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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                        COMMISSION FILE NUMBER: 0-21213

                            LCC INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      54-1807038
         (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)

           7925 JONES BRANCH DRIVE
                  MCLEAN, VA                                       22102
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 873-2000

   SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NOT APPLICABLE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                 CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

     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  X   No
                                               ---     ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     Based upon the closing price of the registrant's common stock as of March
16, 1998, the aggregate market value of the common stock held by non-affiliates
of the registrant is $121,669,080.*

     As of March 16, 1998, the registrant had outstanding 7,077,333 shares of
Class A Common Stock, par value $.01 per share, (the "Class A Common Stock") and
8,460,984 shares of Class B Common Stock, par value $.01 per share, (the "Class
B Common Stock").

                      DOCUMENTS INCORPORATED BY REFERENCE

     List hereunder the following documents incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:

          (1) Portions of the definitive Proxy Statement for the Annual Meeting
     of the Stockholders to be held on May 19, 1998 (the "Proxy Statement") to
     be filed within 120 days after the end of the registrant's fiscal year are
     incorporated by reference into Part III, Items 10 -- 13 of this Form 10-K.
---------------
* Solely for purposes of this calculation, all executive officers and directors
  of the registrant and all shareholders reporting beneficial ownership of more
  than 5% of the registrant's common stock are considered to be affiliates.
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     This Annual Report on Form 10-K ("Form 10-K") contains certain
forward-looking statements within the meaning of Section 27A of the Securities
and Exchange Act of 1934, which statements can be identified by the use of
forward looking terminology, such as "may", "will", "expect", "anticipate",
"estimate", or "continue" or the negative thereof or other variations thereon or
comparable terminology. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth elsewhere in this Form 10-K. See the
"Risk Factors" section of Item 1 "Business" for cautionary statements
identifying important factors with respect to such forward looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from results referred to in forward looking statements. Unless
the context indicates or requires otherwise, references in this Form 10-K to the
"Company" are to (1) the combined operations of the Company's predecessor, LCC,
L.L.C., a Delaware limited liability company, and its subsidiaries (the "Limited
Liability Company") prior to the date of the merger of the Limited Liability
Company into LCC International, Inc., a Delaware corporation formed in June 1996
("LCC International"), as described below (the "Merger") and (2) LCC
International and its subsidiaries, after the Merger. Definitions of technical
and other terms are set forth in the Glossary appearing elsewhere herein.
References herein to wireless telecommunications or similar terms are not
intended to include satellite transmission, which some consider to be a
"wireless" technology.

                                     PART I

ITEM 1.  BUSINESS

GENERAL

     The Company is one of the world's largest independent providers of RF
engineering and program management services and products to the wireless
telecommunications industry. The Company has provided these services, along with
related proprietary software tools and field measurement and analysis equipment,
to operators of more than 200 wireless systems in more than 40 countries. In
1997, the Company also began providing asset management services. The Company
intends to leverage its leadership position and its relationships with major
wireless customers to expand its current service and product offerings and to
benefit from the expected significant growth in wireless networks worldwide.

     The Company has provided services and products to seven of the ten largest
U.S. cellular system operators; large international cellular operators,
including British Telecom, France Telecom and Mannesmann; companies building or
proposing to build PCS systems, including AT&T Wireless Services and Pacific
Bell Mobile Services; operators of ESMR systems, including Nextel
Communications; and operators of two-way messaging systems, such as PageNet. The
customers listed above each contributed 5% or more of the Company's consolidated
revenues (10% or more in the case of Nextel) during one or more of fiscal years
1991 through 1997. Many of the Company's major customers have entered into
partnerships with international wireless operators, which has enabled the
Company to obtain significant new business from such operators. The Company also
has established working relationships with two major telecommunications
equipment vendors, pursuant to which the Company provides services and products
on a subcontract basis. The Company derives a significant portion of its
revenues from its international customers (approximately 37.2% in 1997).

     A substantial number of new wireless network licenses have been awarded
worldwide over the last five-years, and the Company expects a significant number
of additional wireless licenses to be awarded in the next few years. In
addition, many existing systems are continuing to grow; the Company estimates
that operators of wireless networks operating at capacity add a new cell site,
requiring additional RF engineering services, for every approximately 1,500 new
subscribers added. Furthermore, competition among operators of wireless networks
is generating greater requirements for operational quality and efficiency.
Construction of new networks, and expansion and optimization of existing
networks, require substantial amounts of RF engineering services and products
and provide new opportunities for asset management services.

     The Company's approximately 480 professionals provide engineering and
program management solutions to operators of a wide range of wireless networks,
incorporating all major wireless technologies available today, including TDMA
(which includes IS-54 and IS-136), GSM, CDMA, iDEN, AMPS and ETACS. The

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Company provides services and/or products for operators involved in all four
phases of wireless system development: (i) Phase 1 -- bidding for the licenses
necessary to build and operate the system; (ii) Phase 2 -- design and build-out
of the system; (iii) Phase 3 -- optimization and enhancement of the system to
meet the requirements of an increasing subscriber base and to provide increased
quality and coverage; and (iv) Phase 4 -- achievement of greater efficiencies in
providing service in order to compete in areas where there are multiple system
operators.

BACKGROUND

     The Company's business commenced in 1983 in a corporation named LCC,
Incorporated (presently named Cherrywood Holdings, Inc. ("Cherrywood")), a
Kansas corporation organized in 1983 and wholly owned by Dr. Rajendra and Neera
Singh and certain Singh family trusts. In 1994, Cherrywood transferred the
business to Telcom Ventures, L.L.C. ("Telcom Ventures"), a Delaware limited
liability company, for a 75% interest in Telcom Ventures. At the same time,
certain entities formed by The Carlyle Group, a Washington, D.C.-based
investment group (the "Carlyle Investors"), acquired a 25% interest in Telcom
Ventures in consideration of a cash contribution. Telcom Ventures then formed
the Limited Liability Company and transferred the business to the Limited
Liability Company in exchange for a 99% interest in the Limited Liability
Company. Cherrywood and TC Group, L.L.C. ("TC Group"), an affiliate of the
Carlyle Investors, received direct interests of 0.75% and 0.25%, respectively,
in the Limited Liability Company. LCC International was formed in June 1996 for
the purpose of effecting an initial public offering of equity interests in the
Limited Liability Company, which was accomplished in September 1996 by the
Merger in connection with completion at that time of the initial public offering
of the Class A Common Stock (the "Offering"). Prior to the Merger, Telcom
Ventures transferred its interest in the Limited Liability Company to RF
Investors, L.L.C. ("RF Investors"), a Delaware limited liability company of
which Telcom Ventures owns 99% and Cherrywood and TC Group own 0.75% and 0.25%,
respectively. Since the Offering, Cherrywood and TC Group have transferred to RF
Investors the shares of the Company which they received as a result of the
Merger.

     In June 1994, the Limited Liability Company and Telcom Ventures entered
into a Note Purchase Agreement with a then unrelated third party, MCI
Telecommunications Corporation ("MCI"), which provided for the issuance of a $20
million subordinated note by the Limited Liability Company and of a $30 million
subordinated note by Telcom Ventures (the "Telcom Ventures Note") to MCI in
return for cash in such amounts. These notes are convertible, under certain
circumstances, into 2,841,099 shares of Class A Common Stock (see note 13 to the
Consolidated Financial Statements). Immediately prior to the Merger in September
1996, the Telcom Ventures Note was assumed by the Limited Liability Company (the
"MCI Note Assumption") and the $30 million principal repayment obligation and
interest thereon became the sole obligation of the Limited Liability Company
and, following the Merger, the sole obligation of the Company. Immediately
following the Offering, the Company made a loan of $3.5 million to Telcom
Ventures to assist Telcom Ventures in paying certain taxes due in connection
with the MCI Note Assumption. The loan is repayable over five-years, with equal
annual principal payments over the term of the loan. Interest accrues at the
rate of LIBOR plus 1.75% and is payable annually.

     The Company issued 3,162,500 shares of Class A Common Stock in the Offering
at an initial public offering price of $16.00 per share. The total proceeds of
the Offering, net of underwriting discounts and offering expenses, were
approximately $44.8 million. The Company used approximately $16.2 million of the
proceeds for repayment of outstanding amounts under the Credit Facility (defined
below), $3.5 million to fund the loan to Telcom Ventures, approximately $6.85
million for vendor financing and approximately $11.85 million to fund a portion
of the ETP Acquisition (defined below) purchase price. Of the approximately $6.4
million balance of such proceeds, approximately $2.0 million has been used for
working capital and the remainder has been invested in various short term
investments pending use for other acquisitions, strategic financing or
investments in customers and equipment vendors, working capital and general
corporate purposes.

     In December 1996, the Company, through its newly formed wholly-owned
subsidiary LCC Europe AS (formerly known as LCC International AS) ("LCC
Europe"), a Norwegian limited liability company, acquired the business of
European Technology Partner AS ("ETP"), a Norwegian limited liability company

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(the "ETP Acquisition"), which consisted of the design, development, manufacture
and sale and license of hardware and software products for the testing,
monitoring and management of the operations of wireless telecommunications
networks. As consideration for the ETP Acquisition, LCC Europe paid $13.075
million (including acquisition costs) and assumed substantially all of the
liabilities of the ETP business.

     In December 1996, through its newly formed subsidiary, Microcell
Management, Inc. ("Microcell Management"), the Company acquired the business of
Microcell, L.L.C., which consisted of the acquisition, development, lease and
management of RF transmission towers. As consideration therefor, Microcell
Management paid $290,000, $200,000 of which was used by Microcell, L.L.C. to pay
an outstanding loan from the Company.

INDUSTRY BACKGROUND

  Overview

     Wireless telecommunications networks use a variety of radio frequencies to
transmit voice and data. Wireless telecommunications networks include two-way
radio applications, such as cellular, wide band and narrow band PCS and ESMR
networks, and one-way radio applications, such as paging services. Each
application operates within a distinct radio frequency block. Although cellular
represents the largest segment of the wireless communications industry, other
wireless technologies are expected to grow significantly.

  Types of Wireless Communications

     Cellular.  A cellular network is a telephone system based on a grid of
"cells" deployed primarily at 800 and 900 MHz. Each cell contains transmitters,
receivers and antennas, and is connected to switching gear and control
equipment. The cellular industry is well established in the developed world. In
some countries, the cellular network provides significantly improved access to
the local and international wireline telephone network compared to existing
wireline telephone service.

     PCS.  In 1993, the FCC allocated a portion of the radio spectrum for the
provision of a new wireless communications service, commonly known as PCS. In
the U.S., PCS differs from traditional cellular service principally in that PCS
systems operate at a higher frequency range. Licenses to operate PCS networks
were awarded in the United States through auctions conducted during 1995 (the A-
and B-blocks, which involved licenses for large areas known as MTAs) and 1996
(the C-block, which involved licenses for smaller metropolitan and rural areas
known as BTAs); additional licenses were awarded through auctions concluded in
early 1997 (the D-block, E-block and F-block, which also involved licenses for
BTAs).

     ESMR.  Enhanced Specialized Mobile Radio is a mobile communication service
that relies on specialized mobile radio frequencies that have been historically
limited to two-way voice communications in small local networks (such as for
taxi or messenger dispatch). As a result of advances in digital technology, ESMR
operators have begun to design and deploy digital mobile networks that increase
the frequency capacity of ESMR systems to a level that is intended to be
competitive with that of cellular and PCS systems. Companies such as Nextel
Communications (in the U.S.), Clearnet Communications (in Canada) and Tricom (in
Mexico) have acquired licenses for ESMR two-way radio channels in their
respective operating areas and are offering wireless voice services over their
networks.

     Paging.  Paging is a method of wireless telecommunications that uses an
assigned radio frequency to contact a paging subscriber anywhere within a
service area. Each paging subscriber is assigned a distinct telephone number
which a caller dials to activate a subscriber's pager (a pocket-size radio
carried by the subscriber). The radio signal causes the pager to emit a beep or
vibrate and to provide the subscriber with information from the caller in the
form of a voice, time, numeric or alphanumeric message. "Two-way" data
applications, which allow the subscriber to acknowledge and reply to messages
and therefore require system designs akin to cellular and PCS networks, have
been implemented.

     Other.  Wireless cable, wireless local loop (a system that eliminates the
need for a wire loop connecting users to the public switched telephone network),
satellite, and wireless high speed data services represent other areas of the
wireless communications industry being developed by operators in the U.S. and
abroad.

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  Wireless Technologies

     Most traditional cellular systems historically transmitted voice and data
signals over analog-based systems, which use one continuous electronic signal
that varies in amplitude or frequency over a single radio channel. Digital
systems, on the other hand, convert voice or data signals into a stream of
digits that is compressed before transmission, enabling a single radio channel
to carry multiple simultaneous signal transmissions. This enhanced capacity,
along with enhancements in digital protocols (discussed below), allows
digital-based wireless technologies to offer new and enhanced services, such as
greater call privacy and single number (or "find me") service, and more data
transmission features, such as "mobile office" applications (including
facsimile, electronic mail and connecting notebook computers with computer/data
networks).

     Digital signal transmission is accomplished through the use of frequency
management technologies, or "protocols." Two common protocols used in cellular
and other networks "manage" the radio channel either by dividing it into
distinct time slots (a method known as Time Division Multiple Access, or "TDMA")
or by assigning specific coding instructions to each packet of digitized data
that comprises a signal (a method known as Code Division Multiple Access, or
"CDMA"). In the U.S., the FCC has intentionally avoided mandating a universal
digital signaling protocol, and three principal digital signal protocols (which
are incompatible with each other) are currently being used in the U.S. for PCS
networks: GSM, CDMA and TDMA. European Union countries generally have agreed to
adopt GSM as a common standard protocol for cellular and PCS transmission and
approximately 60 countries, including virtually all countries in Western Europe,
have issued or propose to issue GSM 900 or 1800 MHz licenses. The universal GSM
standard is designed to allow subscribers to roam throughout Europe and wherever
else GSM technology has been adopted. Other wireless technologies are also
presently in use for a variety of different types of transmission. The Company
has expertise in all these technologies.

  Operation of Two-Way Wireless Systems

     Two-way wireless service areas are divided into multiple regions called
"cells," each of which contains a base station consisting of a transmitter, a
receiver and signaling equipment. The cells are typically configured on a grid
pattern, although terrain factors (including natural and man-made obstructions)
and signal coverage patterns may result in irregularly shaped cells and overlaps
or gaps in coverage. Cellular system cells generally have a radius ranging from
two miles to 25 miles. PCS system cells have a radius ranging from approximately
one-quarter mile to approximately 12 miles, depending on the PCS technology
being used and the terrain. Since each cell site requires engineering services,
growth in the number of cell sites is one of the key drivers of demand for the
Company's products and services. The base station in each cell is connected by
microwave, fiber optic cable or telephone wires to a switch, which uses
computers and specially developed software to control the operation of the
wireless telephone system for its entire service area. The switch controls the
transfer of calls from cells within the system and connects calls to the local
landline telephone system or to a long distance telephone carrier.

     Wireless transmission requires a certain signal strength for the parties to
hear each other or for data to be received. The signal strength of a
transmission between a handset and a base station declines as the handset moves
away from the base station, so the switch and the base stations monitor the
signal strength of calls in progress. When the signal strength of a call
declines to a predetermined level, the switch may "hand off" the call to another
base station that can establish a stronger signal with the handset. Hand-off to
an adjacent system must be effected through an appropriate technical interface
when a handset leaves the service area of the wireless service provider. The
quality of wireless transmission depends in part on signal strength, limitations
imposed by the terrain and interference from other uses of radio signals.
Transmission quality is measured in the field at various locations so that
adjustments can be made to enhance quality.

     Each wireless network is planned and laid out to meet a certain level of
subscriber density and traffic demand and to provide a certain geographic
coverage. Each transmission over the wireless network requires a certain amount
of radio frequency, so a system's capacity is limited by the amount of frequency
that is available. The same frequency can be reused by each separate
transmitter, subject to certain interference limitations. The design of each
wireless system involves placement of transmission equipment in locations that

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will make optimal use of available frequency based upon projected subscriber
usage patterns, subject to availability of such locations and ability to use
them for wireless transmissions under applicable zoning requirements.

     After a wireless system has been installed, the system's capacity can be
increased in various ways, by (i) adding available frequency capacity to cells
as required, if such capacity is available, (ii) using directional antennae to
divide a cell into discrete multiple sectors or coverage areas, thereby reducing
the required distance between cells using the same frequency, or (iii) "cell
splitting" (i.e., dividing a single cell into a number of smaller cells served
by lower-power transmitters, thereby increasing the ability to reuse radio
frequencies and increasing the number of calls that can be handled in a given
area). Additional solutions are being designed to increase network capacity and
coverage, including (i) the introduction of microcells, which can be placed very
close together to increase frequency reuse and the total capacity of the
wireless network and which can be placed within buildings, train stations and
other structures to provide coverage where none was available before and (ii)
the introduction of digital technologies, which increase the number of
conversations which can be transported on a single radio carrier from two to
potentially more than ten times, depending on the type of digital technology
deployed.

  Engineering Services and Products for the Wireless Industry

     The planning, geographic layout, build out and operation of a wireless
network requires significant RF engineering work. The RF engineer must design
the wireless network to meet the operator's requirements for transmission over
the wireless network, which requirements are based upon a projected level of
subscriber density and traffic demand and the coverage area specified by the
operator's license or cost-benefit decisions. In addition to meeting basic
transmission requirements, the RF network design must make optimal use of
available radio frequency and result in the highest possible signal quality for
the greatest portion of projected subscriber usage within existing constraints.
These constraints may be imposed by cost parameters, terrain, limitations in the
license, interference with other operators, availability of cells, applicable
zoning requirements and other factors. The complexity of network design and
large number of variables requires the RF engineer to rely on advanced
technology including specially-developed software design tools. As the design is
implemented and the network is built out, the system's performance must be
tested in the field with field measurement and analysis equipment so that
optimization adjustments can be made.

     Set forth below is a description of the life cycle of a typical wireless
system:

        Phase 1 pursuit of the licenses necessary to build and operate the
                system

        Phase 2 design and build-out of the system

        Phase 3 optimization and enhancement of the system to meet the
                requirements of an increasing subscriber base and to provide
                increased quality and coverage

        Phase 4 achievement of greater efficiencies in providing service in
                order to compete in areas where there are multiple system
                operators

     Phase 1.  In Phase 1, the pursuit of the licenses necessary to build and
operate the system, a rough engineering design is often required to determine
construction costs and revenue generating ability of the system.

     Phase 2.  A substantial amount of engineering services are required for
Phase 2, the actual design and build-out of the wireless system. Detailed site
location designs are prepared, interference to or from co-located antennae is
checked, site performance is measured after completing construction and,
finally, the site is optimized to work with neighboring sites. Wireless network
operators (even the few which have sizable internal engineering staffs)
typically rely on outside RF engineering companies, such as the Company, for
Phase 2. Depending on the size of the system, this phase can involve from four
RF engineers for a typical small system, to 15 RF engineers for a typical
medium-sized system and up to 100 RF engineers for a nationwide deployment (all
of whom require software design and field measurement tools) over a period of 12
to 24 months. The Company believes that the number of RF engineers is limited.

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     Phase 3.  As the number of subscribers handled by the wireless system
increases, the system enters Phase 3, in which RF engineering services are
necessary to expand the system by adding cell sites or using other techniques to
increase system coverage and capacity. The system must also be optimized to meet
the increased subscriber usage from the new cell cites and to provide increased
quality and coverage. In network expansions, the operator typically continues to
rely on the RF engineering company, such as the Company, to design the expansion
and make optimization adjustments to the existing system. Since each new cell
site requires additional RF engineering, the increase in cell sites is a key
driver of the demand for RF engineering services and products.

     Phase 4.  Eventually the system will enter Phase 4, in which the operator
must achieve greater efficiencies in service provision in order to compete in
areas where there are multiple system operators. In most European countries and
Australia, certain systems have entered Phase 4. In the U.S., with the
construction of new PCS systems in areas that already have two cellular systems
and with the rollout of a national ESMR system by Nextel, wireless networks are
reaching Phase 4. Competing systems in Phase 4 generally have the same network
coverage; thus, competition is focused primarily on price and call quality.

SERVICES, SYSTEMS & PRODUCTS AND ASSET MANAGEMENT

  Background

     In the early 1980's, when the FCC began to issue licenses for cellular
systems, wireless system design was an unsophisticated process. Since minimal
data had been collected on system performance and limited engineering had been
done, the Company (following its formation in 1983) worked to develop a standard
method of applying design engineering principles to wireless system design. The
method included the development of software to accelerate and automate the
design process, and use of such software with digitized system coverage maps,
enabling the engineer to measure the effect of changes to various system
parameters or use of different locations for cell sites. Over time, the Company
gathered significant amounts of data on various system configurations, improving
the ability of its engineering models to predict system coverage. The Company
also developed a large staff of RF engineers experienced in conducting the
design analysis. Moreover, because the field measurement and analysis equipment
required for verification and measurement of wireless system performance in the
field was generally unsophisticated, the Company created its own field
measurement and analysis equipment. Originally, RF engineering focused
principally on the cellular industry. Although the services provided by various
wireless technologies may be similar, the engineering requirements of each
system are different. As new wireless technologies were introduced, the Company
developed engineering solutions for the different forms of wireless
transmissions, and modified its field measurement and analysis equipment and
software products to function with differing wireless technologies. As a
complement to the foregoing activities, the Company has expanded its services to
include program management services involving the deployment or management, on a
turnkey basis, of wireless systems. These services include systems integration,
site acquisition, site engineering, construction management, installation and
commissioning, and customer training services. In addition, through Microcell
Management, the Company now offers wireless network operators the opportunity to
finance and outsource the ownership and maintenance of the transmission towers
utilized in their networks.

  Services

     RF Engineering Services.  Through its Services Group the Company provides a
variety of RF engineering and other services over the four phases of the life
cycle of a wireless telecommunications system, as follows:

          Phase 1 Services.  The Company's engineers help prepare applications
     for network system operators seeking licenses in formal government license
     grant processes. The Company also has assisted foreign governments in
     preparing Requests for Proposals ("RFPs") and analyzing responses thereto.
     Phase 1 services include the following:

     - preparation of the technical response to a government tender

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     - preliminary design

     - coverage parameters

     - propagation maps

     - technical requirements

     - advice on strategic issues relating to license tender responses

     - preparation of RFPs and analysis of responses

     - refinement of system objectives and translation into technical
       requirements

     - evaluation of responses on technical, cost and regulatory compliance
       grounds

The Company has assisted in preparing winning applications in several
(approximately eight) license tender processes worldwide, including the second
nationwide cellular license in Germany and the first cellular license in Bombay,
India. The Company's involvement in successful tenders has generally led to
follow-on contracts with winning applicants as they implement new systems.

