------------------------------ |  | ---------------------------------------------
|Shareholders' meeting date                                       |  | 02/25/99                                                     |  | 03/15/00                                     
|Total of warrants authorized                                     |  | 530 800                                                      |  | 300 000                                      
|Board of directors date                                          |  | N/A                                                          |  | 03/30/00                                     
|Total of warrants granted                                        |  | 530 800                                                      |  | 157 200                                      
|Exercise price                                                   |  | €4.57                                                        |  | €139.52                                      
|Total of warrants exercised                                      |  | 315 183                                                      |  |                                             
|Total of warrants cancelled at December 31, 2003                 |  | 39 184                                                       |  | 38 500                                       
|Total of warrants cancelled during the year ended                |  |                                                             |  | 11 100                                       
|Total of warrants granted and not exercised at December 31, 2003 |  | 176 433                                                      |  | 118 700                                      
|Total of warrants exercisable at December 31, 2003               |  | 176 433                                                      |  | 111 120                                      
|Expiration date(1)                                               |  | 02/24/04                                                     |  | 03/14/05                                     

---

F-22          Wavecom Annual Report Form 20-F 2003

---

A summary of the stock options is as follows:

|                                                                      |  | STOCK OPTIONS
|--------------------------------------------------------------------- |  | -------------
|Shareholders' meeting date                                            |  | 09/21/98     
|Total of stock options authorized                                     |  | 650 000      
|Board of directors date                                               |  | 09/21/98     
|Total of stock options granted                                        |  | 495 000      
|Exercise price                                                        |  | €2.29        
|Total of stock options exercised                                      |  |              
|Total of stock options cancelled at December 31, 2003(2)              |  | 492 612      
|Total of stock options granted and not exercised at December 31, 2003 |  | 2 388        
|Total of stock options exercisable at December 31, 2003               |  | 2 388        
|Expiration date(1)                                                    |  | 09/20/08     

---

Wavecom Annual Report Form 20-F 2003          F-23

---

In connection with the issuance of the founders' warrants and options granted in September 1998 and February 1999, Wavecom recorded deferred compensation of
€2,022,000 and €5,344,000, respectively. Deferred compensation was amortized on a straight line basis over the four-year vesting periods of the warrants and
options. For the years ended December 31, 2001, 2002 and 2003, Wavecom recorded compensation expense of €1,711,000, €1,587,000 and €205,000
respectively, resulting from amortization of deferred compensation.

A
summary of the activity in the warrants and stock options is as follows:

Number of
shares

Weighted average
exercise price per share
€

Price range
€Balance at December 31, 2000

1,735,692

49.65

2.29 - 150.72Granted

1,082,546

36.75

26.68 -  41.09Exercised

(128,333
)
3.00

2.29 -    4.57Cancelled

(115,812
)
78.17

2.29 - 139.52Balance at December 31, 2001

2,574,093

45.27

2.29 - 150.72Granted

589,455

39.29

39.18 -  42.46Exercised

(297,276
)
3.54

2.29 -  26.68Cancelled

(87,176
)
49.77

4.57 - 139.52Balance at December 31, 2002

2,779,096

48.32

2.29 - 150.72Granted

749,700

9.84

8.07 -  11.40Exercised

(234,899
)
3.37

2.29 -    4.57Cancelled

(429,368
)
49.67

8.07 - 139.52Balance at December 31, 2003

2,864,529

41.73

2.29 - 150.72


At
December 31, 2003, 1,371,650, founders' warrants, stock options and warrants were exercisable (1,146,564 and 486,497 at December 31, 2002 and 2001, respectively).

The
weighted-average remaining contractual life of the warrants and stock options outstanding at December 31, 2003 was approximately 8 years.