          Phase 2 Services.  Services in Phase 2 include some or all of the
     following:

     - analysis of customer expectations for network coverage, capacity and
       other requirements

     - development of necessary databases for network design, including
       digitized maps of terrain and buildings

     - use of software tools to prepare network design, including analysis of
       interference and other technical factors affecting coverage, capacity and
       performance

     - identification and rank of desirable cell sites

     - preparation of regulatory filings (FCC, Federal Aviation Administration
       and others) required for system deployment

     - assistance with systems deployment, including site acquisition and
       construction management services

     - measurement of network performance

     - optimization of system

          Phase 3 Services.  The Company's services are used by existing system
     operators to plan system expansions to accommodate subscriber growth (the
     Company estimates that operators of wireless networks operating at capacity
     require a new cell site for approximately each additional 1,500
     subscribers), incorporate improvements in technology, improve system
     performance and achieve efficient use of available radio spectrum. The
     Company also assists in capacity expansion planning and technology
     changeovers, such as conversion from analog to digital technology. In Phase
     3 the Company provides some or all of the following:

     - identification of additional cell sites

     - integration of new cell sites with existing cell sites

     - measurement of network performance, including "benchmarking" (i.e.,
       evaluation of the performance of an operator's system against that of its
       competitors)

     - optimization of system

     - technology migration analysis and implementation

          Phase 4 Services.  As multiple service providers offer competing
     services in the same service area, network operators will require
     additional engineering services focusing on the achievement of cost savings
     and quality enhancements within the existing coverage area. These services
     include the following:

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     - system analysis and network management, including redistribution or
       elimination of cell sites

     - cost management

     - measurement of network performance, including "benchmarking"

     - technology and network upgrades

The Company is currently working with several existing customers to further
define the types of services that such customers will require during Phase 4,
although there can be no assurance that the Company will provide any such
services.

     Most of the Company's RF engineers are based in McLean, Virginia, but spend
significant periods (approximately one to nine months per year) at customer
sites. The Company is one of the world's largest independent providers of RF
engineering and wireless network design services. The Company believes that its
large number of RF engineers enables it to respond quickly to customers who may
require the Company to staff a major project on a timely basis. In addition, the
Company believes that the wide-ranging experience of its RF engineers, including
exposure to and participation in the standards-setting process for new digital
technologies, helps the Company understand the changing marketplace for wireless
communications and for engineering services and products to support the wireless
industry. Since a large number of its RF engineers work on customer sites, the
Company is able to develop an understanding of many of the issues of importance
to its customers and uses this information in planning. The Company also
believes that the various nationalities of its RF engineers provides the Company
with an understanding of different practices in business and wireless telephony
in many countries around the world that will assist the Company in continuing to
pursue international opportunities.

     The Company provides engineering services on a contract basis, usually in a
customized plan for each client. The Company generally charges for engineering
services on a time and materials basis, although Phase 1 services or other
projects of short duration may involve a fixed price or success fee. The
Company's revenues also include reimbursement for expenses, including the living
expenses of engineers on customer sites.

     Program Management Services.  The Company offers its customers a "one stop
shopping" approach to Phase 2 system build-outs and Phase 3 network expansions
by packaging program management services in a customized plan for each client.
To provide these services the Company has affiliated with commercial real estate
firms (for site acquisition), architectural engineering firms and contracting
and construction firms. The Company provides these services on a contract basis,
on a time and materials basis or for a fixed price per cell site.

     Revenues from RF engineering and program management services represented
approximately 58.8% of revenues for 1997.

  Systems & Products

     Software Tools.  The Company's software tools are used by the Company's
engineers and by customers to design wireless networks, optimize the performance
of an existing network, adapt networks to demand growth and environmental
changes and migrate networks to new technologies. Approximately one-third of the
Company's revenues from software tools is generated by the Company's use of the
tools (which are typically charged to customers separately from engineering
services) in conjunction with engineering service projects, particularly large
build-outs or enhancements during Phase 2 or Phase 3. As these software tools
are used by the Company's engineers, a database for the customer network is
generated based upon the actual design. The software and database are used by
the customer pursuant to a license following implementation of the network,
become the foundation of the customer's design environment and record of network
design, and are critical to subsequent expansion or enhancement of the system.
The other approximately two-thirds of the Company's software revenues is
generated by licensing of the software to customers, which use the tools in
network design and generate their own design specific databases.

                                        9
<PAGE>   10

     The Company's software offerings include:

<TABLE>
<S>                  <C>
ANET(R)............  DOS-based software for network design. Allows
                     users to locate, move and configure cell
                     sites on computer screens, run propagation
                     analyses, change frequency or power settings,
                     analyze cell hand-offs, conduct interference
                     analysis, manipulate other variables and run
                     analysis of system parameters under varying
                     conditions. Accepts input from the Company's
                     field measurement products.
CellCAD(R).........  UNIX-based software for network design with
                     same functionality as ANET(R) plus microcell
                     and CDMA design capability.
CellSIGHT(R).......  Allows user to generate a series of
                     customized spreadsheet programs based upon
                     data received from the switch, to organize
                     and display statistics and other data, to
                     generate and store reports, and to filter
                     data and information into a database.
                     Interfaces with ANET(R) and CellCAD(R)
                     products.
</TABLE>

     The Company plans to release during the third quarter of 1998 a next
generation software for network design and optimization. This product will
combine the functionalities of ANET(R) and CellCAD(R), providing multi-platform
compatibility and allowing users to analyze multiple technologies.

     Another component of the Company's software offerings is its database
services. Databases are maintained for virtually all of the U.S. and many other
parts of the world and include data useful in designing and implementing
wireless networks, including data regarding terrain, building heights, land-use,
highways and secondary roads, traffic volume, political boundaries, demographics
and other parameters. Customers use a combination of these data sources in
designing their wireless networks. The Company believes that as the need for
more efficient system design becomes more important in the wireless industry,
databases with precise information will become more important.

     The Company provides its software tools to customers under license
agreements that call for license fees on a per workstation basis. As of December
31, 1997, the Company had software license agreements in effect with
approximately 75 customers. Typically, customers license the software for
between one to five-years, with the right to annual renewals thereafter. In some
cases, the Company will grant a perpetual license to software for a fixed fee
payable at the commencement of the licenses. The number of work stations
licensed by LCC's current customers range up to approximately 200, with an
average of 14. The Company generally warrants that the software will perform
substantially in the manner specified in its documentation. Many customers
purchase maintenance support following expiration of the warranty period as well
as contract for installation and training services.

     Field Measurement and Analysis Products.  The Company's field measurement
and analysis products are used both by the Company's engineers and by customers
in connection with system design and build out and the maintenance and
improvement of operational systems. The Company's revenues from field
measurement and analysis products are generated from sales or monthly rentals to
customers and associated maintenance and upgrade fees.

                                       10
<PAGE>   11

     The Company's field measurement and analysis product lines are as follows:

<TABLE>
<S>                  <C>
EXP-2001(R)........  Modular vehicle mounted measurement system
                     used to measure RF system parameters for
                     field diagnostics, troubleshooting and RF
                     analysis. Linked to Global Positioning System
                     receivers, permitting identification of
                     changes in system performance based on time
                     and location. Information captured into
                     laptop computer for subsequent analysis.
RSAT-2000(R).......  Performs similar functions as EXP-2001(R),
                     but also provides real-time data for on-site
                     troubleshooting.
MSAT-2000(TM)......  Performs similar functions as the RSAT-
                     2000(R) but is lightweight and portable for
                     use inside buildings.
PENCAT(TM)           Five pound pen-based collection and analysis
                     tool used with the MSAT-2000(TM) for
                     real-time data collection, display and
                     post-processing analysis.
DeskCAT(TM)          Analysis tool used for post-processing
                     analysis of data collected from the EXP-
                     2001(R).
LL-2000(R)           Analysis tool used to measure the quality of
                     the "uplink" from the wireless network to the
                     Public Switched Telephone Network.
TX-1500(TM)          Continuous wave test transmitter used to
                     simulate cell sites from which test
                     transmissions are emitted, allowing
                     validation of predicted coverage.
CellAD               Autonomous collection and analysis tool that
                     is installed in taxis, delivery and other
                     fleet vehicles and roams a wireless network
                     collecting statistics regarding system
                     quality, including call success rate, call
                     completion rate and call set up time.
Champ                Collection and analysis tool installed at a
                     mobile switching center to continuously
                     monitor and report on the quality and
                     performance of a wireless network.
Auryst(TM)           Audio quality analysis system which uses MOS
                     scores to measure network audio quality from
                     a subscriber's point of view.
</TABLE>

                                       11
<PAGE>   12
<TABLE>
<S>                  <C>
Benchmarker(TM)      A modular vehicle mounted measurement system
                     equipped with test phones, Auryst(TM)audio
                     quality modules, scan receivers, specialized
                     data collection software for real -- time
                     operation and diagnostic display and a laptop
                     PC, which allow operators to simultaneously
                     gather detailed engineering data on their own
                     networks while collecting analyses of all
                     other networks in a market.
</TABLE>

     Each of the EXP-2001(R), RSAT-2000(R) and MSAT-2000(TM) is designed for use
in wireless systems employing any of the major access technologies (TDMA, CDMA,
GSM, iDEN, etc.) and may be utilized by network operators to measure the
performance of other wireless systems. To support the RSAT-2000(R), EXP-
2001(R)and LL-2000(R) products, the Company offers a DOS-based software package
called Cellular Measurement Analyst, a corresponding UNIX-based product called
CellQUEST and a Windows-based product called DeskCAT(TM), each of which provides
comprehensive data analysis functions for coverage, interference, calls-
in-progress and call quality. These programs organize, edit and analyze RF and
navigation data for both digital and analog measurements. They provide detailed
reports, multi-colored graphs and high resolution on-screen graphic displays
which can be generated on a laptop computer for immediate field analysis.

     The Company provides its field measurement and analysis products to
customers primarily through sales and to a lesser extent through monthly
rentals. The Company generally warrants that the field measurement and analysis
products will perform substantially in the manner specified in their
documentation for a period of 12 months following delivery thereof. The Company
offers various extended maintenance and support programs to customers.

     Revenues from Systems & Products represented approximately 41.2% of
revenues for 1997.

  Asset Management

     Since January 1997, the Company, through Microcell Management, has been
offering wireless network operators the following arrangements with respect to
the transmission towers utilized in their networks: (i) Microcell Management
will build a multi-tenant tower to the initial committed operator's
specifications and will lease space thereon to such operator and other
operators, (ii) Microcell Management will purchase existing multi-tenant towers
from operators and lease back space to the existing users thereof as well as to
new operators or (iii) Microcell Management will lease space on an existing
tower owned or to be built by it.

     Leasing of tower space may provide a network operator with financial
benefits, including lower capital and operating costs. Third party tower
ownership also facilitates zoning and resolution of co-location issues among
tenants. At December 31, 1997, Microcell Management owned 21 revenue-producing
towers (each with at least one contractually committed tenant), and had 55
additional towers in process of site acquisition or construction.

CUSTOMERS AND BACKLOG

  Customers

     The Company has provided services and products to seven of the ten largest
U.S. cellular system operators; large international cellular operators,
including British Telecom, France Telecom, Mannesmann and Korea Mobile Telecom;
companies building or proposing to build PCS systems, including AT&T Wireless
Services and Pacific Bell Mobile Services; operators of ESMR systems, including
Nextel Communications; and operators of two-way messaging systems. Many of the
Company's major customers have entered into partnerships with international
wireless operators, which has enabled the Company to receive significant new
business from such international wireless operators. The Company also has
established working relationships

                                       12
<PAGE>   13

with two major telecommunications equipment vendors, pursuant to which the
Company provides services and products on a subcontract basis.

     In 1997, Nextel Communications and Lucent Technologies accounted for
approximately 13.8% and 10.1%, respectively, of the Company's revenues and were
the only customers accounting for 10% or more of the Company's revenues. The
Company has an agreement with Nextel Communications pursuant to which Nextel
Communications is committed to pay a minimum amount until October 1999 for the
purchase of RF engineering services in connection with the design and operation
of its digital mobile telephone systems in the United States (including Alaska
and Hawaii), Puerto Rico and/or the U.S. Virgin Islands.

     The Company's existing and targeted customer base includes operators of all
forms of wireless communications services, operating a variety of different
network platforms and access technologies in diverse geographic markets. The
Company's experience includes the following projects:

     - The Company has designed analog cellular systems throughout the U.S.,
       including substantially all of the largest MSAs, as well as in several
       other countries.

     - The Company has designed TACS/ETACS analog cellular systems in the United
       Kingdom and Spain.

     - In the U.S., the Company is assisting its cellular customers in
       implementing the emerging North American digital cellular standards
       (i.e., TDMA, CDMA and others).

     - The Company has designed, or is currently designing, GSM digital cellular
       networks in the U.S., Germany, France, Italy, Spain, Portugal, Malaysia
       and other nations.

     - The Company has designed, or is currently designing, ESMR systems
       throughout the U.S. and in Brazil, Canada, Mexico and China.

     - In the U.S., the Company is supporting narrowband PCS clients with
       INFLEXION(TM) and REFLEX(TM) standards.

  Backlog

     The Company has entered into long-term contracts with customers for the
provision of the Company's services and products. As of December 31, 1997 the
Company had a total backlog of $42.9 million, consisting of $19.7 million
relating to services and $23.2 million relating to systems and products. The
Company includes in its backlog only committed fees or purchase prices specified
in contracts which have been executed by the Company to the extent that the
Company contemplates recognition of the related revenue.

     The principal portion of the Company's present backlog arises from Nextel
Communications, which represents approximately $12.1 million (or 28.2%) of the
overall backlog. In addition, it represents approximately $10.6 million (or
53.8%) and $1.5 million (or 6.5%), respectively, of the portions of the total
backlog relating to services and systems and products. Since the Company's
backlog is subject to significant timing uncertainties, the Company cannot
accurately predict the portion of the backlog that will be filled within the
current year, but expects that it will not fill at least $13.0 million of its
overall backlog in 1998. There can be no assurance that the contracts included
in the backlog will actually generate the specified revenues or that the actual
revenues will be generated within any particular period.

SALES AND MARKETING

     The Company markets its products to operators of wireless
telecommunications networks in North America, Europe, Asia, the Middle East and
Latin America through its direct sales force based at its headquarters in
McLean, Virginia and in Oslo, Norway. The members of the systems and products
direct sales force are compensated based on factors such as revenues generated
compared to revenues forecasted, receivables collected and the blend of products
and services sold. The Company markets its program and management services
primarily through its RF engineers and other technical professional staff with
support for the marketing of services from the systems and products direct sales
force. Customers generally have

                                       13
<PAGE>   14

engineers involved in their procurement decisions, and the Company's engineers
work closely with the customer's engineers to help them understand the Company's
services and products and their advantages compared to those of the competition.
The Company also utilizes independent distributors and sales agents to
supplement its sales force outside the U.S. where business practices or customs
make it most effective to proceed through local companies. The Company utilizes
the offices of its German subsidiary to supplement its European sales efforts
and the offices of its Brazilian subsidiary to supplement its Latin American
sales efforts and has established a regional sales office in the Asia-Pacific
region.

     Additional business from existing customers is pursued through the joint
efforts of both the direct sales force member primarily responsible for the
product sale and of the RF engineers and other technical staff who have
developed a service relationship and worked closely with the customer's
engineers. This combination gives the Company an advantage in pursuing follow-on
business.

     The Company generates sales leads for new customers through referrals from
existing customers (including referrals to international wireless operators with
which such customers have entered into partnership arrangements) and other
industry suppliers, its reputation in the industry, contacts with bidders for
new wireless licenses and others in the industry and other sources, which
include advertising, use of explanatory literature and publications and
participation in conferences and trade shows. The Company utilizes various
strategies to attract business from new customers, particularly various
arrangements in which Phase 1 services are provided for a reduced fee or with a
success-based contingent arrangement, coupled with a commitment from, or
understanding with, the customer to retain the Company in connection with Phase
2 services and products should the customer be awarded the applicable licenses.

     In addition to obtaining business directly from wireless network operators,
the Company has also established working relationships with major
telecommunications equipment vendors, pursuant to which the Company provides RF
engineering services and related products, on a subcontract basis. The Company
is seeking to establish additional relationships with telecommunications
equipment vendors.

     Purchases of the Company's services or products by customers often entails
an extended decision-making process for the customer because of the substantial
costs and strategic implications associated with selecting the Company's
services and products. Senior management of the customer is often involved in
this process, given the importance of the decision as well as the risks faced by
the customer if the Company's services and products do not meet the customer's
particular needs. Therefore, large procurements of the Company's services and
products involve lengthy selling cycles, often as long as nine months.

RESEARCH AND DEVELOPMENT

     The Company intends to continue developing new services and products and
enhance existing ones to maintain its position as a leader in RF engineering and
wireless network design. The Company is presently developing a number of new
products, including software tools and upgrades of field measurement and
analysis products. The Company's research and development efforts are focused on
making its existing products easier to use, adding functionality, making the
products compatible with different technologies and enabling the products to
interface with other products offered by the Company or other parties. In
December 1996 the Company acquired the business of ETP and currently sells
products specifically for use in connection with Phase 4, and is engaged in the
further development of the technological capabilities of these products. The
Company recently announced the introduction of Benchmarker(TM), a vehicle
mounted measurement system which allows operators to simultaneously gather
detailed engineering data on their own networks while collecting analyses of all
other networks in a market. The Company has also developed its next generation
software product, which it expects to be available for commercial use in the
third quarter of 1998. The Company believes that its experience in providing a
range of engineering and wireless network services gives it an advantage in
developing products for use by engineers providing wireless network design
services.

MANUFACTURING AND PRODUCT ASSEMBLY

     The Company assembles field measurement and analysis products by obtaining
standard parts and components from a variety of computer and electronic vendors
and specially configuring these components to
                                       14
<PAGE>   15

produce the field measurement and analysis products. It also engages third party
contractors to assemble certain of these products based on the Company's design
specifications. The proprietary aspects of the Company's systems are primarily
in the product design, the software provided with the equipment and the specific
applications development designed for the customer. Equipment assembly, testing
and quality control are performed by the Company at its McLean, Virginia and
Oslo, Norway facilities. Certain components used in the Company's products are
presently available from limited sources. To date, the Company generally has
been able to obtain supplies of these components in a timely manner from these
sources. The Company began the development and assembly of its own field
measurement and analysis products in early 1992 and took over performance of the
bulk of its development and assembly in 1994. The Company experienced a stagnant
demand for its field measurement and analysis products during 1994 (reflected in
revenues from field measurement and analysis products for 1995) when it devoted
its resources to enhancing its own field measurement and analysis product
development capabilities rather than developing new products.

COMPETITION

     The current market for wireless network design services, related software
tools and field measurement and analysis equipment and program and asset
management services is highly competitive. Many companies offer such services
and products, and the Company believes that the number of other independent
firms providing a combination of these services and products to wireless network
operators throughout the world is increasing.

  Services

     Engineering Services.  The Company's competition in the provision of RF
engineering services consists of (i) companies such as Mobile Systems
International, Inc., Moffett, Larson & Johnson P.C. and Comsearch, Inc., which
provide a full range of RF engineering services (as well as related software),
(ii) companies that provide only a portion of the engineering services, which
generally act as a supplement to a wireless operator's in-house engineering
staff, (iii) telecommunications equipment vendors, which provide RF engineering
services through subcontractors as part of larger turnkey projects, and (iv) the
internal staffs of wireless network operators. The Company believes that it is
able to compete effectively against competitors in RF engineering services
procurements based upon its leadership position, pricing, reputation,
experience, ability to provide its customers "one-stop-shopping," ability to
deploy quickly a large number of RF engineers to a project, its databases for
many geographic areas, its technological tools, and its relationships with major
wireless operators. In particular, the Company believes that its existing
customer base gives it a significant advantage in obtaining additional business
for its existing and new products and services. The Company has been less
successful in competing where the customer has a strong internal staff of
wireless network operators or where RF engineering services are packaged with
large equipment procurements.

     Program Management Services.  Competition for the provision of program
management services is highly fragmented consisting of (i) equipment vendors
that provide program management services as part of larger turnkey projects,
(ii) companies with experience in project management in other industries, (iii)
the internal staffs of wireless network operators and (iv) small firms that
focus on a limited number of the entire range of activities involved in wireless
network deployment and expansion.

  SYSTEMS & PRODUCTS

     Software Tools.  The Company's competition for the provision of software
tools consists of (i) the companies that provide the full range of RF
engineering services along with related software, particularly Mobile Systems
International, Inc. and Comsearch, Inc., which compete vigorously with the
Company in this area, (ii) a limited number of companies that have developed
software tools but generally do not provide engineering services and (iii) the
internal staffs of wireless network operators. The Company believes that its
experience in providing a range of engineering and network services gives it an
advantage in developing software tools for use by engineers providing network
design services, particularly because of the experience it receives as a result
of the use of the products by its own engineers. The Company believes that
competition depends on such factors as functionality, price product performance
and reputation. The most successful of the
                                       15
<PAGE>   16

Company's competitors in this area have been European companies, and the Company
has been enhancing the functionality of its software tools in the GSM area to
compete more effectively for European customers. In pursuing international
business the Company has been flexible with the terms of its software licenses
in markets where standard license terms differ from those used in the U.S.

     Field Measurement and Analysis Equipment.  The Company's competition for
the provision of field measurement and analysis products consists of (i) full
service companies and equipment vendors, particularly those specializing in
field measurement and analysis products, principally Safeco Technologies, Inc.,
Comarco, Inc. and Erisoft and (ii) small independent entrepreneurial companies.
As is the case with its software tools, the Company believes that its experience
in providing a range of engineering and network services gives it an advantage
in developing field measurement and analysis tools for use by engineers
providing network design services, particularly because of the feedback it
receives as a result of the use of the products by its own engineers. The
Company believes that competition depends on such factors as functionality,
price product performance, reputation and compatibility with software tools. The
Company is designing a series of products to make the Company's field
measurement and analysis tools compatible with software products from other
companies.

  ASSET MANAGEMENT

     Competition for the provision of asset management services is highly
fragmented consisting of (i) independent transmission tower owners and
operators, the largest of which, American Tower Corp. and American Tower
Systems, own approximately 800 transmission towers each, (ii) wireless network
operators, (iii) companies (such as utility providers) that operate their own
private communication networks, (iv) broadcasters and (v) site developers.

SOFTWARE PROTECTION AND TECHNOLOGY LICENSES

     The Company regards its software as proprietary and has implemented
protective measures both of a legal and a practical nature to ensure that the
software retains that status. The Company derives protection for its software by
licensing only the object code to customers and keeping the source code
confidential. Like many other companies that license software, the Company does
not have patent protection for its software. It therefore relies upon the
copyright laws to protect against unauthorized copying of the object code of its
software, and upon copyright and trade secret laws for the protection of the
source code of its software. Despite this protection, competitors could copy
certain aspects of the Company's software tools or field measurement and
analysis products, or obtain information which the Company regards as trade
secrets. In addition, the Company enters into confidentiality agreements with
its employees, distributors, and customers, and limits access to and
distribution of its software, documentation, and other proprietary information.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to deter misappropriation of its technology.
Further, there can be no assurance that any patent issued to the Company or the
copyrights registered by the Company can be successfully defended. In any event,
the Company believes that factors such as technological innovation and expertise
and market responsiveness are more important than the legal protections
described above.

RISK FACTORS

  CHANGES ADVERSELY IMPACTING DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES

     The wireless telecommunications industry is undergoing a number of
significant changes that are adversely impacting demand for the Company's RF
engineering and related services and products. Such changes include (i)
increased use of in-house engineers by operators of mature wireless networks,
(ii) increasing dependence of wireless network operators on equipment vendors
for design services and financing and (iii) delays in deployment of networks.

                                       16
<PAGE>   17

     Increased Use of In-House Engineers by Operators of Mature Wireless
Networks

     Over the last few years, operators of several mature wireless networks have
reduced the amount of engineering services purchased from the Company and have
replaced such services with those provided by their own engineers. The Company
expects this trend to continue and to affect other types of wireless networks
both within the U.S. and internationally.