The
weighted-average fair value of options and warrants granted during 2001, 2002 and 2003 was as follows:

2001

2002

2003Options whose price equaled market price of the underlying shares on the grant date








Options whose price was less than the market price of the underlying shares on the grant date

€
34.99




€
5.38Options whose price was greater than the market price of the underlying shares on the grant date

€
26.16

€
31.48

€
8.30


F-24          Wavecom Annual Report Form 20-F 2003

---

10.   Income taxes

Income
tax expense comprises:

Years ended December 31,2001

2002

2003(in thousands)Current tax expense (benefit)

€
(2,299
)
€
18,487

€
(10,011
)Deferred tax expense (benefit)





(11,931
)

5,611Total

€
(2,299
)
€
6,556

€
(4,400
)


Taxes
paid totaled approximately €19,000, €462,000 and €21,296,000 (including €7,670,000 in estimated income tax payments
for 2003 which are expected to be reimbursed in 2004) in the years ended December 31, 2001, 2002 and 2003, respectively.

The
income tax benefit in 2001 is the net of a research tax credit (€2,535,000), French current tax expense (€19,000) and income tax expense of Wavecom's
Asian subsidiary (€217,000).

The
current tax expense in 2002 is the net of research tax credit (€449,000), French current tax expense (€15,790,000) and income tax expense of Wavecom's
Asian (€3,139,000) and Wavecom's German (€7,000) subsidiaries.

The
current tax benefit in 2003 is the net of research tax credit (€1,355,000), French current tax expense (€21,000), tax loss carrybacks
(€8,558,000) and income tax benefit of Wavecom's Asian subsidiary (€119,000). Research tax credit and tax loss carrybacks are recorded as recoverable taxes to the
balance sheet.

A
reconciliation of income taxes computed at the French statutory rate (35.3% in 2001, 35.4% in 2002 and 33.33% in 2003) to the income tax expense (benefit) is as follows:

Years ended December 31,2001

2002

2003(in thousands)Income tax expense computed at the French statutory rate

€
2,474

€
17,220

€
(10,092
)Research tax credit


(2,535
)

(449
)

(1,355
)Impact of valuation allowance on deferred tax assets


(3,174
)

(7,736
)

6,866Other individually immaterial permanent differences


33


45


(56
)Non-deductible deferred compensation amortization


839


779


252Impact of differences in foreign income tax rates





(3,320
)

Other


64


17


(15
)Total income tax expense (benefit)

€
(2,299
)
€
6,556

€
(4,400
)


Wavecom Annual Report Form 20-F 2003          F-25

---

Significant
components of Wavecom's deferred tax assets and liabilities consist of the following:

December 31,2001

2002

2003(in thousands)Deferred tax assets: Royalty accruals not currently deductible

€
2,410

€
7,311

€
4,371Other provisions and accruals not currently deductible


1,285


4,620


7,500Capitalized leases


6





Net operating loss carryforwards


6,648


1,291


4,01910,349


13,222


15,890Valuation allowance


(10,349
)

(1,291
)

(9,570
)Net deferred tax asset (liability)

€


€
11,931

€
6,320


Because
of the significant losses in 1999 and 2000, Wavecom recorded a valuation allowance against deferred tax assets in 2001. The valuation allowance was reversed in 2002 due to the
use of all previous net operating losses in the company's primary tax jurisdictions, 2002 taxable income, and because the company believed it was more likely than not that the deferred taxes were
recoverable. At December 31, 2003, a deferred tax of €11,871,000 was recognized for the French parent company. A valuation allowance of €5,551,000 was recorded
to reduce the net asset to the amount of available tax loss carrybacks in France.

After
the option to carry back €25,674,000 of 2003 tax losses, a receivable of €8,558,000 was recorded at December 31, 2003. Net operating loss
carryforwards in the United States totaled approximately €8,476,000 at December 31, 2003
(€3,647,000 in 2002) and will expire from 2013 to 2018 if not utilized. Net operating loss carryforwards in Asia Pacific totaled approximately €3,581,000 at
December 31, 2003 with no expiry date. The related deferred tax asset of €4,019,000 was recognized in 2003 (€1,291,000 in 2002), and was fully provided for in
the valuation allowance.