     Increasing Dependence of Wireless Network Operators on Equipment Vendors
for Design Services and Financing

     Wireless network operators, particularly PCS operators and new
international licensees, are increasingly dependent on equipment vendors to
provide turnkey solutions for the design and deployment of wireless networks and
to provide vendor financing for the entire project. Vendors of wireless
telecommunications equipment have been conditioning the availability of
financing for services or products, other than those principally offered by the
vendor, on being granted the right to select the providers of such services and
products, including RF engineering and network design. The Company believes that
the need of PCS and other wireless operators for vendor financing and the
packaging of services by equipment vendors is making the vendor a competitor of
the Company (since the vendor is providing engineering services, generally
through a subcontract arrangement) and is causing the vendor to replace the
wireless operator as a customer of the Company. While the Company has
established relationships with major telecommunications equipment vendors
pursuant to which the Company provides services and products for the wireless
telecommunications projects for which such vendors act as prime contractors,
such arrangements often are less profitable for the Company than direct sales to
the end user since the vendor often submits a comparatively lower bid for the
engineering work to secure or increase its profits on equipment sales. In
addition, working through a prime contractor weakens the relationship with the
network operator and may reduce the Company's ability to obtain continuing
business.

     Delays in Deployment of Networks

     The Company believes that demand for its services and products has been and
will continue to be affected by any delays or difficulties in deployment of
networks in the U.S. and abroad. A significant portion of the Company's revenues
is generated from new licensees for designing and building out networks. For
example, in the U.S. the pace of PCS network deployment has been slower than
expected, due in significant part to various levels of difficulty experienced by
holders of PCS licenses in raising the necessary financing. Pocket and NextWave,
the two top bidders in the C-block broadband PCS auction, had agreements with
the Company pursuant to which the Company was to provide services and products
aggregating $115 million over a five-year period beginning in 1996. Both of
these customers failed to pay substantial amounts owing with respect to services
and products provided by the Company and, on April 1, 1997, Pocket announced
that it had voluntarily sought court protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company has suspended all work with respect to Pocket and
NextWave. (See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Cash Flows"). Accordingly, orders for
network design and deployment from PCS licensees are subject to uncertainty. See
"-- Risks Associated with Strategic Relationships, Strategic Financing and
Acquisitions."

  RISKS FROM COMPETITION

     The current market for wireless network design services, related software
tools, field measurement and analysis equipment and program management services
is highly competitive. Many companies offer such services and products, and the
Company believes that the number of other independent firms providing a
combination of these services and products to wireless network operators
throughout the world is increasing. Wireless operators themselves and system
equipment vendors are also developing capabilities competitive with those
provided by the Company. See "-- Changes Adversely Impacting Demand for the
Company's Products and Services -- Increased Use of In-House Engineers by
Operators of Mature Wireless Networks" and "-- Increasing Dependence of Wireless
Network Operators on Equipment Vendors for Design Services and Financing." Some
of the Company's competitors are part of large corporate groups or alliances
with greater
                                       17
<PAGE>   18

resources and broader technology bases than those of the Company. In addition,
some of the Company's competitors have been founded by or have recruited senior
engineering executives from current or potential Company customers and may have
better relationships with those current or potential customers than are
available to the Company. Recently, as a result of increased competition, the
Company has experienced a decline in the prices it can charge for its software
tools and field measurement and analysis equipment. There can be no assurance
that competitive factors will not have an adverse effect on the Company's
business.

  SUBSTANTIAL LEVERAGE

     The Company had $50.0 million of debt obligations as of December 31, 1997,
consisting of the notes held by MCI. The two MCI notes, which are due in 2000,
are exchangeable for Common Stock of the Company. The Company has previously
deferred the exercise of its option to cause the notes to be converted into
2,841,099 shares of Common Stock but presently intends to do so in August 1998.
However, if there is a default under such MCI notes prior to this exchange, or
if there is a default under the Credit Facility, there would be a material
adverse effect on the Company. The Credit Facility prohibits the Company from
incurring additional debt and contains numerous other restrictive covenants. See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Existing Indebtedness."

  RAPID TECHNOLOGICAL CHANGES

     The market for wireless network system design services and tools is
characterized by rapid change and improvements in technology. The Company's
future success will depend in part on its ability to enhance its current
products, to introduce new products that keep pace with technological
developments and to address the increasingly sophisticated needs of its
customers. There can be no assurance that the Company will be successful in
developing and marketing in a timely manner product enhancements or new products
that respond to the technological advances by others, or that its products and
services will adequately and competitively address the needs of the changing
marketplace. Technological changes with respect to software tools and field
measurement and analysis equipment have resulted in the shortening of product
cycles, and if the Company is not ready to introduce new competitive products,
the Company's operating results could be adversely affected. In the past, the
Company's operating revenues from sales of software tools and field measurement
and analysis equipment have been adversely affected by this trend. In
particular, approximately four years ago, customer requirements for UNIX-based
products emerged at a time when the Company's UNIX-based products were still
being developed, and the Company's revenues from software tools for 1994 were
adversely affected. In order to remain competitive, the Company may be required
to expend a greater percentage of its revenues on product innovation and
research and development or technology acquisition than historically has been
the case.

     In addition, the Company believes that, as the number of wireless networks
in the U.S. increases with the addition of PCS license holders and other
competitors (Phase 4), operators will experience greater price competition and
place greater emphasis on containing costs and system efficiency. The Company's
customers will require new network engineering services and products to increase
system efficiency and manage costs in the Phase 4 multiple-operator environment.
Although the Company has and is continuing to develop such services and
products, there can be no assurance that the Company will be able to offer such
services and products in a timely manner.

  DEPENDENCE ON PROFESSIONAL STAFF; NEED FOR ADDITIONAL QUALIFIED TECHNICAL
PERSONNEL

     The Company receives the majority of its revenues from the efforts of
approximately 480 professionals. The success of the Company's business therefore
depends on its ability to attract, hire and retain professional staff. Moreover,
to continue its growth at its current rate, the Company needs to attract
additional RF engineers and other technical professionals. There are a limited
number of RF engineers, and such individuals are sought both by RF engineering
companies such as the Company and by wireless network operators. Competition for
such personnel is intense, which has at times caused the Company to experience
difficulty in recruiting and retaining qualified technical personnel. In the
program management area, although the number of available professionals is
greater, the Company has less experience in hiring such professionals. There can

                                       18
<PAGE>   19

be no assurance that the Company will not experience difficulties in retaining
and augmenting its professional staff.

  DEPENDENCE ON SIGNIFICANT CUSTOMERS AND LARGE CONTRACTS

     The Company derived approximately 55.0% of its revenues from its ten
largest customers in the year ended December 31, 1997. Nextel Communications,
the Company's largest customer in the year ended December 31, 1997, accounted
for approximately 13.8% of its revenues. Lucent Technologies accounted for an
additional 10.1% of the Company's revenues. Although such major customers
generally have differed from year to year as work under existing contracts is
completed and services under new contracts are commenced, the Company depends on
having large contracts from some customers each year to meet its expected
revenues. There can be no assurance that the Company will continue to receive
large contracts from customers. In addition, the Company's contracts typically
have provisions that permit customers to terminate their respective contracts
under various circumstances, which include nonperformance or unsatisfactory
performance by the Company. There can be no assurance that customers under any
of the Company's other long-term contracts will not attempt to cancel or
renegotiate their contracts with the Company.

  LENGTHY SALES CYCLE

     Purchases of the Company's products or services by customers often entail
an extended decision-making process for the customer because of the substantial
costs and strategic implications associated with selecting wireless network
deployment services and products. Senior management of the customer is often
involved in this process, given the importance of the decision as well as the
risks faced by the customer if the Company's services and products do not meet
the customer's particular needs. Therefore, large procurements of the Company's
services and products involve lengthy selling cycles, resulting in a relatively
high cost of new business generation. See "-- Sales and Marketing."

  SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS; UNCERTAINTIES RELATING TO
BACKLOG

     The Company's quarterly revenues and operating results have varied
considerably in the past and are likely to vary considerably from quarter to
quarter in the future. Fluctuations in the Company's revenues depend on a number
of factors, some of which are beyond the Company's control. These factors
include, among others, the timing of issuance of new licenses by governmental
agencies, the length of sales cycles, changes in pricing policy by the Company
or its competitors, the timing of contracts and customer budget changes. In
addition, even after contracts are entered into, the timing of delivery of
services and products depends in part on the customer's readiness to receive the
services and the pace of the build-out of the customer's network, which in turn
depend on a number of business decisions by the customer and provision of
services and equipment by providers other than the Company. The Company's
backlog was reduced significantly in early 1997 as a result of the cessation and
reduction, respectively, of the services to be provided to Pocket and NextWave
(see Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Cash Flows). The Company establishes its expenditure
levels for product development and other operating expenses in large part on its
expected future revenues. As a result, should revenues fall below expectations,
operating results are likely to be adversely affected.

  DEPENDENCE ON PROPRIETARY TECHNOLOGY

     The Company relies on a combination of copyrights, trademarks, trade
secrets, non-disclosure and other contractual agreements and technical measures
to protect its proprietary rights in its products. There can be no assurance
that others will not independently develop similar products or duplicate the
Company's products. There can also be no assurance that the steps taken by the
Company will prevent misappropriation of this technology. In addition, effective
copyright, trademark or trade secret protection may be unavailable or limited in
certain circumstances. There can be no assurance that third parties will not
assert infringement claims against the Company in the future or that any such
claims will not require the Company to enter into royalty arrangements or result
in costly litigation involving the imposition of damages or injunctive relief
against the Company, any of which could adversely affect the Company's business.

                                       19
<PAGE>   20

  TRADE ACCOUNT RECEIVABLES

     The Company is subject to credit risk in the form of trade account
receivables. As of December 31, 1997, the Company had trade account receivables,
net of allowances for doubtful accounts, of $30.6 million. The Company's
existing and potential customer base is diverse and includes start-up companies
and foreign enterprises. Although the Company believes that the diversity of its
customer base has historically minimized the risk of incurring material losses
due to concentrations of credit risk, it may be exposed to a declining customer
base in periods of market downturns, severe competition, or international
developments. As part of the special charge of $30.1 million recorded by the
Company at December 31, 1996 (see Item 7 "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Cash Flows"), the Company
fully reserved for its aggregate $12.4 million receivable exposure from Pocket
and NextWave and in 1997 realized $3.9 million thereof. In addition, the
economic downturn and exchange rate fluctuations in the Asia-Pacific region has
resulted in certain of the Company's customers experiencing difficulty in
arranging in a timely fashion needed additional financing and hard currency to
satisfy U.S. dollar denominated liabilities to the Company. As a result of the
uncertainty associated with the collection of amounts due, the Company recorded
additional reserves of approximately $2.9 million during the fourth quarter to
cover potential Asia-Pacific region exposure. See Item 7 "Management's
Discussion and Analysis of Financial Condition -- Year Ended December 31, 1997
compared to Year Ended December 31, 1996 -- General and Administrative." The
Company frequently is unable to enforce a policy of receiving payment within 30
days of issuing bills, especially in the case of customers who are in the early
phases of business development. In addition, many of the Company's foreign
customers are not accustomed to paying their suppliers on terms as attractive as
those typically existing in the United States. See "Risk Factors -- Risks of
International Operations." Generally, the Company does not require collateral or
other security to support customer receivables.

  RISKS OF INTERNATIONAL OPERATIONS

     Approximately 37.2% of the Company's revenues for 1997 were generated
outside of the United States, and the Company expects this segment of its
business to increase as a percentage of its revenues. Licensing software and
selling other products and services in foreign countries is subject to various
risks inherent in international business activities. Risks include those
presented by general economic and political conditions in each country, the
effect of applicable foreign tax structures, tariff and trade regulations,
difficulties in obtaining local business licenses, the need to manage a
geographically diverse organization and difficulties in complying with a variety
of foreign laws and regulations. In addition, adverse changes in the regulatory
environments in foreign countries, including delays in deregulation or
privatization affecting the pace at which licenses are awarded to wireless
network system operators, affect the level and timing of the demand for the
Company's services and products. Providing products and services outside the
United States carries the additional risk of currency fluctuations and foreign
exchange controls imposed by certain countries. Foreign customers may be
accustomed to paying their suppliers, including the Company, on terms and
conditions less attractive than is typical in the United States, and collection
of accounts receivable due from foreign customers can be more difficult than
from domestic customers. In addition, the economic downturn and exchange rate
fluctuations in the Asia-Pacific region has resulted in certain of the Company's
customers experiencing difficulty in arranging in a timely fashion needed
additional financing and hard currency to satisfy U.S. dollar denominated
liabilities to the Company. As a result of the uncertainty associated with the
collection of amounts due, the Company recorded additional reserves of
approximately $2.9 million during the fourth quarter to cover potential Asia-
Pacific region exposure. See Item 7 "Management's Discussion and Analysis of
Financial Condition -- Year Ended December 31, 1997 compared to Year Ended
December 31, 1996 -- General and Administrative."

  RISKS ASSOCIATED WITH STRATEGIC RELATIONSHIPS, STRATEGIC FINANCING AND
ACQUISITIONS

     Risks Associated with Strategic Relationships and Strategic Financing

     There are a number of risks associated with the Company's plans to pursue
opportunities to enter into strategic relationships with new wireless operators
or to extend financing to customers in return for new business opportunities.
There can be no assurance that the Company will receive the anticipated
business, that

                                       20
<PAGE>   21

the business will be of the anticipated level or that profits from the new
business will offset any possible losses on the investment made or financing
extended by the Company to enter into such relationship. A loan to or investment
in a customer will be subject to many of the same risks to which the customer is
subject in seeking to operate and grow its businesses, and there can be no
assurance that the customer will be able to repay or return the Company's
investment within an acceptable period. The Company's first two arrangements
with customers under this strategy were Pocket and NextWave, the two top bidders
in the recently-concluded C-block auction for broadband PCS licenses, as part of
arrangements involving the Company receiving contracts for new business over a
five-year period. Both of these companies experienced delays in obtaining
adequate financing for the capital intensive build-out of their systems and
failed to pay substantial amounts owing with respect to services and products
provided by the Company. On April 1, 1997, Pocket announced that it had
voluntarily sought court protection under Chapter 11 of the U.S. Bankruptcy
Code. The Company has suspended all work with respect to Pocket and NextWave.
The Company recorded a special charge of $30.1 million pre-tax ($24.5 million
after tax) to fully reserve for its exposure with Pocket and NextWave, of which
it has received $3.9 million. See Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Cash Flows."

     Risks Relating to Acquisitions

     The Company's intention to engage in acquisitions to acquire companies that
have developed or are developing complementary products and services is subject
to the risks that the assets being acquired or additional professional staff
being recruited to perform services will not perform as expected, that the
acquired entity will have unanticipated liabilities and that the returns
realized by the Company ultimately will not support the investments made or
indebtedness incurred in such acquisitions.

     Restrictions Affecting the Company's Ability to Engage in Strategic
Financings or Acquisitions

     There are several restrictions and other factors affecting the Company's
ability to engage in strategic financings or acquisitions. The Company cannot
predict the extent to which additional capital may be required to engage in such
transactions, there can be no assurance that the Company will be able to obtain
such additional capital on terms acceptable to the Company. In addition, the
Credit Facility contains certain restrictions with regard to, among other
things, acquisitions, capital expenditures and incurrence of additional
indebtedness that may limit the ability of the Company to complete certain
acquisitions. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Existing Indebtedness." The Carlyle Group
Investors also have certain rights that limit the ability of the Company to
incur debt above specified ratios or amounts. See "-- Control of the Company by
RF Investors." Moreover, in seeking to make investments in wireless operators or
acquire other companies, the Company will be competing with organizations that
are larger, have access to more substantial capital resources or are pursuing
other strategic goals. There can be no assurance that the Company will be
successful in completing these transactions.

  RISKS ASSOCIATED WITH CONSTRUCTION AND ACQUISITION OF TRANSMISSION TOWERS

     The success of the Company's asset management business depends on its
ability to construct and acquire transmission towers. The Company's ability to
construct new towers can be affected by a number of factors beyond its control,
including zoning and local permitting requirements, Federal Aviation
Administration considerations, availability of tower components and construction
equipment, skilled construction personnel and bad weather conditions. There can
be no assurance that the Company will be able to overcome these barriers to
construct new towers. With respect to the Company's acquisition of transmission
towers, the Company competes with certain wireless service providers,
broadcasters, site developers and other independent tower owners and operators
to acquire towers, and expects such competition to increase. Increased
competition for acquisitions may result in fewer acquisition opportunities and
higher acquisition prices.

                                       21
<PAGE>   22

  RISKS ASSOCIATED WITH DAMAGE TO TRANSMISSION TOWERS

     The Company's transmission towers are subject to risks associated with
natural disasters such as tornadoes, hurricanes and earthquakes. The Company
maintains insurance to cover the estimated cost of replacing damaged towers
(subject to certain caps). The Company also maintains third party liability
insurance to protect the Company in the event of an accident involving a tower.
A tower accident for which the Company is uninsured or underinsured, or damage
to a tower or group of towers, could have a material adverse effect on the
Company's business.

  DEPENDENCE ON KEY PERSONNEL; MANAGEMENT OF GROWTH

     Dependence on Key Personnel

     The success of the Company depends to a significant degree upon the
contribution of its executive officers and other key personnel. The Company
recently hired a new Chief Executive Officer following the resignation of its
former Chief Executive Officer. With the exception of the new Chief Executive
Officer, none of the Company's executive officers has an employment agreement
with the Company, other than an agreement terminable at will. There can be no
assurance that the Company will be able to retain its key managerial and other
key personnel or to attract suitable replacements or additional personnel if
required.

     Management of Growth

     To manage its growth effectively, the Company must continue to strengthen
its operational, financial and management information systems, and expand, train
and manage its work force. Failure to do so effectively and on a timely basis
would have an adverse effect upon the Company's business.

  CONTROL OF THE COMPANY BY RF INVESTORS

     RF Investors owns all of the outstanding shares of Class B Common Stock,
which represents 92.2% of the combined voting power of both classes of Common
Stock. Accordingly, RF Investors and its equity holders are able, without the
approval of the Company's public stockholders, to (i) elect all of the Company's
directors, (ii) amend the Company's certificate of incorporation (the
"Certificate of Incorporation") with respect to most matters or effect a merger,
sale of assets, or other major corporate transaction, (iii) defeat any
non-negotiated takeover attempt, (iv) sell RF Investors' shares of Common Stock
without participation in such sale by the Company's public stockholders, (v)
determine the amount and timing of dividends paid, if any, with respect to
Common Stock and (vi) otherwise control the management and operations of the
Company and the outcome of virtually all matters submitted for a stockholder
vote. RF Investors may also, by converting its shares of Class B Common Stock
into shares of Class A Common Stock, obtain a sufficient number of shares of
Class A Common Stock (54.5% of the total outstanding shares of Class A Common
Stock (based upon the number of shares of Class B Common Stock held by RF
Investors on March 16, 1998)) to determine the outcome of any vote with respect
to any matter on which the holders of Class A Common Stock are entitled to vote
together as a class. Dr. Rajendra and Neera Singh, who with certain Singh family
trusts indirectly own 75% of Telcom Ventures (collectively, the "Singh Family
Group"), are also directors or executive officers of the Company, and Mark Ein,
a designee of the Carlyle Investors, who are the 25% indirect owners of Telcom
Ventures, also is a director of the Company. The Telcom Ventures and RF
Investors limited liability company agreements provide that, for as long as the
Carlyle Investors collectively own at least 5% of the total membership interests
of Telcom Ventures, Telcom Ventures shall vote any and all shares of the Company
held by it, and shall cause RF Investors to vote any and all shares held by it,
from time to time: (i) to elect as directors of the Company up to two persons
recommended by the Carlyle Investors upon the request of the Carlyle Investors,
and (ii) not to take any of the following actions without the consent of the
Carlyle Investors: (a) approve any amendment to the Certificate of Incorporation
or the Bylaws of the Company; (b) approve the incurrence by the Company of any
debt (or the granting of security relating to the incurrence of debt) if as a
result of such incurrence, the debt to equity ratio of the Company exceeds 6:1
or, if as a result of such debt incurrence, the total outstanding debt of the
Company exceeds $50 million plus or minus, as the case may be, the cumulative
net income or the net losses of the Company after January 1994;

                                       22
<PAGE>   23

(c) approve any new affiliated party transactions in excess of $150,000 or
modifications to existing transactions, subject to certain limited exceptions;
(d) approve the appointment as independent accountants of the Company of a firm
other than one of the "big six" accounting firms; or (e) approve certain events
relating to the bankruptcy or insolvency of the Company. The RF Investors and
Telcom Ventures limited liability company agreements provide for certain rights
of the Carlyle Investors to cause the distribution to the Carlyle Investors,
beginning September 30, 1999, of up to 25% of the Common Stock held by RF
Investors. Such a distribution would still leave RF Investors with voting
control of the Company.

  RELATIONSHIP WITH TELCOM VENTURES; POTENTIAL CONFLICTS OF INTEREST

     Telcom Ventures, RF Investors' parent, is principally engaged in making
investments in wireless system operators and emerging wireless technologies.
Directors of Telcom Ventures and its subsidiaries who are also directors or
officers of the Company have certain fiduciary obligations to each organization.
Telcom Ventures and directors of Telcom Ventures and its subsidiaries who are
also directors and officers of the Company are in positions involving the
possibility of conflicts of interest with respect to certain transactions
concerning the Company. In addition, the Company and Telcom Ventures and certain
of Telcom Ventures' subsidiaries have entered and will enter into arrangements
which provide for certain transactions and relationships between the parties or
which otherwise affect the Company. The Company, RF Investors, Telcom Ventures,
and Telcom Ventures' owners (Cherrywood, the Singh Family Group and the Carlyle
Investors) (in each case as defined herein and collectively, the "Telcom
Ventures Group") have entered into an agreement (the "Intercompany Agreement"),
effective with the Offering, whereby, among other things, (i) the Singh Family
Group is limited in its ability to compete with the Company in its traditional
lines of business and (ii) Telcom Ventures is limited in its ability to invest
in entities whose primary business is to compete with the Company in its
traditional lines of business, in each case until the earlier of (i) the date on
which the Telcom Ventures Group no longer possesses 51% or more of the
outstanding voting power of the Company or (ii) the occurrence of certain
termination events specified in the Formation Agreement among the Telcom
Ventures Group. Each of the Carlyle Investors (but not its affiliates) is
limited in its ability to invest in entities whose primary business is to
compete with the Company in its traditional line of business (excluding the
program management business) until the earlier of (i) the date on which such
Carlyle Investor no longer owns, directly or indirectly, an interest in the
Company or (ii) the occurrence of certain termination events specified in the
Formation Agreement among the Telcom Ventures Group. The Company is free to
pursue investment opportunities on its own, but is obligated to refer to Telcom
Ventures investment opportunities prior to offering such opportunities to any
other third party. If Telcom Ventures does not elect to pursue the investment
opportunity within five days, the Company will be free to offer the opportunity
to third parties. There can be no assurance that the Intercompany Agreement will
eliminate or reduce conflicts of interest or inconsistent fiduciary obligations.

EMPLOYEES

     As of December 31, 1997, the Company employed 827 full-time employees. The
Company believes that relations with its employees are good. None of its
employees is part of any collective bargaining unit. The Company believes that
its future growth and success will depend upon its ability to attract and retain
skilled and motivated personnel.