11.   Commitments and contingencies



At December 31, 2003, Wavecom had two bank guarantees (€2,868,000 issued in 2000 and €13,110,000 issued in 2002) in favor
of the owners of leased office space, in order to secure annual lease payments. These credit lines were secured by the pledge of certificates of deposit and mutual funds. The total value of these
pledged investments was €2,994,000, €13,671,000 and €16,021,000 at December 31, 2001, 2002 and 2003, respectively.



Wavecom leases its facilities under operating leases that expire through July 2011. Future minimum lease payments under operating leases, excluding common
area maintenance charges and inflation escalation, due for the years ending December 31, are as follows (in thousands):

2004

€
10,9912005


10,4472006


10,0022007


9,6232008


7,932Thereafter


17,013Total

€
66,008


F-26          Wavecom Annual Report Form 20-F 2003

---

In
2003, Wavecom decided to vacate certain of its premises and is actively pursuing subletting certain facilities. These operating lease commitments include a total of approximately
€13 million in rent payments beginning January 2004 under the three leases related to office space that Wavecom vacated. A provision of
€5.8 million for the estimated cost to terminate these lease commitments was recorded at December 31, 2003.

Rental
expense, excluding common area maintenance charges, for the years ended December 31, 2001, 2002 and 2003 was approximately €3,913,000,
€8,350,000 and €11,238,000 respectively.



Wavecom contributes to pensions for personnel in France in accordance with French law by contributing amounts based on salaries to the relevant government
agencies. There exists no actuarial liability in connection with these plans. French law also requires payment of a lump sum retirement indemnity to employees based upon years of service and
compensation at retirement. Benefits do not vest prior to retirement. Wavecom's obligation, for the years ended December 31, 2001, 2002 and 2003, amounted to €86,000,
€159,000 and €247,000, respectively, and is calculated as the present value of estimated future benefits to be paid.

The
main assumptions used in the calculation are the following:



There
are no retirement plans in Hong Kong, Germany, Great Britain, South Korea and the United States.



At December 31, 2003, Wavecom had commitments outstanding to purchase €1,162,000 in fixed assets, which are expected to be placed in
service during the first half of 2004.

At
December 31, 2003, Wavecom had purchase commitments with its third-party manufacturers for future deliveries of products, principally during the first half of 2004. These
purchase commitments totaled €32,538,000.

12.   Employees

Information related to Wavecom's employees is as follows:

December 31,2001

2002

2003(in thousands, except for employee data)Salaries

€
17,694

€
33,983

€
41,300Benefits

€
7,558

€
12,353

€
13,730Employees at year end


421


666


692


13.   Compensation of executive officers

Wavecom paid €1,475,000, €2,277,000 and €2,359,000 in compensation to executive officers for the years ended
December 31, 2001, 2002 and 2003, respectively.

Wavecom Annual Report Form 20-F 2003          F-27

---

14.   Related party transactions

In December 2000, Wavecom entered into a consulting agreement with Delphis. Delphis, represented by Marc Fourrier, is a major shareholder and member of the
board of directors. The agreement calls for Mr. Fourrier to provide consulting services in the areas of corporate organization, information systems and general management from time to time, up
to a maximum of two days per week. Such services are compensated at the rate of €1,448 per day. During the year ended December 31, 2003, Delphis invoiced
€20,031 (€26,157 in 2002 and €17,303 in 2001).

In
November 2001, Wavecom loaned $200,000 to a senior employee of the group. The loan bore a market rate of interest, was repayable in three years and was secured by a lien on the
employee's residence. The loan and accrued interest were repaid in full in February 2003.

15.   Subsequent events (unaudited)

Wavecom announced in October 2003 a plan to consolidate all production with one contract manufacturer located in China as well as to reorganize its
customer care unit. Under the restructuring plan the Company will terminate a number of employees resulting in an accounting impact which will be reflected in the 2004 financial statements because
benefit arrangements were not defined and announced to employees until January 2004.

On
January 23, 2004, Wavecom announced an additional plan to reduce headcount linked to the implementation of a new organizational structure based on the two primary Wavecom sales
markets and on wireless silicon development. Once the plans are fully implemented, the worldwide headcount is expected to be reduced by about 300 positions. Primarily the entities in France and in the
United States are concerned. This plan is expected to cost approximately €10 to €15 million related primarily to headcount reduction and associated charges,
including severance and outplacement packages.