ITEM 2.  PROPERTIES

     At December 31, 1997 the Company leased approximately 155,000 square feet
of office space in McLean, Virginia pursuant to a lease entered into in May
1996, with an initial annual rent of approximately $2.9 million. The term of
this lease is ten years, with two five-year renewal options. The Company entered
into another lease in May 1996 for approximately 10,000 square feet of office
space in McLean, Virginia, with an initial annual rent of approximately
$153,700. The Company occupied a portion of this office space in 1997 and
expects to occupy or sublease additional portions thereof in 1998. The term of
this lease is five-years with three five-year renewal options. The Company
believes that its facilities will be adequate for its needs for the foreseeable
future.

                                       23
<PAGE>   24

ITEM 3.  LEGAL PROCEEDINGS

     The Company is party to various legal proceeding and claims incidental to
its business. The Company does not believe that these matters will have a
material adverse effect on the Company.

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

     None

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     Since completion of the Offering in September 1996, the Class A Common
Stock has been quoted on the Nasdaq National Market under the trading symbol
"LCCI." As of March 27, 1998, there were 73 stockholders of record of the Class
A Common Stock and, in excess of 2,700 beneficial holders thereof, and two
stockholders of record of the Class B Common Stock. The following table
summarizes the high and low closing sale prices of the Class A Common Stock by
fiscal quarter for 1996 and 1997 as reported on the Nasdaq National Market:

<TABLE>
<CAPTION>
QUARTER ENDED:                                                       1996
--------------                                                ------------------
<S>                                                           <C>
September 30 (from September 25)**..........................   $18.25 to $20.00
December 31.................................................  $13.625 to $19.25
QUARTER ENDED:                                                       1997
------------------------------------------------------------  ------------------
March 31....................................................   $7.75 to $18.875
June 30.....................................................   $8.75 to $15.875
September 30................................................  $13.625 to $21.875
December 31.................................................   $12.50 to $25.00
</TABLE>

     The Company has never paid any cash dividends on Common Stock and the
Company does not anticipate paying dividends on the Common Stock, cash or
otherwise, in the foreseeable future. In addition, the Credit Facility prohibits
the payment of dividends by the Company without the consent of the lenders
thereunder. Future dividends, if any, will be at the discretion of the Board of
Directors and will depend upon, among other things, the Company's operations,
capital requirements and surplus, general financial condition, contractual
restrictions and such other factors as the Board of Directors may deem relevant.
---------------
** The Class A Common Stock began trading on the NASDAQ Stock Market on
   September 25, 1996. Prior to that time there was no established trading
   market for the Class A Common Stock.

                                       24
<PAGE>   25

ITEM 6.  SELECTED FINANCIAL DATA

    Set forth below are (i) selected consolidated financial data as of and for
each of the years in the five-year period ended December 31, 1997, which have
been derived from the Company's audited Consolidated Financial Statements and
(ii) unaudited pro forma net income (loss) and net income (loss) per share data
prepared as if the Company was treated as a Subchapter C Corporation for Federal
and state income tax purposes from January 1, 1995. The selected consolidated
financial data set forth below should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included, or incorporated by reference, elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                                        -------------------------------------------------
                                                         1993      1994      1995       1996       1997
                                                        -------   -------   -------   --------   --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>       <C>       <C>       <C>        <C>
Revenues:
  Service revenues....................................  $30,712   $41,063   $64,016   $ 93,156   $ 91,289
  Product revenues....................................   29,595    34,992    40,445     48,414     63,959
                                                        -------   -------   -------   --------   --------
    Total revenues....................................   60,307    76,055   104,461    141,570    155,248
                                                        -------   -------   -------   --------   --------
Cost of revenues:
  Cost of service revenues............................   21,087    29,185    45,682     65,801     66,837
  Cost of product revenues............................   14,571    18,739    22,448     29,533     40,869
                                                        -------   -------   -------   --------   --------
    Total cost of revenues............................   35,658    47,924    68,130     95,334    107,706
                                                        -------   -------   -------   --------   --------
Gross profit..........................................   24,649    28,131    36,331     46,236     47,542
                                                        -------   -------   -------   --------   --------
Operating expenses:
  Sales and marketing.................................    4,146     4,987     5,823      6,475      7,645
  General and administrative..........................    5,799     8,802    10,108     11,964     16,380
  Research and development............................    1,455     2,560     3,007      8,609      4,570
  Special charge (credit).............................       --        --        --     30,050     (3,894)
  Non-cash compensation...............................       --     3,255     4,646      7,005        580
  Depreciation and amortization.......................    1,838     2,020     3,699      5,039      8,044
                                                        -------   -------   -------   --------   --------
    Total operating expenses..........................   13,238    21,624    27,283     69,142     33,325
                                                        -------   -------   -------   --------   --------
Operating income (loss)...............................   11,411     6,507     9,048    (22,906)    14,217
                                                        -------   -------   -------   --------   --------
Other income (expense)
  Interest, net.......................................      146      (221)   (2,193)    (2,125)    (2,601)
  Other...............................................     (231)      721     1,027      2,376      1,194
                                                        -------   -------   -------   --------   --------
    Total other income (expense)......................      (85)      500    (1,166)       251     (1,407)
                                                        -------   -------   -------   --------   --------
Income (loss) before income taxes.....................   11,326     7,007     7,882    (22,655)    12,810
  Provision (benefit) for income taxes................      829     2,037     3,142    (11,371)     5,235
                                                        -------   -------   -------   --------   --------
Net income (loss).....................................  $10,497   $ 4,970   $ 4,740   $(11,284)  $  7,575
                                                        =======   =======   =======   ========   ========
Net income per share:
  Basic...............................................                                           $   0.51
                                                                                                 ========
  Diluted.............................................                                           $   0.47
                                                                                                 ========
Unaudited Pro Forma Data:
  Pro forma net income (loss).........................                      $ 4,729(1) $(20,769)(1)
                                                                            =======   ========
  Pro forma net income (loss) per share:
    Basic.............................................                      $  0.42(1) $  (1.70)(1)
                                                                            =======   ========
    Diluted...........................................                      $  0.39(1) $  (1.70)(1)
                                                                            =======   ========
Consolidated Balance Sheet Data (at year-end):
  Working capital.....................................  $ 4,682   $31,503   $17,649   $ 37,237   $ 46,981
  Licenses and other intangibles, net.................       --     1,797     3,745     10,540     10,530
  Total assets........................................   55,417    58,586    62,041    114,947    111,018
  Long term obligations...............................      655    23,930    28,627     51,860     51,038
  Equity (deficit)....................................   12,270    13,938      (244)     8,477     20,202
</TABLE>

---------------
(1) Unaudited pro forma net income (loss) has been adjusted to reflect the pro
    forma effects as if the Company was a Subchapter C Corporation in 1995.
    Unaudited pro forma net income (loss) is net of a provision (benefit) for
    income taxes at an assumed effective income tax rate of 40% for its U.S.
    operations and 28%, beginning in 1996, for its Norwegian subsidiary. The
    amount of the pro forma provision (benefit) for income taxes was $3,153,000
    and ($1,886,000) for the years ended December 31, 1995 and 1996,
    respectively. Weighted average shares used in the computation of pro forma
    net income per share was as follows:

<TABLE>
<CAPTION>
                                                           BASIC    DILUTED
                                                           ------   -------
<S>                                                        <C>      <C>
1995.....................................................  11,364   14,205
                                                           ======   ======
1996.....................................................  12,211   12,211
                                                           ======   ======
</TABLE>

                                       25
<PAGE>   26

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

     The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto and the
other financial data appearing elsewhere in this Form 10-K.

OVERVIEW

     The Company is one of the world's largest independent providers of RF
engineering and program management services and products to the wireless
telecommunications industry. The Company has provided these services, along with
related proprietary software tools and field measurement and analysis equipment,
to operators of more than 200 wireless systems in more than 40 countries.

     The Company's revenues are generated through contracts for RF engineering
and program management services, licenses of the Company's software products and
sales of the Company's field measurement and analysis products. The Company
provides engineering services on a contract basis, usually in a customized plan
for each client and generally charges for engineering services on a time and
materials or fixed price basis. The Company generally provides program
management services on a time and materials or fixed price basis. The Company's
revenues also include reimbursement for expenses, including the living expenses
of engineers on customer sites. The software tools used by the Company's
engineers, which are used as part of the customer's system after completion of
the project pursuant to a license, are recorded as product, not service
revenues. Revenues from software tools are earned under license arrangements,
which in the U.S. often consists of monthly or annual fees per workstation or
per cell site and which are for a fixed term that requires renewal by the
customer to retain the software. The Company charges an up-front fee in many
cases outside the U.S. where customers are not accustomed to paying annual
licensing fees for software. A portion of the revenues from licensing software
to customers, apart from those associated with engineering design services
contracts, consists of upgrades or additional software modules developed by the
Company following the initial licensing. Revenues from field measurement and
analysis equipment consist primarily of one-time payments, although there are
some periodic rental payments and there may be additional charges for equipment
maintenance and upgrades.

     In December 1996, through the formation of a new subsidiary, Microcell
Management, Inc. ("Microcell"), the Company entered the wireless infrastructure
asset management business to acquire, develop and manage RF transmission towers.
Capitalized cost related to tower development was $2.9 million at December 31,
1997. Expenses of $0.9 million were incurred in calendar 1997 related to the
asset management business and are included in general and administrative
expenses in the accompanying consolidated statement of operations.

     Service revenues consist of revenues from engineering design services and
program management services (approximately 58.8% of 1997 revenues). Systems and
product revenues consist of revenues from software tools and field measurement
and analysis products (approximately 41.2% of 1997 revenues). The Company
derives a significant portion of its revenues from its international customers
(approximately 37.2% in 1997). Since almost all of the Company's contracts are
denominated in U.S. dollars, the Company does not generally maintain currency
hedge agreements.

     Cost of revenues consists of costs associated with engineering design
services and program management services as well as costs associated with the
production of field measurement and analysis equipment, licensing of software
and related maintenance costs. Sales and marketing expenses consist of salaries,
sales commissions, bonuses, travel and other expenses required to implement the
Company's marketing, sales and customer support plans. General and
administrative expenses consist of the compensation, finance, information
systems, professional services and office and occupancy costs required to manage
the Company's business. Non-cash compensation consists of awards under a program
for key employees adopted in 1994. Such plan was accounted for as a variable
plan, and therefore, to the extent that the deemed fair market value of the
Company increased, compensation expense increased accordingly. In connection
with the Company's initial public offering in September 1996, the Company
granted stock options to replace the awards granted under this plan. (See note
15 to the Consolidated Financial Statements).


                                       26
<PAGE>   27

     The key drivers of the Company's growth have historically been (i) the
issuances of new or additional wireless telecommunications licenses by
governmental authorities to wireless operators, (ii) increases in the number of
cell sites operated and the number of subscribers served by wireless network
operators, (iii) the introduction of new services or technologies, (iv) the
increasing complexity of the systems deployed by wireless network operators, and
(v) the expansion and optimization of existing systems by wireless network
operators.

     To keep pace with the subscriber growth currently anticipated by most
industry analysts, the Company expects that there will continue to be
significant investment by network system operators over the next few years in
design services, program management services, software tools and field
measurement analysis equipment. The Company expects that as system build-out is
completed and areas begin to have multiple network operators, the demand for
traditional design and build RF engineering services, particularly in the U.S.,
will change.

     Although the Company's revenues from the sales of products and services are
primarily derived from the design, build-out and optimization of wireless
systems, increased emphasis has been placed on products and services which
assist in achieving network efficiency and cost savings. The Company's
acquisition of ETP in December 1996 has facilitated the Company's development of
hardware and software products and services designed to enhance system
performance by providing automated data collection, analysis and optimization
capabilities.

     The Company has experienced fluctuations in revenues in each of the past
several years, with greater revenues in the second half of its calendar year and
lesser amounts in the first half. This trend may or may not continue as the
Company broadens its product and service offerings. A significant portion of the
Company's software license agreements are concluded in the last month of the
calendar quarter, generally with a concentration of such revenues in the final
ten business days of that month. The Company believes that these revenue
fluctuations are caused primarily by customer buying patterns. In any case, due
to the relatively fixed nature of certain costs, including personnel and
facilities expenses, a decline or shortfall in quarterly and/or annual revenues
typically results in lower profitability.

RESULTS OF OPERATIONS

     The following table sets forth certain items as a percentage of revenues
from the Company's audited consolidated statements of operations for the years
ended December 31, 1995, 1996, and 1997. The table and discussion which follows
provides information which management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations and financial
condition. The discussion

                                       27
<PAGE>   28

should be read in conjunction with the consolidated financial statements and
accompanying notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               1995      1996      1997
                                                              ------    ------    ------
<S>                                                           <C>       <C>       <C>
Revenues:
  Service revenues..........................................   61.3%     65.8%     58.8%
  Product revenues..........................................   38.7      34.2      41.2
                                                              -----     -----     -----
          Total revenues....................................  100.0     100.0     100.0
Cost of revenues............................................   65.2      67.3      69.4
                                                              -----     -----     -----
Gross profit................................................   34.8      32.7      30.6
                                                              -----     -----     -----
Operating expenses:
  Sales and marketing.......................................    5.6       4.6       4.9
  General and administrative................................    9.7       8.5      10.5
  Research and development..................................    2.9       6.1       2.9
  Special charge (credit)...................................     --      21.2      (2.5)
  Non-cash compensation.....................................    4.4       4.9       0.4
  Depreciation and amortization.............................    3.5       3.6       5.2
                                                              -----     -----     -----
          Total operating expenses..........................   26.1      48.9      21.4
                                                              -----     -----     -----
Operating income (loss).....................................    8.7     (16.2)      9.2
                                                              -----     -----     -----
Other income (expense):
  Interest income...........................................    0.6       0.7       0.5
  Interest expense..........................................   (2.7)     (2.2)     (2.1)
  Other.....................................................    0.9       1.7       0.7
                                                              -----     -----     -----
          Total other income (expense)......................   (1.2)      0.2      (0.9)
                                                              -----     -----     -----
Income (loss) before income taxes...........................    7.5     (16.0)      8.3
Provision (benefit) for income taxes........................    3.0      (8.0)      3.4
                                                              -----     -----     -----
Net income (loss)...........................................    4.5%     (8.0)%      4.9%
                                                              =====     =====     =====
</TABLE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

     Revenues.  Revenues for 1997 were $155.2 million, compared to $141.6
million for 1996, an increase of $13.6 million or 9.7%. Service revenues were
$91.3 million, compared to $93.2 million for the prior year, a decrease of $1.9
million, or 2.0%. The decrease was primarily the result of a $6.8 million or
41.2% decrease in program management service revenue as a result of the decrease
in chargeability from ceasing all work for Pocket and NextWave during the first
quarter of 1997. Engineering design services revenue increased $4.9 million or
6.4% primarily as a result of an increase in chargeable hours. Product revenues
were $64.0 million, compared to $48.4 million the prior year, an increase of
$15.6 million or 32.1%. The increase was primarily the result of an increase in
field measurement and network analysis product revenues due to strong sales in
North America, the acquisition of ETP in December 1996 and new product
introductions during 1997.

     Cost of Revenues.  Cost of revenues were $107.7 million for 1997, compared
to $95.3 million for 1996, an increase of $12.4 million or 13.0%. As a
percentage of total revenues, cost of revenues was 69.4% and 67.3% for 1997 and
1996, respectively. Total cost of service revenues as a percentage of service
revenues increased to 73.2%, as compared to 70.6% for the prior year. The
increase was primarily due to greater compensation and related costs, in part,
as a result of the increase in the number of professional personnel between
years. Total cost of product revenues as a percentage of product revenues
increased to 63.9%, compared to 61.0% for the

                                       28
<PAGE>   29

prior year. The increase was primarily due to a change in software products mix
between years favoring lower margin products.

     Gross Profit.  Gross profit was $47.5 million, compared to $46.2 million
for the prior year, an increase of $1.3 million or 2.8%. As a percentage of
total revenues, gross profit was 30.6% and 32.7% for 1997 and 1996,
respectively. Service gross profit decreased to $24.5 million, compared to $27.3
million for the prior year, a decrease of $2.8 million or 10.6%. As a percentage
of service revenues, service gross profit was 26.8% and 29.4% for 1997 and 1996,
respectively. The decrease in service gross profit was primarily due to the
decrease in chargeability from ceasing all work for Pocket and NextWave. Product
gross profit increased to $23.1 million, compared to $18.9 million for the prior
year, an increase of $4.2 million or 22.3%. As a percentage of product revenue,
product gross profit was 36.1% and 39.0% in 1997 and 1996, respectively. The
dollar increase in product gross profit was primarily the result of increased
field measurement and network analysis product revenues. The decline in product
gross profit as a percentage of product revenues was primarily due to the change
in software products mix between years.

     Sales and Marketing.  Sales and marketing expenses were $7.6 million,
compared to $6.5 million for the prior year, an increase of $1.1 million or
18.1%. The increase was primarily attributable to marketing expenses of ETP
which was acquired in December 1996. As a percentage of total revenues, sales
and marketing expenses increased to 4.9%, compared to 4.6% for the prior year.

     General and Administrative.  General and administrative expenses were $16.4
million, compared to $12.0 million for the prior year, an increase of $4.4
million or 36.9%. The increase was primarily the result of costs associated with
the Company's Microcell Management, Inc. subsidiary ($0.9 million) which was
established in December 1996, costs related to the Company's Brazilian
operations ($0.8 million) which were new in 1996 and an increase in the
allowance for doubtful accounts due to the continued aging of receivables from
the Company's Asia-Pacific customers. The economic downturn and exchange rate
fluctuations in the Asia-Pacific region has resulted in certain of the Company's
customers experiencing difficulty in arranging in a timely fashion needed
additional financing and hard currency to satisfy U.S. dollar denominated
liabilities to the Company. As a result of the uncertainty associated with the
collection of amounts due, the Company recorded additional reserves of
approximately $2.9 million to cover potential Asia-Pacific region exposure and
established procedures to require downpayment or use of letters of credit for
certain Asia-Pacific sales.

     Research and Development.  Research and development expenses were $4.6
million, compared to $8.6 million for the prior year, a decrease of $4.0 million
or 46.9%. The decrease is primarily due to the inclusion of $5.6 million of
in-process research and development expenses in 1996 as a result of the purchase
of substantially all the assets and liabilities of ETP in December 1996.
Excluding this item, research and development expenses increased $1.6 million or
52.1%. The increase is due primarily to research and development costs related
to ETP ($1.2 million) and costs related to the Company's field test measurement
and analysis products.

     Special Charge (credit).  During September 1997, the Company recognized an
approximate $3.9 million recovery of the $30.1 million special charge recorded
in December 1996 related to Pocket and NextWave. Of the $3.9 million, $2.0
million represents payments received through June 1997 under the revised payment
schedule established with NextWave on April 15, 1997 and $1.9 million represents
additional payments of $2.0 million received in April 1997 from NextWave, net of
related expenses. For financial reporting purposes, income recognition of the
entire $3.9 million balance was deferred pending the lapse in the third quarter
of a 90 day window during which such funds could have been subject to being
treated as preference payments recoverable by NextWave had it filed for
protection under the bankruptcy laws. (See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Cash Flows").

     Non-Cash Compensation.  Non-cash compensation was $0.6 million, compared to
$7.0 million for the prior year, a decrease of $6.4 million or 91.7%. The
balance recorded in the prior year includes additional compensation expense as a
result of the increase in the deemed fair market value of the Company. In
addition, certain awards became fully vested and related expense recognition was
completed during 1997. Awards under the related compensation plans were
converted to stock options in connection with the Company's initial public
offering in September 1996.
                                       29
<PAGE>   30

     Depreciation and Amortization.  Depreciation and amortization expense was
$8.0 million, compared to $5.0 million for the prior year, an increase of $3.0
million or 59.6%. The increase was primarily the result of an increase in the
amount of capitalized software development costs, the acquisition of ETP and
related amortization of intangibles and a generally higher capital asset base as
compared to the prior year.

     Interest Expense, Net.  Interest expense, net was $2.6 million in 1997
compared to $2.1 million for the prior year, an increase of $0.5 million or
22.4%. Interest expense in 1997 results from $50.0 million of convertible
subordinated debt ($30.0 million of which was assumed from Telcom Ventures in
September 1996 as a result of the merger of LCC, L.L.C. with and into the
Company), whereas during the prior year, the Company had a total of $20.0
million debt outstanding under its convertible subordinated debt instrument and
up to an additional $20.0 million outstanding under the Company's credit
facility. All amounts outstanding under the credit facility were paid from the
proceeds of the Company's initial public offering in September 1996. The
increase in interest expense, net results from the change in amount and mix of
the debt as well as related interest rates.

     Other Income.  Other income was $1.2 million in 1997, compared to $2.4
million in 1996, a decrease of $1.2 million or 49.7%. The decrease is primarily
due to the gain recorded on the sale of the Company's 50.5% interest in Telemate
S.A. in January 1996 ($0.5 million) and a decrease in the amount of income
recognized from the Company's 33 1/3% investment in Koll Telecommunications
Services, L.L.C. in 1997 as compared to the prior year.

     Provision (Benefit) for Income Taxes.  The provision for income taxes was
$5.2 million in 1997, compared to a benefit of $11.4 million for the prior year.
The provision for income taxes was recorded in 1997 based on an effective income
tax rate of 40% for the Company's U.S. operations and various effective tax
rates ranging from 28% to 59% for the Company's foreign operations. The
provision for income taxes was recorded through September 26, 1996 assuming that
the Company was a Limited Liability Corporation. In addition, the Company
recorded a one-time deferred tax benefit of $8.7 million in 1996 as a result of
its conversion from a Limited Liability Corporation to a Subchapter C
Corporation in connection with the merger of LCC, L.L.C. with and into the
Company prior to the initial public offering in September 1996.

     Net Income (loss).  Net income was $7.6 million in 1997 compared to a net
loss of $11.3 million for the prior year. As a percentage of total revenues, net
income increased to 4.9% from (8.0%) in the prior year. Adjusting for the
special charge recorded by the Company in 1996, non-cash compensation,
in-process research and development, 1996 earnings from the Pocket and NextWave
engagements, the recovery of special charge in 1997 and assuming an effective
tax rate of 40.0% in 1996, net income would have been $5.6 million compared to
$7.7 million for 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

     Revenues.  Revenues for 1996 were $141.6 million, compared to $104.5
million for 1995, an increase of $37.1 million or 35.5%. Service revenues were
$93.2 million, compared to $64.0 million for the prior year, an increase of
$29.2 million, or 45.5%. The increase was primarily the result of an $18.0
million or 30.6% increase in engineering design services revenue due to the
generation of additional chargeable hours in 1996, in part due to demand from
the PCS market. Program management services revenues increased $11.2 million or
213.5%. Calendar 1996 was the first full year of contract work for program
management, which initiated operations in 1995. Product revenues were $48.4
million, compared to $40.4 million the prior year, an increase of $8.0 million
or 19.7%. The increase was primarily the result of a $5.0 million or 23.7%
increase in field measurement and network analysis product revenues due to
strong sales in North America and an increase of $3.0 million or 15.3% in
software licensing revenue as a result of several large sales in 1996.

     Cost of Revenues.  Cost of revenues were $95.3 million for 1996, compared
to $68.1 million for 1995, an increase of $27.2 million or 39.9%. As a
percentage of total revenues, cost of revenues was 67.3% and 65.2% for 1996 and
1995, respectively. Total cost of service revenues as a percentage of service
revenues decreased to 70.6%, as compared to 71.4% for the prior year. The
decrease was primarily due to start-up costs incurred by the program management
division in 1995, the year operations were initiated. Total cost of product
revenues

                                       30
<PAGE>   31

as a percentage of product revenues increased to 61.0%, compared to 55.5% for
the prior year. The increase was primarily due to the change in mix of product
revenues between years.

     Gross Profit.  Gross profit was $46.2 million, compared to $36.3 million
for the prior year, an increase of $9.9 million or 27.3%. As a percentage of
total revenues, gross profit was 32.7% and 34.8% for 1996 and 1995,
respectively. Service gross profit increased to $27.3 million, compared to $18.3
million for the prior year, an increase of $9.0 million or 49.2%. As a
percentage of service revenues, service gross profit was 29.4% and 28.6% for
1996 and 1995, respectively. Engineering design services gross profit increased
$5.6 million or 28.7% and program management services gross profit increased
$3.4 million or 296.6%. The increase in engineering design services gross profit
was primarily due to revenue growth. The increase in program management services
gross profit was the result of the start-up of the business in 1995 and
accompanying investment in business development. Product gross profit increased
to $18.9 million, compared to $18.0 million for the prior year, an increase of
$0.9 million or 4.9%. As a percentage of product revenue, product gross profit
was 39.0% and 44.5% in 1996 and 1995, respectively. Software gross profit
decreased to 37.9% of software sales, compared to 43.3% the prior year, as the
result of the investment in product development.

     Sales and Marketing.  Sales and marketing expenses were $6.5 million,
compared to $5.8 million for the prior year, an increase of $0.7 million or
11.2%. The increase was primarily attributable to sales commissions paid to
agents due to an increasing level of sales in Asia-Pacific where the Company
makes extensive use of agents. As a percentage of total revenues, sales and
marketing expenses decreased to 4.6%, compared to 5.6% for the prior year,
primarily as a result of a greater rate of increase in revenues relative to the
growth in sales and marketing expenses.

     General and Administrative.  General and administrative expenses were $12.0
million, compared to $10.1 million for the prior year, an increase of $1.9
million or 18.4%. The increase was primarily the result of an increase in the
allowance for doubtful accounts due to higher revenues and due to the aging of
outstanding receivables.

     Research and Development.  Research and development expenses were $8.6
million, compared to $3.0 million for the prior year, an increase of $5.6
million or 186.3%. Research and development includes expenses of $5.6 million
incurred by the Company in 1996 as the result of the purchase of substantially
all of the assets and liabilities of ETP on December 30, 1996. Based upon an
independent appraisal of the fair market value of certain of the assets acquired
and liabilities assumed, approximately $5.6 million of the purchase price of
$13.1 million was allocated to in-process research and development expenses
resulting in a one-time, non-recurring charge to 1996 earnings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity, Capital Resources and Other Financial Data" and note 4
to the Consolidated Financial Statements. Management believes that the
acquisition of ETP will enhance the Company's ability to provide wireless
operators with quality measurement systems which provide automated quality
monitoring and benchmarking. ETP's software portfolio assists operators in the
monitoring, analysis, maintenance and optimization of their wireless networks.

     Special Charge.  The Company recorded a special charge of $30.1 million
pre-tax ($24.5 million after tax) to fully reserve for its exposure with Pocket
and NextWave. The $30.1 million special charge consists of a reserve against the
Company's aggregate receivable exposure at December 31, 1996 of $12.4 million,
recognition of the other than temporary impairment of the Company's investments
of $11.5 million and accruals of approximately $6.2 million related to loss
contracts under which the Company was obligated to perform at December 31, 1996.
(See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Cash Flows.")

     Non-Cash Compensation.  Non-cash compensation was $7.0 million, compared to
$4.6 million for the prior year, an increase of $2.4 million or 50.8%. The
increase was primarily the result of vesting of certain portions of the awards
of non-cash compensation under the program for key executives adopted in 1994
and an increase in the deemed fair market value of the Company.

     Depreciation and Amortization.  Depreciation and amortization expense was
$5.0 million, compared to $3.7 million for the prior year, an increase of $1.3
million or 36.2%. The increase was primarily the result of

                                       31
<PAGE>   32

increased depreciation expense ($0.5 million) resulting from increased capital
additions and additional amortization ($0.8 million) resulting from decreased
deferred software costs related to the development of software tools and field
measurement and analysis products.

     Interest Expense, Net.  Interest expense, net was $2.1 million in 1996,
compared to $2.2 million in 1995, a decrease of $0.1 million or 3.1%. The
decrease was due primarily to a $0.3 million increase in interest income to $0.9
million in 1996 as a result of the investment of funds received in connection
with the Offering in September 1996. Interest expense was $3.1 million, compared
to $2.8 million in the prior year, an increase of $0.3 million or 8.2%. The
increase was the result of the assumption of $30.0 million of convertible
subordinated debt from Telcom Ventures in September 1996 in connection with the
Merger (see notes 2 and 13 to the Consolidated Financial Statements).

     Other Income.  Other income was $2.4 million in 1996, compared to $1.0
million in 1995, an increase of $1.4 million or 131.4%. The increase resulted
from the gain on sale of the Company's 50.0% interest in Telemate S.A. ($0.5
million) and recognition of income related to distribution rights for the
Company's hardware and software products granted with the sale ($1.2
million -- see note 10 to the Consolidated Financial Statements).

     Provision (Benefit) for Income Taxes.  The provision (benefit) for income
taxes was $(11.4) million compared to $3.1 million in the prior year. The
provision for income taxes was recorded through September 26, 1996 and in all of
calendar 1995 assuming that the Company was a Limited Liability Corporation. In
addition, the Company recorded a one-time deferred tax benefit of $8.7 million
in 1996 as a result of its conversion from a Limited Liability Corporation to a
Subchapter C Corporation in connection with the merger of LCC, L.L.C. with and
into the Company prior to the initial public offering in September 1996.

     Net Income (Loss).  Net income was $(11.3) million for 1996, compared to
$4.7 million for 1995, a decrease of $16.0 million. As a percentage of total
revenues, net income decreased to (8.0)% from 4.5% in the prior year. Adjusting
net income (loss) for non-cash compensation, in-process research and development
and the special charge recorded by the Company, net income would have been $7.7
million as compared to $7.5 million for 1995.

LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA

     Additions to property and equipment were $8.8 million for 1997, compared to
$3.3 million for 1996 and $4.2 million for 1995. Of the $5.5 million increase
from 1996 to 1997, approximately $2.0 million was due to the move of the
Company's headquarter operations (see below), $0.4 million was the result of
additions made by ETP which was acquired in December 1996 and $3.0 million was
due to additions made by Microcell. Approximately $2.9 million of the Microcell
additions represent costs related to the acquisition and development of RF
transmission towers. The Company anticipates a significant continuing commitment
for capital expenditures for its Microcell subsidiary. This effort is currently
expected to be funded from the Company's working capital. Approximately $0.2
million of the $0.9 million decrease from 1995 to 1996 was due to a decrease in
cost related to the ongoing upgrade of the Company's financial information
systems software (cost of $0.9 million in 1995 and $0.7 million in 1996). The
remainder of the decrease from 1995 to 1996 represented changes in the amount of
ongoing additions to office furniture and computer equipment, largely in support
of the Company's revenue base. In May 1996, the Company entered into 10-year and
5-year facility lease agreements effective March 1, 1997 and July 1, 1997,
respectively, and moved into new office space during the first and second
quarter of 1997. This move resulted in a consolidation of the Company's
headquarter operations, decreased office facilities administration costs and an
increase in property and equipment additions in 1997 as compared to 1996.
Additions to investments in joint ventures were $0.8 million for 1996 compared
to $0.4 million for 1995. The $0.4 million increase in investments in joint
ventures from 1995 to 1996 was primarily the result of additional contributions
by the Company to Koll Telecommunications Services, L.L.C. ("Koll"). Koll
provides site acquisition and construction management services to operators of
wireless communications systems (see note 10 to the Consolidated Financial
Statements). No contributions were made by the Company to Koll during calendar
1997. Under the Company's software development programs, software development
costs (primarily wages and contractor fees) are capitalized after establishing

                                       32
<PAGE>   33

the commercial and technological feasibility of the product in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or otherwise Marketed."

<TABLE>
<CAPTION>
                                                           1995   1996   1997
                                                           ----   ----   -----
                                                              (IN MILLIONS)
<S>                                                        <C>    <C>    <C>
Additions to property and equipment......................  $4.2   $3.3   $ 8.8
Investments in joint ventures............................   0.4    0.8     0.0
Software development costs...............................   2.9    3.2     4.2
                                                           ----   ----   -----
                                                           $7.5   $7.3   $13.0
                                                           ====   ====   =====
</TABLE>

CASH FLOWS

     Cash and cash equivalents were $15.8 million at December 31, 1997, an
increase of $2.1 million from December 31, 1996. The increase was due primarily
to payments made for the acquisition of ETP ($10.5 million) and for additions to
property and equipment and capitalized software (total of $13.0 million), as
well as the investment of available cash on hand ($1.7 million), offset by cash
provided by operations ($22.7 million), cash received from the exercise of stock
options and from the issuance of shares under the Company's Employee Stock
Purchase Plan ($3.6 million) and cash received from Telcom Ventures under the
terms of the Company's $3.5 million loan ($1.0 million). In September 1996, in
connection with its initial public offering the Company issued 3,162,500 shares
of Class A Common Stock at an initial public offering price of $16.00 per share.
The net proceeds to the Company (after deducting discounts, commissions and
other expenses of the offering) were approximately $44.8 million. As of December
31, 1996, approximately $16.2 million of this amount was used to pay all
remaining amounts outstanding under the Credit Facility (as defined below), $3.5
million was advanced to Telcom Ventures to assist in paying certain taxes due in
connection with the assumption by the Company of the Telcom Ventures Note,
approximately $6.85 million was used for vendor financing and approximately
$11.85 million was being held to fund the portion of the ETP Acquisition
purchase price due at closing. The balance of approximately $6.4 million was
invested in various short-term investments and cash equivalents. As of December
31, 1997, approximately $2.0 million of the balance of $6.4 million at December
31, 1996 had been used for working capital with the remainder invested in tax
exempt municipals and overnight repurchase agreements.

     During December 1997, the Company increased its allowance for doubtful
accounts due to the continued aging of receivables from its Asia-Pacific
customers. Asia-Pacific export revenues were $16.7 million, $17.6 million and
$19.2 million for the years ended December 31, 1995, 1996 and 1997,
respectively. The economic downturn and exchange rate fluctuations in the
Asia-Pacific region during the latter part of calendar 1997 has resulted in
certain of the Company's customers experiencing difficulty in arranging in a
timely fashion needed additional financing and hard currency to satisfy U.S.
dollar denominated liabilities to the Company. As a result of the uncertainty
associated with the collection of amounts due, the Company recorded additional
reserves of approximately $2.9 million to cover potential Asia-Pacific region
exposure and established procedures to require downpayment or use of letters of
credit for certain Asia-Pacific sales.

     In December 1996, the Company, through its newly formed subsidiary,
Microcell, acquired certain of the assets and liabilities of Microcell
Management, LLC. Microcell provides consulting services to the wireless
telecommunications industry and offers a package to finance the construction of
RF transmission towers on a sale-leaseback or build-to-suit basis. Assets
acquired included contracts rights of $393,000, which are being amortized on a
straight-line basis over the 10 year life of the related contract.

     In December 1996, the Company, through its wholly-owned subsidiary LCCI AS,
acquired the business of ETP for $13.1 million, including $250,000 of
acquisition costs. ETP designs, develops, manufactures and sells and licenses
hardware and software products for the testing, monitoring and management of the
operations of wireless telecommunications networks. Exclusive of the acquisition
costs, (i) $10.45 million was paid in January 1997 in satisfaction of a note
agreement dated December 30, 1996, (ii) $1.4 million is being held in escrow for
two years as security for ETP's indemnity obligations under the asset purchase
agreement,

                                       33
<PAGE>   34

and (iii) $667,000 and $308,000 will be paid in January 1998 and 1999,
respectively. Payments under (i) and (ii) above were made in January 1997 from
the remaining net proceeds of the Offering.

     Net cash used in operations was $3.1 million for 1996. Net cash used in
investing activities was $15.2 million, consisting primarily of cash paid for
additions to property and equipment ($3.3 million), increase in capitalized
software ($3.2 million), increase in short-term investments ($6.1 million), and
loans convertible into shares of common stock ($5.6 million), partially offset
by the proceeds of the sale of the Company's interest in Telemate S.A. and
certain distribution rights ($3.8 million). Net cash provided by financing
activities was $25.5 million, primarily representing net proceeds from the
Offering of $44.9 million, partially offset by a $20.0 million reduction in
short-term debt under the Credit Facility.

     Dividends paid during 1996 were $16.9 million, all by the Limited Liability
Company. In September 1996, the Limited Liability Company received $16.9 million
as repayment of its loans to Telcom Ventures. Also in September 1996, the
Company advanced $3.5 million to Telcom Ventures to assist in the payment of
taxes due in connection with the assumption by the Company of $30.0 million of
convertible subordinated debt from Telcom Ventures (see notes 2 and 13 to the
Consolidated Financial Statements). In November 1997, the Company received
approximately $1.0 million from Telcom Ventures representing payment of $0.7
million principal and approximately $0.3 million interest under the terms of the
$3.5 million advance. No dividends were paid by the Company in 1997.

     In November 1996, the Company entered into master service, convertible note
and stock option agreements with Communication Consulting Services, Inc.
("CCS"), a provider of radio frequency engineering services in connection with
the design, optimization and operation of wireless systems. Under the
convertible note agreement, the Company loaned CCS a total of approximately $0.6
million. Interest accrues on the loan at a variable rate equal to the prime rate
plus 1.5%. The loan was convertible, at the Company's option, into shares
representing 50.0% of the capital stock of CCS. The stock option agreement gave
the Company an option to purchase an additional 10%, for a total purchase price
of $0.15 million. On April 7, 1997 the Company exercised both the conversion
right in the convertible note and the 10% purchase right set forth in the stock
option agreement.

     In March 1996, the Company made investments in Pocket and NextWave of $6.5
million and $5.0 million, respectively. The $6.5 million investment in Pocket
consisted of loans convertible into shares of non-voting common stock upon the
satisfaction of certain conditions. In connection with this investment, The
Company obtained a commitment from Pocket for the purchase of services and
products aggregating $65.0 million over the subsequent five-year period. The
$5.0 million investment in NextWave consisted of an equity investment. In
connection with this investment, the Company obtained a commitment from NextWave
for the purchase of services and products aggregating $50.0 million over the
subsequent five-year period. Through December 31, 1996, revenues recognized
under the commitments with Pocket and NextWave were approximately $2.2 million
and $12.5 million, respectively, and related amounts receivable were
approximately $2.2 million and $10.6 million, respectively. Included in the
amounts receivable are notes receivable from Pocket and NextWave of
approximately $950,000 and $5.9 million, respectively. The notes bear interest
at prime plus 2%, and were payable upon maturity of the notes on March 31, 1997.
Both customers are development stage enterprises pursuing the build-out and
operation of networks obtained in the auction of C-Block licenses by the FCC and
subject to risks typically associated with start-up entities, such as (i) the
uncertainty of securing sufficient financing, (ii) competition from other
providers of telecommunications services, (iii) dependence on key vendors and
strategic operation of its PCS networks and (iv) delays encountered in the
development and successful operation of their PCS networks.

     On March 31, 1997, Pocket failed to pay interest due the Company under the
$6.5 million convertible loan agreement and failed to pay principal and interest
due the Company under the $950,000 note agreement. Also on March 31, 1997,
NextWave failed to pay principal and interest due under the $5.9 million note
agreement. In addition, on April 1, 1997, Pocket announced that it had
voluntarily sought court protection under Chapter 11 of the U.S. Bankruptcy
Code. Given these developments and the uncertainty related to Pocket's and
NextWave's ability to meet their future obligations under the agreements
outlined above, the Company fully reserved its exposure with these customers and
has consequently recorded a special charge of

                                       34
<PAGE>   35

$30.1 million pre-tax ($24.5 million after tax) at December 31, 1996. The $30.1
million special charge consisted of a reserve against the Company's aggregate
receivable exposure at December 31, 1996 of $12.4 million (net payments of $0.4
million received in January 1997), the recognition of an other than temporary
impairment of the Company's investments of $11.5 million and accruals of
approximately $6.2 million related to loss contracts under which the Company was
obligated to perform at December 31, 1997. The Company experienced lower than
historical margins in the first two quarters of calendar year 1997 as a result
of the decision to suspend work performed for these two customers.

     On April 15, 1997, the Company and NextWave agreed to a revised payment
schedule for amounts outstanding under the note receivable and other receivables
due from NextWave to the Company. Under the terms of the agreement, the Company
was to receive approximately $1.0 million per month from May 15, 1997 through
May 15, 1998. In addition, under certain circumstances, in the event of the sale
or issuance of any debt or equity instruments/securities or the sale of any
assets by NextWave, the Company would be entitled to a prepayment equal to 30%
of the gross proceeds from such transaction(s). In May and June 1997, the
Company agreed to defer NextWave's obligations to prepay the foregoing
obligations out of the proceeds of NextWave's debt or equity financings to
August 20, 1997. Payments of $2.0 million were received under the revised
payment schedule through June 30, 1997. NextWave has failed to make the $1.0
million monthly payments which were due July 15, 1997 through October 15, 1997,
as well as any payment that would have been due on August 20, 1997 related to
any debt or equity financings.

     During September 1997, the Company recognized an approximate $3.9 million
recovery of the $30.1 million special charge. Of the $3.9 million, $2.0 million
represents the payments received through June 1997 under the revised payment
schedule and $1.9 million represents additional payments received in April 1997
from NextWave, net of related expenses. For financial reporting purposes, the
recovery of the $3.9 million balance was deferred pending the lapse in the third
quarter of a 90 day window during which such funds could have been subject to
being treated as preference payments recoverable by NextWave had it filed for
protection under the bankruptcy laws.

     Working capital was $47.0 million at December 31, 1997, compared to $37.2
million at December 31, 1997, an increase of $9.8 million or 26.2%, The increase
in working capital was primarily due to a decrease in notes payable, accounts
payable and accrued expenses, a net increase in cash and cash equivalents and
short-term investments primarily as a result of cash flow from operations, all
offset by a net decrease in receivables and deferred income taxes.

     Working capital was $37.2 million at December 31, 1996, compared to $17.6
million at December 31, 1995, an increase of $19.6 million or 111.0%. The
increase was primarily due to the net proceeds of the Offering, increase in
receivables and recognition of deferred tax assets as a result of (i) the
conversion of the Company to a Subchapter C Corporation effective September 27,
1996 in connection with the Offering, (ii) the allocation of approximately $5.6
million of the purchase price for the ETP Acquisition to in-process research and
development expenses and (iii) the special charge of $30.1 million related to
Pocket and NextWave, all offset by an increase in accrued expenses and the
establishment of a note payable for the purchase of ETP (see notes 2, 4, 9 and
11 to the Consolidated Financial Statements).

     In February 1998 the Company adopted a stock repurchase program pursuant to
which the Company is authorized to purchase, through open market transactions,
privately negotiated transactions, or in such other manner as will comply with
the provisions of the Securities Exchange Act of 1934, and the rules and
regulations thereunder, up to one million shares of Class A Common Stock. The
actual timing and blocks of shares to be purchased will depend on a variety of
factors, including price and market conditions. As of March 30, 1998, the
Company had not purchased any shares pursuant to this program.

EXISTING INDEBTEDNESS

     In June 1994, the Company and Telcom Ventures sold $20 million and $30
million, respectively, of notes to MCI, which notes are exchangeable, at certain
times, consisting of 45 day periods commencing in June and August of 1997, 1998,
and 1999, into 2,841,099 shares of the Company's Class A Common Stock. The $30
million owed by Telcom Ventures was assumed by the Company in connection with
its initial public offering
                                       35
<PAGE>   36

in September 1996. On October 23, 1997, the Company announced that it had agreed
with MCI to defer the Company's option to convert the notes in 1997. As part of
the agreement, interest payable under the notes was reduced from 6.8% to 4.4%
per annum. The notes are also convertible upon the happening of specified
corporate events, including certain tender offers, sale of substantially all of
the Company's assets, and are partially convertible (up to 1 million shares) in
the event of an underwritten public offering during certain periods in 1998. The
Company presently intends to exercise its option in August 1998 to cause the
notes to be exchanged into Class A Common Stock. Events of default under the
notes (which would cause such notes to become due and payable) include
non-payment and bankruptcy.

     Effective May 30, 1995, the Company entered into a credit facility with
Nomura under which Nomura agreed to purchase from the Company up to $15.0
million of variable rate guaranteed senior secured notes (the "Nomura Notes"),
$10.0 million of which were issued on June 5, 1995. The Nomura Notes were
secured by substantially all the assets of the Company and a pledge of all of
Telcom Ventures' membership interest in the Company. Chase Manhattan Bank Co.,
N.A. ("Chase") purchased the Nomura Notes in March 1996, and became the lender
under these notes. Also in March 1996, the Company borrowed an additional $10.0
million from Chase (the "March 1996 Facility"), resulting in a total outstanding
balance of $20.0 million.

     In June 1996, the Company entered into a new credit facility with Chase, as
Administrative Agent, (the "Credit Facility") which replaced the March 1996
Facility. The Credit Facility consists of a revolving loan and letter of credit
facility in an aggregate principal amount not to exceed $20.0 million. The
revolving loan commitment will expire in September 1999. Subject to certain
restrictions on the minimum permitted amount of any prepayment and the
requirement that certain notices of prepayment be given to Chase, the principal
of the revolving loans is prepayable without penalty or premium, so long as the
lenders are compensated for losses, costs and expenses attributable to any
prepayment of any loan accruing interest at the fixed rate on a date other than
the last day of the applicable interest period. Interest under the Credit
Facility accrues at the Company's election (subject to certain restrictions and
limitations contained in the credit agreement), at either (i) the variable rate
equal to the higher of (a) the Federal Funds Rate plus 0.50%, and (b) the
announced prime commercial lending rate of Chase, or (ii) the fixed rate for a
designated period of time (1, 2, 3 or 6 months) equal to the rate at which U.S.
dollar deposits are offered to leading banks in the London interbank market plus
1.25%.

     The payment and performance of the obligations of the Company under the
Credit Facility are secured by substantially all of the assets of the Company,
including the stock and membership interests of its subsidiaries. The Credit
Facility requires that the Company satisfy certain financial tests, including
the maintenance of certain leverage, debt service and other financial ratios,
and that the Company meet certain minimum quarterly operating cash flow
requirements. The Credit Facility also contains certain restrictive covenants
which impose restrictions and/or limitations on the operations and activities of
the Company including, among other things: the incurrence of indebtedness, and
the terms thereof, the creation or incurrence of liens, investments and
acquisitions, sales of assets, declaration or payment of dividends on or other
payments or distributions to stockholders and capital expenditures. The Credit
Facility provides for various events of default, including interest or principal
payment default, breach of any condition or covenant that (in certain cases)
continues unremedied for 30 days, materially adverse events, the rendering of
one or more material judgments against the Company or any subsidiary thereof
which is not vacated, satisfied, discharged, or stayed within 30 days, and
certain events relating to the bankruptcy or solvency of the Company. In
addition, the Credit Facility provides for an event of default if, without the
prior written consent of lenders, (i) the Company sells, leases, assigns,
transfers or otherwise disposes of any of its assets, other than in the ordinary
course of business and in other limited circumstances, (ii) the Company merges
with another corporation other than a wholly-owned subsidiary, (iii) any person
or two or more persons acting in concert (other than Dr. Rajendra Singh, Neera
Singh, any trusts for their benefit or for the benefit of their family members,
and any of their respective affiliates which are controlled by any one or more
of them) acquire beneficial ownership of more than 25% of the voting stock of
the Company, or (iv) during any period of 12 consecutive months, individuals who
at the beginning of such 12-month period were directors of the Company (or other
persons nominated by such individuals) cease for any reason to constitute a
majority of the Board of Directors of the Company.