On
February 20, 2004, Wavecom signed a memorandum of understanding with the minority shareholders of Arguin Communications, Inc. for the purchase of the remaining minority
interest in Arguin for a total of $2.135.625. As part of this agreement, certain shareholders will enter into non-compete agreements for a period of two years.

On
March 23, 2004, the board of directors granted 38,000 founders' warrants to employees to the French parent company and 3,000 stock options to an employee of Wavecom Asia
Pacific, Ltd. The exercise price of these plans was €9.62.

F-28          Wavecom Annual Report Form 20-F 2003

---



Item 19. Exhibits

Exhibit Index

|1*    |  | Statuts (By-Laws) of the Registrant, updated as of February 6, 2004 (English Translation).                                                                                                                                                                                                 
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1   |  | Form of Deposit Agreement among the Registrant, The Bank of New York, as Depositary, and the Holders of American Depositary Shares issued thereunder (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on
Form F-1, File No. 333-10372).                
|2.2   |  | Form of American Depositary Receipt (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form F-1, File No. 333-10372).                                                                                                                                 
|4.1** |  | GSM Essential Properties Cross-License Agreement, dated January 6, 1999, between the Registrant and Motorola, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form F-1, File No.
333-10372).                                                 
|4.2** |  | Contract for Manufacturing and Related Services, dated June 17, 1999 between Wavecom S.A. and Solectron-France S.A. (incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 20-F, filed with the Commission on
May 24, 2000).                                 
|4.3** |  | Agreement between Funkanlagen and Wavecom S.A. dated February 25, 2000 (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 20-F, filed with the Commission on May 24, 2000).                                                                              
|4.4** |  | GSM/DCS 1800/1900 Patent License Agreement between Wavecom S.A. and Koninklijke Philips Electronics N.V., dated October 9, 2001 (incorporated by reference to Exhibit 4.6 to the Registrant's Annual Report on Form 20-F, filed with the
Commission on June 28, 2002).                     
|4.5** |  | Agreement relating to a cross-license of essential GSM patents between Wavecom S.A. and Siemens Aktiengesellschaft, effective as of October 31, 2001 (incorporated by reference to Exhibit 4.7 to the Registrant's Annual Report on
Form 20-F, filed with the Commission on June 28, 2002).
|4.6** |  | GSM patent non assertion agreement with NEC Corporation, effective November 19, 2002 (incorporated by reference to Exhibit 4.8 to the Registrant's Annual Report on Form 20-F, filed with the Commission on May 21, 2003).                                                                 
|4.7** |  | Patent License Agreement with Thomson Licensing S.A. and Alcatel S.A., effective January 1, 2003 (incorporated by reference to Exhibit 4.9 to the Registrant's Annual Report on Form 20-F, filed with the Commission on May 21,
2003).                                                     
|4.8*+ |  | Agreement relating to a cross-license of essential GSM patents between Wavecom S.A. and Nokia Corporation, effective as of December 31, 2003.                                                                                                                                              
|4.9*+ |  | Agreement relating to the supply of Compact 605 with WISMO Flex products dated October 20, 2003, between Wavecom Asia Pacific Limited and TCL Mobile Communications (HK) Co. Ltd.                                                                                                          
|8*    |  | List of subsidiaries of the Registrant.                                                                                                                                                                                                                                                    
|10*   |  | Consent of Ernst & Young Audit.                                                                                                                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                                            

E-1

---

|12.1* |  | Certification of the Chief Executive Officer.                                   
|----- |  | --------------------------------------------------------------------------------
|12.2* |  | Certification of Chief Financial Officer.                                       
|13.1* |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|13.2* |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

---

E-2

---

SIGNATURE

Wavecom S.A. hereby confirms that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.

| |  | WAVECOM S.A.
| |  | ------------
| |  | By:         

---

|Date: April 16, 2004 |  |  |  | 
|-------------------- |  |  |  |