                                       36
<PAGE>   37

     In September 1996 in connection with the Merger, the Credit Facility was
transferred from the Limited Liability Company to LCC International and amended
and restated. Also in September 1996, approximately $16.2 million of the
proceeds of the Offering was used to pay all amounts outstanding under the
Credit Facility. Effective December 30, 1996 the Credit Facility was amended to
revise the financial ratios and certain other covenants contained therein for
the effect of the special charge recorded by the Company. Effective December 15,
1997, the Credit Facility was amended to "carve-out" a separate credit facility
for ETP (the "ETP Credit Facility") in the aggregate principal amount of $2.5
million. ETP and Microcell executed the amended credit facility as parties and
guarantors of the Company's obligation. The Company has pledged 65% of the
equity of ETP and 100% of the Company's equity of Microcell to Chase as security
for repayment under the facility. (See notes 4 and 12 to the Consolidated
Financial Statements). Also, effective December 31, 1997, the Company obtained a
waiver for non-compliance with the covenant limiting the Company's capital
expenditures and one of its financial ratios. The Company was in compliance with
all other financial covenants and ratios. No amounts were outstanding under the
Credit Facility at December 31, 1996, or during the period January 1, 1997
through December 31, 1997 with the exception of amounts, if any, outstanding
under the ETP Credit Facility. Approximately $1.4 million was outstanding under
the ETP Credit Facility at December 31, 1997.

     The Company believes that its cash and cash equivalents, short-term
investments, cash flow from operations and available credit will be sufficient
to satisfy current and anticipated future capital requirements of the Company.

IMPACT OF THE YEAR 2000 ISSUE

     Many computer systems and software products currently in use by businesses
and government organizations are coded to accept two digits, rather than four,
to specify the year. Such computer systems and software products will be unable
to properly interpret dates beyond the year 1999, which could lead to business
disruptions (the "Year 2000 Issue"). As a result, in less than two years,
computer systems and/or software used by many companies may need to be upgraded
to properly interpret dates beyond 1999. The Company's technical personnel are
in the process of assessing the impact of the Year 2000 Issue on the Company's
products.

     Based on a recent assessment of its internal computer systems, the Company
determined that it will be required to modify or replace portions of its
internal software so that its computer systems will properly utilize dates
beyond December 31, 1999. Although the Company is in the process of performing
its Year 2000 modifications and expects to have its internal computer system
year 2000 compliant by the end of 1998, if such modifications are not completed
timely, the Year 2000 Issue could have a material impact on the operations of
the Company.

     The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
Issue. However, there can be no guarantee that the systems of other companies on
which the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have material adverse effect on the Company.

     The Company will utilize both internal and external resources to reprogram,
or replace, and test software for Year 2000 modifications. The total cost of the
program is being funded through operating cash flows. Costs associated with the
purchase of new software will be capitalized. The total cost associated with the
required modifications and conversions is not expected to be material to the
Company's consolidated results of operations and financial position.

INFLATION

     The financial statements are presented on a historical cost basis and do
not fully reflect the impact of prior years' inflation. It is estimated that the
cost of replacing equipment today is greater than its historical cost.
Accordingly, depreciation expense would be greater if the expense were stated on
a current cost basis.
                                       37
<PAGE>   38

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
LCC International, Inc. and Subsidiaries:

     We have audited the accompanying consolidated balance sheets of LCC
International, Inc. and Subsidiaries (the "Company") as of December 31, 1996 and
1997, and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 1997. In connection with our audits of the consolidated
financial statements, we have also audited the related financial statement
schedule. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. 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 LCC
International, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.

                                                           KPMG PEAT MARWICK LLP

Washington, D.C.
February 9, 1998

                                       F-1
<PAGE>   39

                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   YEARS ENDED DECEMBER 31, 1995, 1996, 1997
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                1995       1996       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenues (notes 6 and 9):
  Service revenues..........................................  $ 64,016   $ 93,156   $ 91,289
  Product revenues..........................................    40,445     48,414     63,959
                                                              --------   --------   --------
Total revenues..............................................   104,461    141,570    155,248
                                                              --------   --------   --------
Cost of revenues:
  Cost of service revenues..................................    45,682     65,801     66,837
  Cost of product revenues..................................    22,448     29,533     40,869
                                                              --------   --------   --------
Total cost of revenues......................................    68,130     95,334    107,706
                                                              --------   --------   --------
Gross profit................................................    36,331     46,236     47,542
                                                              --------   --------   --------
Operating expenses:
  Sales and marketing.......................................     5,823      6,475      7,645
  General and administrative................................    10,108     11,964     16,380
  Research & development (notes 3 and 4)....................     3,007      8,609      4,570
  Special charge (credit) (note 9)..........................        --     30,050     (3,894)
  Non-cash compensation (note 15)...........................     4,646      7,005        580
  Depreciation and amortization.............................     3,699      5,039      8,044
                                                              --------   --------   --------
Total operating expenses....................................    27,283     69,142     33,325
                                                              --------   --------   --------
Operating income (loss).....................................     9,048    (22,906)    14,217
                                                              --------   --------   --------
Other income (expense):
  Interest income...........................................       625        925        700
  Interest expense..........................................    (2,818)    (3,050)    (3,301)
  Other.....................................................     1,027      2,376      1,194
                                                              --------   --------   --------
Total other income (expense)................................    (1,166)       251     (1,407)
                                                              --------   --------   --------
Income (loss) before income taxes...........................     7,882    (22,655)    12,810
Provision (benefit) for income taxes (note 11)..............     3,142    (11,371)     5,235
                                                              --------   --------   --------
Net income (loss)...........................................  $  4,740   $(11,284)  $  7,575
                                                              ========   ========   ========
Net income per share:
  Basic.....................................................                        $   0.51
                                                                                    --------
  Diluted...................................................                        $   0.47
                                                                                    ========
Pro forma income (loss) data (unaudited) (note 3):
  Income (loss) before income taxes.........................  $  7,882   $(22,655)
  Pro forma provision (benefit) for income taxes (note
     11)....................................................     3,153     (1,886)
                                                              --------   --------
  Pro forma net income (loss) (unaudited)...................  $  4,729   $(20,769)
                                                              ========   ========
Pro forma net income (loss) per share (unaudited):
  Basic.....................................................  $   0.42   $  (1.70)
                                                              ========   ========
  Diluted...................................................  $   0.39   $  (1.70)
                                                              ========   ========
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
                                       F-2
<PAGE>   40

                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                    ASSETS:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1996       1997
                                                              --------   --------
<S>                                                           <C>        <C>
Current assets:
  Cash and cash equivalents (note 5)........................  $ 13,732   $ 15,838
  Short-term investments (note 3)...........................     6,934      8,619
  Receivables, net of allowance for doubtful accounts of
    $17,942, and $15,426 at December 31, 1996 and 1997
  Trade accounts receivable (note 9)........................    35,563     30,643
  Due from related parties and affiliates (note 6)..........     2,244      1,375
  Unbilled receivables (note 9).............................     9,819     11,695
  Inventory (note 7)........................................     6,387      7,400
  Deferred income taxes, net (note 11)......................    12,755      9,874
  Prepaid expenses and other current assets.................     4,413      1,315
                                                              --------   --------
         Total current assets...............................    91,847     86,759
Property and equipment, net (note 8)........................     5,952     10,531
Software development costs, net of accumulated amortization
  of $2,676 and $5,855 at December 31, 1996 and 1997........     5,069      6,133
Notes receivable (notes 9 and 10)...........................       602         --
Investments in joint ventures (note 10).....................     1,650      1,300
Deferred income taxes, net (note 11)........................     4,584      1,513
Other assets (notes 4 and 9)................................     5,243      4,782
                                                              --------   --------
                                                              $114,947   $111,018
                                                              ========   ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
  Note payable (notes 4 and 12).............................  $ 10,445   $     --
  Accounts payable..........................................     6,218      4,994
  Accrued expenses (note 9).................................    15,569      9,895
  Accrued employee compensation and benefits................     7,727      9,038
  Deferred revenue..........................................     4,951      4,650
  Income taxes payable (note 11)............................     7,446      7,507
  Obligations under incentive plans, current (note 15)......       448      1,106
  Other current liabilities (note 4)........................     1,806      2,588
                                                              --------   --------
         Total current liabilities..........................    54,610     39,778
Convertible subordinated debt (note 13).....................    50,000     50,000
Obligations under incentive plans, net of current portion
  (note 15).................................................       807         --
Other liabilities (note 4)..................................     1,053      1,038
                                                              --------   --------
         Total liabilities..................................   106,470     90,816
                                                              --------   --------

Commitments and contingencies (notes 1, 10, 11, 14, 15, 16
  and 17)
Shareholders' Equity:
  Preferred Stock:
    10,000 shares authorized; -0- shares issued and
     outstanding............................................        --         --
  Class A common stock; $.01 par value:
    70,000 shares authorized; 6,066 shares and 6,644 shares
     issued and outstanding at December 31, 1996 and 1997,
     respectively...........................................        61         66
  Class B common stock; $.01 par value:
    20,000 shares authorized; 8,461 shares issued and
     outstanding at December 31, 1996 and 1997..............        85         85
  Paid-in capital...........................................    28,353     33,210
  Retained deficit..........................................   (16,422)    (8,847)
  Cumulative foreign currency translation adjustment........      (100)    (1,512)
  Note receivable from shareholder (note 6).................    (3,500)    (2,800)
                                                              --------   --------
         Total shareholders' equity.........................     8,477     20,202
                                                              --------   --------
                                                              $114,947   $111,018
                                                              ========   ========
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.


                                       F-3
<PAGE>   41

                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                 YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  CUMULATIVE       NOTES
                                          COMMON STOCK                              FOREIGN     RECEIVABLE
                                        -----------------                          CURRENCY        FROM
                            PREFERRED                       PAID-IN   RETAINED    TRANSLATION   SHAREHOLDER   MEMBERS'
                              STOCK     CLASS A   CLASS B   CAPITAL   (DEFICIT)   ADJUSTMENT     (NOTE 6)     CAPITAL     TOTAL
                            ---------   -------   -------   -------   ---------   -----------   -----------   --------   --------
<S>                         <C>         <C>       <C>       <C>       <C>         <C>           <C>           <C>        <C>
Balances at December 31,
  1994....................     $--        $--       $--     $    --   $     --      $   (39)      $    --     $13,977    $ 13,938
  Loan to member (note
    6)....................      --         --        --          --         --           --        (9,382)         --      (9,382)
  Dividends paid..........      --         --        --          --         --           --            --      (9,500)     (9,500)
  Net income..............      --         --        --          --         --           --            --       4,740       4,740
  Cumulative foreign
    currency translation
    adjustment............      --         --        --          --         --          (40)           --          --         (40)
                               ---        ---       ---     -------   --------      -------       -------     --------   --------
Balances at December 31,
  1995....................      --         --        --          --         --          (79)       (9,382)      9,217        (244)
  Dividends paid..........      --         --        --          --         --           --            --     (16,950)    (16,950)
  Net income -- pre-merger
    (note 2)..............      --         --        --          --         --           --            --       5,138       5,138
  Cumulative foreign
    currency translation
    adjustment............      --         --        --          --         --         (132)           --          --        (132)
  Loan to member..........      --         --        --       1,640         --           --        (7,568)         --      (5,928)
  Repayment of loan to
    member................      --         --        --          --         --           --        16,950          --      16,950
  Assumption of
    subordinated debt
    (notes 2 & 13)........      --         --        --     (30,000)        --           --            --          --     (30,000)
  Merger of LCC, L.L.C.
    into LCC
    International, Inc.
    (note 2)..............      --         --       114      (2,920)        --          211            --       2,595          --
  Net proceeds of initial
    public offering (note
    2)....................      --         61       (29)     44,725         --           --            --          --      44,757
  Loan to shareholder
    (notes 2 and 6).......      --         --        --          --         --           --        (3,500)         --      (3,500)
  Exercise/issuance of
    stock options (note
    15)...................      --         --        --      14,908         --           --            --          --      14,908
  Net (loss) -- post
    merger................      --         --        --          --    (16,422)          --            --          --     (16,422)
  Cumulative foreign
    currency translation
    adjustment............      --         --        --          --         --         (100)           --          --        (100)
                               ---        ---       ---     -------   --------      -------       -------     --------   --------
Balances at December 31,
  1996....................      --         61        85      28,353    (16,422)        (100)       (3,500)         --       8,477
  Payment from
    Shareholder...........      --         --        --         261         --           --           700          --         961
  Exercise/issuance of
    stock options.........      --          5        --       4,148         --           --            --          --       4,153
  Issuance of common
    stock.................      --         --        --         448         --           --            --          --         448
  Net income..............      --         --        --          --      7,575           --            --          --       7,575
  Cumulative foreign
    currency translation
    adjustment............      --         --        --          --         --       (1,412)                       --      (1,412)
                               ---        ---       ---     -------   --------      -------       -------     --------   --------
Balances at December 31,
  1997....................     $--        $66       $85     $33,210   $ (8,847)     $(1,512)      $(2,800)    $    --    $ 20,202
                               ===        ===       ===     =======   ========      =======       =======     ========   ========
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
                                       F-4
<PAGE>   42

                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                1995       1996       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $  4,740   $(11,284)  $  7,575
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation and amortization.............................     3,699      5,039      8,044
  Provision for doubtful accounts...........................       622      2,937      4,115
  Non-cash compensation.....................................     4,646      7,005        580
  In-process research & development.........................        --      5,605         --
  Special charge (credit)...................................        --     30,050     (3,894)
  Income (loss) from investments in joint ventures, net.....      (732)      (346)       350
  Gain on disposition of joint venture, net.................        --       (514)        --
  Changes in operating assets and liabilities:
    Trade, unbilled, and other receivables..................   (12,260)   (23,378)      (200)
    Accounts payable and accrued expenses...................    (2,411)     8,809     (5,587)
    Inventory...............................................      (377)    (1,154)      (947)
    Other current assets and liabilities....................     6,704    (14,359)    10,502
    Other noncurrent assets and liabilities.................       126    (11,538)     2,116
                                                              --------   --------   --------
Net cash provided by (used in) operating activities.........     4,757     (3,128)    22,654
                                                              --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of investment securities..............       357        558         --
  Purchase of investment securities.........................      (682)    (6,714)    (1,685)
  Purchases of property and equipment.......................    (4,222)    (3,263)    (8,791)
  Increase in capitalized software..........................    (2,876)    (3,177)    (4,243)
  Investment in joint ventures..............................      (350)      (787)        --
  Issuance of notes receivable..............................        --     (5,602)        --
  Proceeds from sale of investment in joint venture.........        --      3,800         --
                                                              --------   --------   --------
Net cash used in investing activities.......................    (7,773)   (15,185)   (14,719)
                                                              --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock, net...............        --     44,902        448
  Proceeds from exercise of options.........................        --         --      3,207
  Proceeds from line of credit/note.........................    10,000     10,000         --
  Payments on line of credit/note...........................        --    (20,000)   (10,445)
  Distributions and loans to member.........................    (9,382)    (5,928)        --
  Repayment of loans to member..............................        --     16,950         --
  Payments of dividends.....................................    (9,500)   (16,950)        --
  Loan to shareholder.......................................        --     (3,500)        --
  Repayment of loan to shareholder..........................        --         --        961
                                                              --------   --------   --------
Net cash (used in) provided by financing activities.........    (8,882)    25,474     (5,829)
                                                              --------   --------   --------
Net (decrease) increase in cash and cash equivalents........   (11,898)     7,161      2,106
Cash and cash equivalents at beginning of period............    18,469      6,571     13,732
                                                              --------   --------   --------
Cash and cash equivalents at end of period..................  $  6,571   $ 13,732   $ 15,838
                                                              ========   ========   ========
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest................................................  $  2,372   $  3,749   $  3,286
    Income taxes............................................       506      3,535      1,317
Supplemental schedule of non-cash investing and financing
  activities:
  Assumption of convertible debt (notes 2 and 13)...........  $     --   $ 30,000   $     --

  In December 1996, the Company purchased substantially all
    of the assets and liabilities of European Technology
    Partner AS, for a note payable of $10,445 and certain
    future obligations, including acquisition costs, of
    approximately $2,630. Assets of $9,800, including cash
    of $150 and liabilities of $2,300 were assumed in
    conjunction with the acquisition (note 4).
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.


                                       F-5
<PAGE>   43

                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(1) DESCRIPTION OF OPERATIONS

     LCC International, Inc. and subsidiaries (also referred to herein as the
"Company") is a leading provider of integrated services and products relating to
the design and engineering of wireless communications systems. The services and
products provided by the Company are as follows:

  Services

     Engineering and design services -- The Company provides engineering and
design services for cellular phone system operators, personal communication
system ("PCS") operators and other wireless communication system providers.

     Program management services -- The Company provides construction management
services related to the build-out of wireless communications systems.

  Products

     Software products -- The Company develops and markets proprietary software
and data, which support the design and operation of wireless communications
systems.

     Hardware products -- The Company designs, assembles and sells field
measurement and network analysis tools used in the implementation, testing and
maintenance of wireless communications systems.

     In December 1996, through the formation of a new subsidiary, Microcell
Management, Inc. ("Microcell"), the Company entered the wireless infrastructure
asset management business to acquire/ develop and manage RF transmission towers.
Microcell incurred expenses of $0.9 million in calendar 1997 which are included
in general and administrative expenses in the accompanying consolidated
statement of operations.

     The Company operates in a highly competitive environment subject to rapid
technological change and emergence of new technologies. Future revenues are
dependent upon the re-engineering of existing wireless communications systems,
introduction of existing wireless technologies into new markets, the entrance of
new wireless providers into existing markets, the introduction of new
technologies and the retention of existing professional staff. Although the
Company believes that its services and products are transferable to emerging
technologies, rapid changes in technology could have an adverse financial impact
on the Company.

(2) MERGER AND INITIAL PUBLIC OFFERING

     The Company is the successor to the business formerly conducted by LCC,
L.L.C. ("LCC"). Effective September 27, 1996, in connection with the Company's
initial public offering of Class A Common Stock, LCC merged with and into LCC
International, Inc. The Company is the surviving company in the merger, and owns
all of the assets and rights and is subject to all of the obligations and
liabilities of LCC. Immediately prior to the merger, LCC assumed $30.0 million
of convertible subordinated debt from Telcom Ventures, L.L.C. ("Telcom
Ventures"), its parent company. The repayment obligation for principal and
interest became the sole obligation of LCC and, following the merger, the sole
obligation of the Company. The $30.0 million of convertible subordinated debt
assumed from Telcom Ventures and the $20.0 million of existing convertible
subordinated debt (see note 13) are due to a third party investor and are
convertible at certain specified times, including during the 45 day period
commencing on June 27, 1997, the 45 day period commencing on August 27, 1997
("Company Conversion Right"), and the respective periods in 1998 and 1999, and
upon certain extraordinary events, such as merger or sale of all assets of the
Company, tender offer for more than 25% of the Common Stock or distribution of
assets representing 5% or more of the total assets of the Company. Any
conversion of one note must include the conversion of the other. The Company
presently

                                       F-6
<PAGE>   44
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

intends to exercise the Company Conversion Right in August 1998 to cause the
convertible subordinated debt to be converted into 2,841,099 shares of Class A
Common Stock.

     Effective with the merger, the Company converted to a Subchapter C
Corporation under the Internal Revenue Code of 1986, as amended. As of September
30, 1996, the Company recorded a one-time deferred income tax benefit of $8.7
million as a result of the change in its tax status from a Limited Liability
Corporation to a Subchapter C Corporation. The income tax benefit has been
recorded as a reduction of income tax expense in the accompanying 1996
consolidated statement of operations (see note 11).

     On September 30, 1996, the Company completed its initial public offering,
which involved the sale of 6,037,500 shares (3,162,500 shares were sold by the
Company and 2,875,000 shares were sold by the selling shareholder) of Class A
Common Stock at $16.00 per share. Net proceeds to the Company, after deducting
underwriting discounts, commissions and other expenses of the offering were
approximately $44.8 million.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

  Cash Equivalents

     Cash equivalents include all highly liquid investments purchased with
original maturities of three months or less.

  Short-Term Investments

     Short-term investments consist of municipal bonds with maturity dates of
more than three months from the date of acquisition. The portfolio of municipal
bonds held by the Company of $6.9 million and $8.6 million at December 31, 1996
and 1997, respectively, has been classified based on management's intentions as
to future investment activity. Such investments are not intended to be held to
maturity and are classified as "available for sale" and carried at market value
with temporary unrealized gains (losses) charged directly to shareholders'
equity. At December 31, 1996 and 1997, the market value of the municipal bonds
held by the Company approximated its cost. Other short-term investments are
carried at cost plus accrued interest which approximates their market value. All
short-term investments have maturity dates of one year or less.

  Concentration of Credit Risk

     Financial instruments that potentially expose the Company to concentration
of credit risk consist primarily of trade receivables. The Company sells its
services and products globally. Generally, the Company does not require
collateral or other security to support customer receivables. The Company
performs ongoing credit evaluations of its customers' financial condition and
maintains reserves for potential credit losses. The Company had the following
significant concentrations of trade receivables from customers located outside
the United States at December 31, 1996 and 1997:

<TABLE>
<CAPTION>
                                                      1996        1997
                                                    --------    --------
                                                       (IN THOUSANDS)
<S>                                                 <C>         <C>
Latin America.....................................   $3,482     $ 2,818
Europe............................................    5,009       3,697
Middle East.......................................      931       1,423
Asia-Pacific......................................    8,950      11,158
</TABLE>

                                       F-7
<PAGE>   45
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     The Company's existing and potential customer base is diverse and includes
start-up companies and foreign enterprises. Although the Company believes that
the diversity of its customer base has historically minimized the risk of
incurring material losses due to concentrations of credit risk, it may be
exposed to a declining customer base in periods of market downturns, severe
competition, or international developments (see notes 9 and 19).

     During December 1997, the Company increased its allowance for doubtful
accounts due to the continued aging of receivables from its Asia-Pacific
customers. The economic downturn and exchange rate fluctuations in the
Asia-Pacific region during the latter part of calendar 1997 has resulted in
certain of the Company's customers experiencing difficulty in arranging in a
timely fashion needed additional financing and hard currency to satisfy U.S.
dollar denominated liabilities to the Company. As a result of the uncertainty
associated with the collection of amounts due, the Company recorded additional
reserves of approximately $2.9 million to cover potential Asia-Pacific region
exposure.

     Revenues generated from one customer were approximately $14.7 million,
$15.2 million, and $21.4 million, or 14.0%, 10.8%, and 13.8% of total revenues
for 1995, 1996, and 1997, respectively. In addition, revenues from another
customer were approximately $14.2 million and $15.6 million or 10.0% and 10.1%
of total 1996 and 1997 revenues, respectively.

  Inventory

     Inventory, net of allowances for obsolete and slow moving inventory,
consisting of parts and accessories, and field measurement and network analysis
tools is stated at the lower of cost, determined on an average cost basis, or
market value.

  Property and Equipment

     Property and equipment are stated at cost, less an allowance for
depreciation. Replacements and major improvements are capitalized; maintenance
and repairs are charged to expense as incurred.

     Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets which range from eighteen months to seven
years. The costs of leasehold improvements are capitalized and amortized using
the straight-line method over the shorter of their useful lives or the terms of
the respective leases.

  Goodwill and Recovery of Long-Lived Assets

     Cost in excess of the fair value of net assets acquired is amortized on a
straight-line basis over ten years.

     The Company's policy is to review its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company recognizes an impairment loss when
the sum of the expected future cash flows is less than the carrying amount of
the asset.

  Research and Development Expenditures

     The Company capitalizes software development costs, principally wages and
contractor fees, when incurred, after establishing the commercial and
technological feasibility of the product. These costs are amortized using the
greater of the ratio of current product revenue to total current and anticipated
product revenue or the straight-line method over the software's estimated
economic life, generally ten to forty-eight months. During 1995, 1996 and 1997,
the Company recognized software amortization costs of approximately $0.9
million, $1.9 million and $3.3 million, respectively.

                                       F-8
<PAGE>   46
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     The Company periodically performs an evaluation of the net realizable value
of its capitalized software development costs. This evaluation requires
considerable judgment by management with respect to certain external factors
including, but not limited to, anticipated future revenues, estimated product
economic life, and changes in technology. No capitalized software development
costs were written off in 1996. Approximately $130,000 and $90,000 of software
development costs were written off in 1995 and 1997, respectively.

     All other research and development expenditures are expensed in the period
incurred.

  Investments in Joint Ventures

     The Company uses the equity method of accounting for its investments in,
advances to and equity in the earnings and losses of its joint ventures.

  Revenue Recognition

     The Company's principal sources of revenues are engineering and design
services, program management services, sales of field measurement and network
analysis tools and software license agreements. The Company recognizes revenues
from long-term fixed price contracts using the percentage-of-completion method,
based on individual contract costs incurred to date compared with total
estimated contract costs. Anticipated contract losses are recognized as soon as
they become known and estimable. The Company recognizes revenues from software
licenses either at the time the software is delivered and accepted or ratably
over the contract term depending on the nature of the license arrangement.
Generally, revenues on sales of field measurement and network analysis tools is
recognized at the time the merchandise is shipped. Revenues from consulting and
other software related services is recognized as such services are rendered.
Revenues from post contract customer support (maintenance) agreements is
recognized ratably over the period during which the services are to be
performed. Revenues earned but not yet billed is reflected as unbilled
receivables in the accompanying consolidated balance sheets. The Company expects
substantially all unbilled and billed receivables to be collected in one year.

  Income Taxes

     Deferred income taxes are determined on the asset and liability method in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109.
Under this statement, temporary differences arise as a result of the differences
between the reported amounts of assets and liabilities and their tax basis.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

     Certain of the Company's international operations are subject to local
income taxation. Currently, the Company is subject to taxation on income from
certain operations in Europe, Latin America, the Far East, the Middle East and
the non-U.S. portions of North America where the Company has subsidiaries, has
established branch offices or has performed significant services that constitute
a "permanent establishment" for tax reporting purposes. Foreign taxes account
for a significant portion of the provision for income taxes as reflected in the
Company's consolidated statements of operations (see note 11). The foreign taxes
paid or accrued by the Company represent a potential credit for the Company
against its Federal income taxes.

  Pro Forma Income (Loss) Data (Unaudited)

     The accompanying pro forma information has been prepared as if the Company
was treated as a Subchapter C Corporation for Federal and state income tax
purposes from January 1, 1995.

                                       F-9
<PAGE>   47
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     Pro forma net income (loss) per share information has been computed by
dividing pro forma net income (loss) by the pro forma weighted average number of
common shares outstanding (basic earnings per share) and potential dilution from
outstanding stock options after applying the treasury stock method and assumed
conversion of the Company's convertible subordinated debt, if dilutive (diluted
earnings per share).

  Foreign Currency Translation

     Gains and losses on translation of the accounts of the Company's foreign
operations where the local currency is the functional currency are accumulated
and included in the cumulative foreign currency translation adjustment within
the accompanying consolidated statement of shareholders' equity (deficit).
Foreign currency transaction gains and losses are recognized currently in the
consolidated statements of operations.

  Pervasiveness of Estimates

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

  Stock-Based Compensation

     In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, Accounting for Stock-Based Compensation, which establishes
financial accounting and reporting standards for stock-based compensation plans.
This statement establishes a fair value based method of accounting for stock
based compensation plans.

     The Corporation will continue to account for stock-based compensation plans
using the method of accounting prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees. The Corporation will make pro-forma disclosures of
net income as if the fair value based method of accounting as defined in SFAS
No. 123 had been applied (see note 15).

  Impact of Recently Issued Accounting Pronouncements

     In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 (SFAS No. 129), "Disclosure of Information about Capital
Structure." The Company is required to adopt provisions of this Statement for
the year ending December 31, 1997. This Statement continues the previous
requirements to disclose certain information about an entity's capital structure
found in APB Opinions No. 10, "Omnibus Opinion 1966," No. 15, "Earnings per
Share," and FASB Statement No. 46, "Disclosure of Long-Term Obligations," for
entities that were subject to the requirements of those standards. As the
Company has been subject to the requirements of each of those standards,
adoption of SFAS No. 129 had no impact on the Company's financial statements.

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS No. 130), "Reporting Comprehensive Income." SFAS No. 130
established standards for the reporting and display of comprehensive income and
its components in the financial statements. The Company is required to adopt the
provisions of the Statement for the year ending December 31, 1998. Earlier
application is permitted; however, upon adoption the Company will be required to
reclassify previously reported annual and interim financial statements. The
Company has not completed its analysis of the impact on the financial statements
that will be caused by the adoption of this statement.

                                      F-10
<PAGE>   48
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise and Related
Information." SFAS No. 131 requires the Company to present certain information
about operating segments and related information, including geographic and major
customer data, in its annual financial statements and in condensed financial
statements for interim periods. The Company is required to adopt the provisions
of this Statement for the year ending December 31, 1998. Earlier application is
permitted; however, upon adoption the Company will be required to restate
previously reported annual segment and related information in accordance with
the provisions of SFAS No. 131. The Company has not completed its analysis of
the impact on the financial statements that will be caused by adoption of this
Statement.

  Reclassification of Prior-Years' Balances

     Prior-years' balances have been reclassified to conform with the
current-year presentation.

(4) ACQUISITION OF EUROPEAN TECHNOLOGY PARTNER AS

     On December 30, 1996, the Company acquired the business of European
Technology Partner AS ("ETP"), a Norwegian limited liability company, pursuant
to the terms of an Asset Purchase Agreement, dated as of December 30, 1996,
between ETP and LCC International AS ("LCCI AS"), a Norwegian limited liability
company and a wholly-owned subsidiary of the Company. Pursuant to the Asset
Purchase Agreement, ETP transferred substantially all of its assets and
liabilities to LCCI AS.

     As consideration for the acquisition of ETP's business, LCCI AS paid $13.1
million, including $250,000 of acquisition costs. Exclusive of the acquisition
costs, (i) $10.5 million was paid in January 1997 in satisfaction of a note
agreement dated December 30, 1996, (ii) $1.4 million is being held in escrow for
two years as security for ETP's indemnity obligations under the Asset Purchase
Agreement, and (iii) $667,000 and $308,000 will be paid in January 1998 and
January 1999, respectively.

     The acquisition has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon their fair values at the
date of acquisition as determined by an independent appraisal. The appraisal
allocated $3.0 million to the tangible and identifiable intangible assets net of
liabilities assumed, $4.5 million to the cost in excess of net assets acquired
("goodwill") and $5.6 million to in-process research and development. Such
in-process research and development represents a non-recurring charge to 1996
earnings. Goodwill is included in other assets in the accompanying consolidated
balance sheet.

     The Company assumed ETP's rights and obligations under a credit facility
with a Norwegian Bank in the total principal amount of approximately $1.1
million. Under the facility, the bank has a first priority security interest in
accounts receivable and other assets up to the amount of the facility. At
December 31, 1996, approximately $109,000 was outstanding under the facility at
an interest rate of 7.5%. The facility is cancelable upon 14 days notice by the
bank. This facility was closed during calendar 1997.

                                      F-11
<PAGE>   49
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     If the acquisition of ETP had occurred on January 1, 1995, management
estimates the Company's results of operations for the years ended December 31,
1995 and 1996 would have been as follows:

<TABLE>
<CAPTION>
                                                         PRO FORMA
                                                 --------------------------
                                                    1995           1996
                                                 -----------    -----------
                                                 (IN THOUSANDS, EXCEPT PER
                                                  SHARE DATA -- UNAUDITED)
<S>                                              <C>            <C>
Revenues.......................................   $108,609       $147,970
Net income (loss)..............................      3,384        (17,248)
Net income (loss) per share:
     Basic.....................................   $   0.30       $  (1.41)
                                                  ========       ========
     Diluted...................................   $   0.30       $  (1.41)
                                                  ========       ========
</TABLE>

     The unaudited pro forma data above has been prepared based on assumptions
management deems appropriate, and the results are not necessarily indicative of
those that might have occurred had the transactions become effective at the
beginning of the respective years. Pro forma net income (loss) and pro forma net
income (loss) per share do not include the $5.6 million non-recurring in-process
research and development charge described above, and for purposes of computing
pro forma net income (loss) per share, assumes effective tax rates of 40% and
28% for U.S. and Norwegian activity, respectively.

(5) CASH AND CASH EQUIVALENTS

     At December 31, cash and cash equivalents consisted of the following:

<TABLE>
<CAPTION>
                                                     1996        1997
                                                   --------    --------
                                                      (IN THOUSANDS)
<S>                                                <C>         <C>
Cash in banks....................................  $   593     $ 2,859
Overnight repurchase agreements..................    5,639       1,195
Short-term commercial paper......................       --      11,699
Short-term money market funds....................    7,500          85
                                                   -------     -------
                                                   $13,732     $15,838
                                                   =======     =======
</TABLE>

     The fair value of overnight repurchase agreements, short-term commercial
paper and short-term money market funds approximate their carrying value.

(6) RELATED PARTY TRANSACTIONS

     During 1996 and 1997, the Company provided services and products to Telcom
Ventures and various other companies owned, in part, by Telcom Ventures or its
members, as well as the Telemate joint venture until its sale in January 1996
(see note 10). Revenues earned during 1996 and 1997 for services and products
provided to these customers were approximately $2.0 million and $1.5 million,
respectively. Trade accounts receivables from these related parties were
$819,000 and $811,000 at December 31, 1996 and 1997, respectively, and are
included in due from related parties and affiliates in the accompanying
consolidated balance sheets. Also included in due from related parties and
affiliates are unbilled receivables and advances to employees aggregating
approximately $614,000 and $533,000 at December 31, 1996 and 1997, respectively.
During calendar 1996 and 1997, program management services were provided to the
Company by Koll Telecommunications Services L.L.C. ("Koll") (see note 10), a
joint venture of the Company.

     During 1996 and 1997, the Company made certain payments on behalf of Telcom
Ventures and its members which consisted primarily of payroll services, fringe
benefit payments, facility related charges,

                                      F-12
<PAGE>   50
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

business insurances, interest and foreign tax payments. At December 31, 1996 and
1997, outstanding amounts associated with these payments totaling $811,000 and
$31,000, respectively, are included in due from related parties and affiliates
within the accompanying consolidated balance sheets.

     At December 31, 1995, notes receivable of approximately $1.4 million
consisted of two promissory notes due from an entity owned approximately 4.5
percent by a 100 percent-owned subsidiary of Telcom Ventures, and approximately
15.0 percent by a member of Telcom Ventures. The notes carried interest at
approximately 16.5 percent and were payable monthly. Late payments were subject
to an additional charge of 2.0 percent on the entire unpaid principal balance
and any outstanding interest. The notes and all outstanding interest were paid
in September 1996.

     In May 1995, the Company entered into a revolving promissory note with
Telcom Ventures under which it had advanced approximately $9.4 million to Telcom
Ventures as of December 31, 1995. The note carried a variable interest rate of
prime plus 3.0 percent, escalating at .25 percent increments at various
intervals over the term of the debt. At December 31, 1995, the note had an
interest rate of prime plus 3.25 percent or 11.75 percent. Outstanding principal
together with all accrued interest was due May 30, 2001. The outstanding note
balance and associated accrued interest (total of $16.9 million) was paid in
September 1996.

     In September 1996, the Company loaned $3.5 million to Telcom Ventures to
assist in the payment of taxes due in connection with the assumption by the
Company of $30.0 million of convertible subordinated debt from Telcom Ventures
(see note 2). The note is payable over five-years with equal annual principal
payments over the term. Interest will accrue at the rate of LIBOR plus 1.75% and
will be payable annually. In November 1997, the Company received approximately
$1.0 million from Telcom Ventures representing payment of $0.7 million principal
and approximately $0.3 million interest under the terms of the note. The note is
reflected as a reduction of shareholders' equity in the accompanying statement
of shareholders' equity (deficit).

     On January 30, 1997, a significant customer of the Company acquired 81% of
the outstanding shares of Wireless Ventures of Brazil, Inc. ("WVB"), an operator
of specialized mobile radio systems in Brazil, for $186 million in the
customer's stock. WVB was principally owned by Telcom Ventures.

(7) INVENTORY

     At December 31, 1996 and 1997, inventory consisted of the following:

<TABLE>
<CAPTION>
                                                       1996        1997
                                                     --------    --------
                                                        (IN THOUSANDS)
<S>                                                  <C>         <C>
Field measurement and network analysis tools.......   $1,641      $4,249
Parts and accessories..............................    5,488       4,190
                                                      ------      ------
                                                       7,129       8,439
Less reserve for obsolete and slow moving
  inventory........................................     (742)     (1,039)
                                                      ------      ------
                                                      $6,387      $7,400
                                                      ======      ======
</TABLE>

                                      F-13
<PAGE>   51
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(8) PROPERTY AND EQUIPMENT

     At December 31, 1996 and 1997, property and equipment consisted of the
following:

<TABLE>
<CAPTION>
                                                   1996        1997
                                                 --------    --------
                                                    (IN THOUSANDS)
<S>                                              <C>         <C>
Computer equipment.............................  $ 11,544    $ 13,271
Furniture and office equipment.................     3,505       4,218
Purchased computer software....................     3,272       4,618
Leasehold improvements.........................     1,301       3,057
RF transmission towers.........................        --       2,880
Vehicles.......................................       163         186
                                                 --------    --------
                                                   19,785      28,230
Less accumulated depreciation and
  amortization.................................   (13,833)    (17,699)
                                                 --------    --------
                                                 $  5,952    $ 10,531
                                                 ========    ========
</TABLE>

(9) SPECIAL CHARGE

     In March 1996, the Company made investments in Pocket Communications, Inc.
("Pocket", formerly known as DCR Communications, Inc.) and NextWave Telecom,
Inc. ("NextWave") of $6.5 million and $5.0 million, respectively. The $6.5
million investment in Pocket consists of loans convertible into shares of
non-voting common stock upon the satisfaction of certain conditions. In
connection with this investment, the Company obtained a commitment from Pocket
for the purchase of services and products aggregating $65.0 million over the
subsequent five-year period. The $5.0 million investment in NextWave consists of
an equity investment. In connection with this investment, the Company obtained a
commitment from NextWave for the purchase of services and products aggregating
$50.0 million over the subsequent five-year period. Through December 31, 1996,
revenues recognized under the commitments with Pocket and NextWave were
approximately $2.2 million and $12.5 million, respectively, and related amounts
receivable were approximately $2.2 million and $10.6 million, respectively.
Included in the amounts receivable are notes receivable from Pocket and NextWave
of approximately $950,000 and $5.9 million, respectively. The notes bear
interest at prime plus 2%, and were payable upon maturity of the notes on March
31, 1997. Both customers are development stage enterprises pursuing the buildout
and operation of networks pursuant to licenses obtained in the auction of
C-Block licenses by the FCC and are subject to risks typically associated with
start-up entities, such as (i) the uncertainty of securing sufficient financing,
(ii) competition from other providers of telecommunications services, (iii)
dependence on key vendors and strategic partners, and (iv) delays encountered in
the development and successful operation of their PCS networks.

     On March 31, 1997, Pocket failed to pay interest due the Company under the
$6.5 million convertible loan agreement and failed to pay principal and interest
due the Company under the $950,000 note agreement. Also on March 31, 1997,
NextWave failed to pay principal and interest due under the $5.9 million note
agreement. In addition, on April 1, 1997, Pocket announced that it had
voluntarily sought court protection under Chapter 11 of the U.S. Bankruptcy
Code. Given these developments and the uncertainty related to Pocket's and
NextWave's ability to meet their future obligations under the agreements
outlined above, the Company fully reserved its exposure with these customers and
has consequently recorded a special charge of $30.1 million pre-tax ($24.5
million after tax or $2.01 per share) at December 31, 1996. The $30.1 million
special charge consists of a reserve against the Company's aggregate receivable
exposure at December 31, 1996 of $12.4 million (net of payments of $0.4 million
received in January 1997), the recognition of an other than temporary impairment
of the Company's investments of $11.5 million and accruals of approximately $6.2
million related to loss contracts under which the Company was obligated to
perform at December 31, 1996.

                                      F-14
<PAGE>   52
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     On April 15, 1997, the Company and NextWave agreed to a revised payment
schedule for amounts outstanding under the note receivable and other receivables
due from NextWave to the Company. Under the terms of the agreement, the Company
was to receive approximately $1.0 million per month from May 15, 1997 through
May 15, 1998. In addition, under certain circumstances, in the event of the sale
or issuance of any debt or equity instruments/securities or the sale of any
assets by NextWave, the Company would be entitled to a prepayment equal to 30%
of the gross proceeds from such transaction(s). In May and June 1997, the
Company agreed to defer NextWave's obligations to prepay the foregoing
obligations out of the proceeds of NextWave's debt or equity financing to August
20, 1997. Payments of $2.0 million were received under the revised payment
schedule through June 30, 1997. NextWave has failed to make the $1.0 million
monthly payments which were due July 15, 1997 through October 15, 1997, as well
as any payment that would have been due on August 20, 1997 related to any debt
or equity financing.

     During September 1997, the Company recognized an approximate $3.9 million
recovery of the $30.1 million special charge. Of the $3.9 million, $2.0 million
represents the payments received through June 1997 under the revised payment
schedule and $1.9 million represents additional payments received in April 1997
from NextWave, net of related expenses. For financial reporting purposes, the
recovery of the $3.9 million balance was deferred pending the lapse in the third
quarter of a 90 day window during which such funds could have been subject to
being treated as preference payments recoverable by NextWave had it filed for
protection under the bankruptcy laws.

(10) INVESTMENTS IN JOINT VENTURES

     The Company's investment in joint ventures at December 31, 1996 and 1997
consisted of a 33 1/3 percent interest in Koll, which was formed in October 1994
with two other unrelated entities. Koll provides site acquisition and
construction management services to operators of wireless communications systems
in the United States. The Company's interest in Koll was received in exchange
for an initial cash investment of $150,000. During 1996 the Company contributed
an additional $587,000. No contribution was made by the Company during 1997.
Operating costs and expenses of the Company include services provided by Koll,
in the amount of $206,000 and $37,000 in 1996 and 1997, respectively.

     The unaudited condensed financial statements of Koll as of and for the
years ended December 31, 1995, 1996 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                             1995     1996      1997
                                                            ------   -------   ------
                                                                 (IN THOUSANDS)
<S>                                                         <C>      <C>       <C>
CONDENSED STATEMENTS OF OPERATIONS
Revenues..................................................  $3,017   $20,143   $8,422
Cost and expenses.........................................   2,908    18,287    8,982
                                                            ------   -------   ------
Net income (loss).........................................  $  109   $ 1,856   $ (560)
                                                            ======   =======   ======
CONDENSED BALANCE SHEETS
Current assets............................................  $1,841   $ 6,969   $3,826
Noncurrent assets.........................................      82       329    2,608
Current liabilities.......................................     726     2,487    2,799
Stockholders' equity......................................   1,197     4,811    3,635
</TABLE>

     The Company had a 50.0 percent interest in Telemate S.A. ("Telemate"),
which provides consulting services in connection with the implementation and
operation of mobile communications systems in certain countries in Europe, Asia
and Latin America. The Company provided design engineering services and software
products to Telemate. Revenues earned related to these services were
approximately $1.8 million in 1995.

                                      F-15
<PAGE>   53
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     In January 1996, the Company sold its 50.0 percent interest in Telemate and
granted certain distribution rights for the Company's software and hardware
products for $3.8 million. Approximately $1.4 million of the proceeds were
received for the Company's investment in Telemate, resulting in a gain of
approximately $514,000, which was recognized by the Company and included in
other income in its calendar 1996 first quarter results. The remaining proceeds
of $2.4 million were recorded as deferred revenue and were amortized to other
income over the 24 month life of the distribution agreement.

     During 1996, the Company entered into master service, convertible note and
stock option agreements with Communication Consulting Services, Inc. ("CCS"), a
provider of radio frequency engineering services in connection with the design,
optimization and operation of wireless systems. Under the master service
agreement, CCS provided the Company with radio frequency engineers effective
November 1, 1996. Under the convertible note agreement, the Company loaned CCS a
total of approximately $602,000 which, at December 31, 1996, was included in
long-term notes receivable in the accompanying consolidated balance sheet.
Interest accrued on the loan at a variable rate equal to the prime rate plus
1.5%. Interest was payable in arrears on the last day each of March 1997, June
1997, September 1997, and December 1997. The entire principal balance, together
with any unpaid interest, was due January 2, 1998. The loan was convertible, at
the Company's option, into shares representing 50% of the authorized capital
stock and/or equity securities of CCS. The stock option agreement gives the
Company an option to purchase an additional 10% of the common stock of CCS for a
total purchase price of $150,000. On April 7, 1997, the Company exercised both
the conversion right in the convertible note and the 10% purchase right set
forth in the stock option agreement.

(11) INCOME TAXES

     The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                           1995         1996         1997
                                                          ------      --------      ------
                                                                   (IN THOUSANDS)
<S>                                                       <C>         <C>           <C>
Current:
     Federal............................................  $   --      $  2,052      $   --
     State and local....................................     345           292          --
     Foreign............................................   2,797         3,624       1,497
                                                          ------      --------      ------
                                                           3,142         5,968       1,497
                                                          ------      --------      ------
Deferred:
     Federal............................................      --       (14,024)      1,775
     State and local....................................      --        (1,746)        572
     Foreign............................................      --        (1,569)      1,391
                                                          ------      --------      ------
                                                              --       (17,339)      3,738
                                                          ------      --------      ------
          Total.........................................  $3,142      $(11,371)     $5,235
                                                          ======      ========      ======
</TABLE>

     The 1997 income tax provision does not include a $0.4 million tax benefit
related to exercising stock options which was recorded directly to paid-in
capital.

     Income before income taxes included the following components:

<TABLE>
<CAPTION>
                                                          1995         1996         1997
                                                         ------      --------      -------
                                                                  (IN THOUSANDS)
<S>                                                      <C>         <C>           <C>
Domestic...............................................  $1,531      $(22,742)     $ 7,678
Foreign................................................   6,351            87        5,132
                                                         ------      --------      -------
          Total........................................  $7,882      $(22,655)     $12,810
                                                         ======      ========      =======
</TABLE>

                                      F-16
<PAGE>   54
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     A reconciliation of the statutory Federal income tax rate and the effective
income tax rate for the years ended December 31, 1995, 1996 and 1997 follows.

<TABLE>
<CAPTION>
                                                        1995              1996           1997
                                                     -----------       -----------       -----
                                                      PRO FORMA         PRO FORMA
                                                     -----------       -----------
                                                     (UNAUDITED)       (UNAUDITED)
<S>                                                  <C>               <C>               <C>
Statutory Federal income tax rate..................      35.0%            (35.0)%         35.0%
Effect of:
     State and local income taxes, net of Federal
       tax benefit.................................       5.0              (0.6)           2.9
     Foreign.......................................      23.0               9.5           11.2
     Tax credits, net..............................     (23.0)             (9.0)         (10.1)
     Other.........................................        --                --            4.3
     Valuation Allowance...........................        --              26.8           (2.4)
                                                        -----             -----          -----
Effective income tax rate..........................      40.0%             (8.3)%         40.9%
                                                        =====             =====          =====
</TABLE>

                                      F-17
<PAGE>   55
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1997 are presented below:

<TABLE>
<CAPTION>
                                                            1996                    1997
                                                           -------                 -------
                                                                   (IN THOUSANDS)
<S>                                                        <C>          <C>        <C>
Deferred tax assets:
     Accounts receivable, principally due to allowance
       for doubtful accounts.............................  $ 1,941                 $ 4,242
     In-process research and development.................    1,569                   1,569
     Special charge:
          Receivables                            4,653                  2,769
          Investment                             4,334                  1,884
          Accruals                               2,339...   11,326        371        5,024
                                                 -----                  -----
     Inventory valuation method..........................      886                     886
     Property and equipment..............................      509                     275
     Non-cash compensation...............................    5,767                   3,852
     Accruals:
          Vacation                                 398                    428
          Incentive compensation                   229                    417
          Accrued expenses                         896...    1,523      2,234        3,079
                                                   ---                  -----
     Telemate S.A. sale, principally due to differences
       in recognition of income on sale of distribution
       rights............................................      452                      --
     Net operating loss carryforward.....................       --                   2,191
     Foreign tax credit carryforward.....................    1,118                   2,774
     Other...............................................      295                     405
                                                           -------                 -------
Total gross deferred tax assets..........................   25,386                  24,297
     Less valuation allowance............................   (5,809)                (10,476)
                                                           -------                 -------
     Net deferred tax assets.............................   19,577                  13,821
                                                           -------                 -------
     Deferred tax liabilities:
          Software development costs.....................   (2,085)                 (2,311)
          Other..........................................     (153)                   (123)
                                                           -------                 -------
     Total gross deferred liabilities....................   (2,238)                 (2,434)
                                                           -------                 -------
     Net deferred tax assets.............................  $17,339                 $11,387
                                                           =======                 =======
</TABLE>

     The components giving rise to the net deferred tax assets described above
have been included in the accompanying balance sheet as of December 31, 1996 and
1997 as follows:

<TABLE>
<CAPTION>
                                                               1996          1997
                                                              -------       -------
<S>                                                           <C>           <C>
Current asset...............................................  $12,755       $ 9,874
Noncurrent asset............................................    4,584         1,513
                                                              -------       -------
                                                              $17,339       $11,387
                                                              =======       =======
</TABLE>

     At December 31, 1997, the Company had $5.9 million of U.S. Federal and
state operating loss carryforwards which expire in varying amounts between 2011
and 2012, foreign tax credits for U.S. tax purposes of $2.8 million that expire
between 2001 and 2002, and $2.9 million of foreign operating loss carryforwards
which expire between 2006 and 2007.

                                      F-18
<PAGE>   56
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     In addressing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. A
valuation allowance has been provided for deferred tax assets which management
believes are not more likely than not to be realized, including the portion of
the special charge (see note 9) which generated a capital loss and certain
foreign tax credit carryforwards.

     Effective September 27, 1996, the Company converted to a Subchapter C
Corporation under the Internal Revenue Code of 1986, as amended ("IRC"). As a
result, the Company recorded a one-time deferred income tax benefit of $8.7
million due to the change in tax status. The benefit is reflected in net income
for the year ended December 31, 1996 as a reduction of the provision for income
taxes. In conjunction with the acquisition of the assets of ETP, the Company
recorded a deferred income tax benefit of approximately $1.6 million as a result
of the allocation of approximately $5.6 million of the purchase price to
in-process research and development expenses (see note 4). The benefit is
recorded as a reduction of the provision for income taxes for the year ended
December 31, 1996. Also, as a result of the reserves recorded related to the
Company's receivables from, investments in and contract costs associated with
Pocket and NextWave, the Company recorded a deferred income tax benefit of $5.5
million, net of a valuation allowance of $5.8 million (see note 9). The net
benefit of $5.5 million is recorded as a reduction of the provision for income
taxes for the year ended December 31, 1996. Prior to September 27, 1996, the
Company was a Limited Liability Company and was not directly subject to U.S.
Federal income taxes and certain state income taxes. Rather, the members were
responsible for Federal income taxes and certain state income taxes on their
proportionate share of taxable income. U.S. state and local income tax expense
was generated from activities conducted in the several states that did not
recognize the limited liability company as a flow-through entity and, therefore,
required the Company to be taxed as if it were a corporation.

     Foreign income tax expense is generated from business conducted in
countries where the Company has subsidiaries or has established branch offices
or has performed significant services that constitute a "permanent
establishment" for tax reporting purposes.

     The unaudited pro forma provisions (benefits) for income taxes presented in
the consolidated statements of operations for the years ended December 31, 1995
and 1996, represent an estimate of the taxes that would have been recorded had
the Company been a Subchapter C corporation as of January 1, 1995. The unaudited
pro forma provisions (benefits) for income taxes for the years ended December
31, 1995 and 1996 consists of the following:

<TABLE>
<CAPTION>
                                                                 1995              1996
                                                              -----------       -----------
                                                                     (IN THOUSANDS)
                                                               PROFORMA          PROFORMA
                                                              (UNAUDITED)       (UNAUDITED)
                                                              -----------       -----------
<S>                                                           <C>               <C>
     Federal................................................    $  736            $(2,140)
     State..................................................       604               (232)
     Foreign................................................     1,813                486
                                                                ------            -------
          Total.............................................    $3,153            $(1,886)
                                                                ======            =======
</TABLE>

(12) NOTE PAYABLE

     In May 1995, the Company entered into a $15.0 million financing facility
with Nomura Holding America Inc. ("Nomura"). At December 31, 1995, $10.0 million
had been drawn against the facility. Under the terms

                                      F-19
<PAGE>   57
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

of the facility, at each six-month anniversary of issuance while the facility
remained outstanding, the original interest rate of prime plus 3.0 percent
increased by .25 percent. At December 31, 1995, the facility carried an interest
rate of prime plus 3.25 percent or 11.75 percent. All unpaid principal and
interest due under the facility was payable no later than May 30, 1997. The
facility was secured by the pledging of substantially all of the Company's
assets and Telcom Ventures' membership interest in the Company and was
guaranteed by Telcom Ventures. In March 1996, LCC's financing facility with
Nomura was purchased by Chase Manhattan Bank, N.A. ("Chase"). Also in March
1996, additional draws aggregating $10.0 million were made by LCC, resulting in
a total outstanding balance under the facility of $20.0 million.

     In June 1996, LCC entered into a new credit facility with Chase which
replaced the March 1996 Facility. Under the new credit facility, Chase extended
(1) a revolving loan and letter of credit facility in an aggregate principal
amount not to exceed the lesser of $12.5 million or 80% of LCC's receivables
which were deemed "eligible" as a basis for obtaining credit, minus the
aggregate amount of letter of credit obligations outstanding at such time, and
(2) a term loan in the principal amount of $7.5 million. The availability of
revolving loans and letters of credit was scheduled to expire on May 15, 1999.
The term loan was scheduled to amortize in 20 equal quarterly installments with
the final principal installment due on May 15, 2001. Interest on the loans was
to accrue at LCC's election at either (1) a variable rate determined with
reference to the higher of (a) the Federal funds rate plus one-half of one
percent and (b) the announced prime commercial lending rate of Chase; or (2) a
fixed rate determined with reference to the London Interbank Market. The payment
and performance of the obligations of LCC under the credit facility were secured
by substantially all the assets of LCC. The credit facility contained certain
covenants which include the maintenance of debt service and other financial
ratios as well as a restriction on the declaration or payment of dividends. The
credit facility was guaranteed by Telcom Ventures. The guarantee terminated upon
consummation of the Company's initial public offering (see note 2).

     In September 1996, the credit facility with Chase was transferred from LCC
to the Company and was amended and restated to reflect the transactions
contemplated by the merger of LCC with and into the Company immediately prior to
the closing of the Company's initial public offering (see note 2). The credit
facility consists of a revolving loan and letter of credit facility in an
aggregate principal amount not to exceed $20.0 million. The limitation on the
amount of outstanding principal based on a calculation of "eligible" receivables
as required in the May 1996 credit facility was eliminated. The revolving loan
commitment expires in September 1999. Interest under the credit facility accrues
at the Company's election (subject to certain restrictions and limitations) at
either (i) the variable rate equal to the greater of (a) the Federal funds rate
plus one-half of one percent, and (b) the announced prime commercial lending
rate of Chase, or (c) a fixed rate for a designated period of time determined by
reference to the London Interbank Market. The credit facility contains certain
covenants which include the maintenance of financial ratios as well as a
restriction on the declaration or payment of dividends. In September 1996,
approximately $16.2 million of the proceeds of the Company's initial public
offering was used to pay all amounts outstanding under the Company's credit
facility with Chase. Effective December 30, 1996, the Credit Facility was
amended to revise the financial ratios and certain other covenants contained
therein for the effect of the special charge recorded by the Company (see note
9).

     Effective December 15, 1997, the Credit Facility was amended to "carve-out"
a separate credit facility for ETP (the "ETP Credit Facility") in the aggregate
principal amount of $2.5 million. ETP and Microcell executed the amended credit
facility as a party and guarantor of the Company's obligation and the Company
has pledged 65% of the equity of ETP and 100% of the equity of Microcell to
Chase as security for repayment under the facility. Also, effective December 31,
1997, the Company obtained a waiver for non-compliance with the covenant
limiting the Company's capital expenditures and one of its financial ratios. The
Company was in compliance with all other financial covenants and ratios. No
amounts were outstanding under the Credit Facility at December 31, 1996, or
during the period January 1, 1997 through December 31, 1997 with

                                      F-20
<PAGE>   58
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

the exception of amounts, if any, outstanding under the ETP Credit Facility.
Approximately $1.4 million was outstanding under the ETP Credit Facility at
December 31, 1997 and is included in other current liabilities in the
accompanying 1997 consolidated balance sheet.

(13) CONVERTIBLE SUBORDINATED DEBT

     In June 1994, the Company issued to MCI Telecommunications Corporation
("MCI") a $20.0 million convertible Subordinated Note Due 2000 (the
"Subordinated Note"). The Subordinated Note bore interest at a rate equal to 6.8
percent, payable semiannually. The entire principal amount of the Subordinated
Note is due in June 2000. Upon the occurrence of certain specified events
(including any merger of the Company with another company or any sale of
substantially all of the Company's assets), the Subordinated Note will
automatically be exchanged for 1,136,440 shares of the Company's Class A Common
Stock. In addition, the investor has the right to exchange the Subordinated Note
for 1,136,440 shares of the Company's Class A Common Stock: (1) at any time
during the 45-day period commencing on the third through fifth anniversaries of
the issuance of the Subordinated Note; and (2) upon the occurrence of certain
other specified events. The investor also has the right to exchange a portion of
the Subordinated Note and of the Telecom Ventures Subordinated Note (as defined
below) for up to 1,000,000 shares of the Company's Class A Common shares of
Stock during certain periods in 1998 in the event of an underwritten public
offering of the Company's Class A Common Stock. The Company has the right to
exchange the Subordinated Note for 1,136,440 shares of the Company's Class A
Common Stock: (1) if the investor does not exchange the Subordinated Note during
the 45-day period commencing on the third through fifth anniversaries of the
issuance of the Subordinated Note; and (2) upon the occurrence of certain other
specified events.

     In June 1994, Telcom Ventures issued a $30.0 million convertible
Subordinated Note Due 2000 (the "Telcom Ventures Subordinated Note") to the same
investor. The Telcom Ventures Subordinated Note bore interest at a rate equal to
6.8%, payable semiannually. Upon the occurrence of certain specified events
(including any merger of the Company with another company or any sale of
substantially all of the Company's assets), the Telcom Ventures Subordinated
Note will automatically be exchanged for 1,704,659 shares of the Company's Class
A Common Stock. In addition, the investor has the right to exchange the Telcom
Ventures Subordinated Note for 1,704,659 shares of the Company's Class A Common
Stock: (1) at any time during the 45-day period commencing on the third through
fifth anniversaries of the issuance of the Telcom Ventures Subordinated Note;
and (2) upon the occurrence of certain other specified events. Telcom Ventures
had the right to exchange the Telcom Ventures Subordinated Note for a 12.0
percent membership interest in the Company: (1) if the investor does not
exchange the Telcom Ventures Subordinated Note during the 45-day period
commencing on the third through fifth anniversaries of the issuance of the
Telcom Ventures Subordinated Note; and (2) upon the occurrence of certain other
specified events. The investor also has the right to exchange a portion of the
Telcom Ventures Subordinated Note and of the Subordinated Note for up to
1,000,000 shares of the Company's Class A Common Stock during certain periods in
1998 in the event of an underwritten public offering of the Company's Class A
Common Stock. The Company fully and unconditionally guaranteed the obligations
of Telcom Ventures under the Telcom Ventures Subordinated Note.

     Effective September 27, 1996, in connection with the Company's initial
public offering of Class A Common Stock, the Company assumed the $30.0 million
Telecom Ventures Subordinated Note from Telcom Ventures. As a result of this
assumption the Company has the exclusive right to exercise all Telecom Ventures'
rights under the Telecom Ventures Subordinated Note and is solely responsible
for the payment of interest and principal thereunder (see note 2).

     On October 23, 1997, the Company announced that it had agreed with MCI to
defer the Company's option to convert the notes in 1997. As part of the
arrangement, interest payable under the notes was reduced from 6.8% to 4.4% per
annum.
                                      F-21
<PAGE>   59
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(14) HEALTH AND RETIREMENT PLANS

     The Company has a defined contribution profit sharing plan under Section
401(k) of the IRC that provides for voluntary employee contributions of 1.0 to
15.0 percent of compensation for substantially all employees. The Company makes
a matching contribution of 50.0 percent of an employee's contribution up to 6.0
percent of each employee's compensation. Company contributions and other
expenses associated with the plan were approximately $419,000, $454,000 and
$633,000 for the years ended December 31, 1995, 1996, and 1997, respectively.

     The Company is self-insured for group health life, and short and long-term
disability claims up to certain stop losses.

(15) INCENTIVE PLANS

     At December 31, 1996 and 1997, the Company had two stock-based incentive
plans, an employee stock purchase plan and an employee stock option plan, which
are described below. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans and employee stock purchase
plan. Had compensation cost for the Company's stock-based compensation plans and
employee stock purchase plan been determined on the fair value at the grant
dates for awards under those plans, consistent with Financial Accounting
Standards Board Statement No. 123 ("SFAS No. 123"), the Company's net income
(loss) and net income (loss) per share would have been reduced to the pro forma
amounts indicated below.

<TABLE>
<CAPTION>
                                                              1995              1996            1997
                                                           -----------       -----------       ------
                                                           (PRO FORMA)       (PRO FORMA)
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                        <C>               <C>               <C>
Net income (loss)
     As reported.........................................    $4,729           $(20,769)        $7,575
     Pro forma...........................................     4,729            (21,099)         5,522
Net income (loss) per share
     As reported:
          Basic..........................................    $ 0.42           $  (1.70)        $ 0.51
          Diluted........................................      0.39              (1.70)          0.47
     Pro forma:
          Basic..........................................    $ 0.42           $  (1.73)        $ 0.37
          Diluted........................................      0.39              (1.73)          0.35
</TABLE>

     Net income (loss) reflects only options granted in 1995, 1996 and 1997.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income (loss) amounts
presented above as compensation cost is reflected over the options' vesting
period of up to five-years and compensation cost for options granted prior to
January 1, 1995 is not considered.

     The per share weighted-average fair value of stock options granted during
1996 and 1997 was $4.25 and $8.41, respectively, on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                           1996        1997
                                                         ---------   ---------
<S>                                                      <C>         <C>
Expected dividend yield................................     0%          0%
Risk-free interest rate................................    6.4%        6.0%
Expected life..........................................  2-6 years   2-8 years
Volatility.............................................    48.0%       65.0%
</TABLE>

                                      F-22
<PAGE>   60
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     Under the Company's Employee Stock Purchase Plan, 360,000 shares of Class A
Common Stock were available for purchase by eligible employees of the Company
beginning in 1997. Rights to purchase shares are deemed granted to participating
employees as of the beginning of each applicable period, as specified by the
Compensation and Stock Option Committee of the Company's Board of Directors. The
purchase price for each share is not less than 85% of the fair market value of
the share of Class A Common Stock on the first or last trading day of such
period, whichever is lower. Under the Employee Stock Purchase Plan, the Company
sold 65,448 shares to employees in 1997. Compensation cost of $161,000 would
have been recognized under SFAS No. 123 for the fair value of the employees
purchase rights and is included in proforma net income above for 1997.
Compensation cost was estimated using the Black Scholes model with the following
assumptions: dividend yield of 0%; expected life of 3 months; expected
volatility of 65%; and a risk free rate of 3%. The weighted average fair value
of those purchase rights granted in 1997 was $2.46.

     In April 1994, the Company adopted the Phantom Membership Plan (the
"Phantom Membership Plan"). Under the Phantom Membership Plan, the Members
Committee was authorized to grant awards ("Phantom Membership Awards") to those
employees of the Company whose responsibilities and decisions, in the Members
Committee's opinion, affect the long-term sustained growth and profitability of
the Company. Each Phantom Membership Award entitled the recipient thereof to
receive, no later than May 1 of each year, an annual award based on a specified
percentage of the Company's net income for the preceding fiscal year. The
Phantom Membership Plan also included a long-term award. Under the long-term
award, once a Phantom Membership Award was fully vested, the recipient had the
right to require the Company to purchase, and the Company had the right to
require such recipient to sell, all or any portion of the recipient's Phantom
Membership Award based on the fair market value of the Company as defined under
the Phantom Membership Plan. In connection with the Company's initial public
offering, all long-term awards granted under the Phantom Membership Plan were
replaced with options granted under the 1996 Employee Stock Option Plan and the
annual award feature of the Phantom Membership Plan was terminated. The options
vest over the original vesting period of the Phantom Membership Plan awards,
generally the third or fifth anniversary of the date of grant.

     Compensation expense related to the annual award feature of the Phantom
Membership Plan was $608,000, and $764,000 for 1995 and 1996, respectively, the
liability for which is included in accrued expenses in the accompanying
consolidated balance sheets. Non-cash compensation related to the long-term
award feature of the Phantom Membership Plan, including compensation expense for
membership awards converted to stock options under the 1996 Employee Stock
Option Plan, was $4.6 million, $7.0 million, and $0.6 million for 1995, 1996,
and 1997, respectively, the liability for which was included in obligation under
incentive plans at December 31, 1995 and paid-in capital at December 31, 1996
and 1997 in the accompanying consolidated balance sheets.

     In March 1996, LCC adopted an Employee Option Plan for certain key
executives under which the Members' Committee granted options for up to an
aggregate six percent interest in the Company. Options representing
approximately a 6.0% interest were outstanding as of March 15, 1996. The Options
were granted at an exercise price equal to fair market value at time of grant,
and generally became exercisable at 20% a year over a five-year period.
Unexercised options generally expire 10 years after issuance.

     In connection with its initial public offering, the Company established the
1996 Employee Stock Option Plan, which authorized the issuance of up to
3,224,000 shares of Class A Common Stock pursuant to options granted under the
plan. Options to purchase approximately 580,000 shares of Class A Common Stock
at the offering price of $16 were granted to approximately 260 employees of the
Company under the Company's 1996 Employee Stock Option Plan. The options vest
with respect to one-third of the shares subject to option on each of the first
three anniversaries of the date of grant. Unexercised options generally expire
10 years after issuance. In addition, options to purchase up to an aggregate of
approximately 2,160,000 shares of Class A Common Stock were issued under the
1996 Employee Stock Option Plan to certain employees of the
                                      F-23
<PAGE>   61
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

Company to replace the options granted by LCC in connection with the Employee
Option Plan (see above) and the Phantom Membership Awards under the LCC
Membership Plan adopted in 1994 (see above). The exercise price and number of
options granted were intended to maintain a comparable value with the
options/awards under the previous plans.

     Also in connection with the Company's initial public offering, the Company
established the 1996 Director's Stock Option Plan and the Employee Stock
Purchase Plan. The Director's Plan provides for the "formula" grant of options,
and authorizes the issuance of up to 60,000 shares of Class A Common Stock and
250,000 shares of Class B Common Stock. The option exercise price for options
granted under the Director's Plan is 100% of the fair value of the shares on the
date of grant. Each eligible director who is not eligible to hold shares of
Class B Common Stock was granted an initial option to purchase 10,000 shares of
Class A Common Stock in connection with the offering. Each eligible director who
is eligible to hold shares of Class B Common Stock and who was a director as of
the offering was granted an initial option to purchase 35,000 shares of Class B
Common Stock in connection with the offering, and will be granted additional
options to purchase 22,500 shares of Class B Common Stock as of each of the next
four annual meetings of the stockholders of the Company if the director
continues to be an eligible director. Options granted with respect to Class A
Common Stock will become immediately exercisable with respect to directors who
were directors of the Company prior to July 1, 1996, and will become exercisable
with respect to one-third of the shares of Class A Common Stock that are subject
to the options on each of the first three anniversaries of the date of grant
subject to acceleration of vesting on a change of control with respect to
directors who became directors of the Company after July 1, 1996.

     The Company has reserved 85,000 shares of Class A Common Stock for issuance
pursuant to options to be granted to a person or entity designated by one of the
investors in the Company. The option exercise price for these options will be
100% of the fair market value of the Class A Common Stock that was granted in
connection with the Offering, and an additional option will be granted to
purchase 15,000 shares of Class A Common Stock on the date of grant of the
option. An initial option to purchase 25,000 shares of Class A Common Stock was
granted in connection with the Offering, and an additional 15,000 shares of
Class A Common Stock on each of the next four anniversaries of the initial date
of grant. Options granted will vest immediately. The options will expire no
later than the fifth anniversary of the date of grant.

Changes in stock options outstanding were as follows:

<TABLE>
<CAPTION>
                                                1996                              1997
                                   -------------------------------   -------------------------------
                                                      WEIGHTED-                         WEIGHTED-
                                     NUMBER OF         AVERAGE         NUMBER OF         AVERAGE
                                       SHARES       EXERCISE PRICE       SHARES       EXERCISE PRICE
                                   --------------   --------------   --------------   --------------
                                   (IN THOUSANDS)    (PER SHARE)     (IN THOUSANDS)    (PER SHARE)
<S>                                <C>              <C>              <C>              <C>
Balance at beginning of year.....         --            $   --           2,813            $ 8.54
Granted..........................      2,825              8.57             418             15.54
Exercised........................         --                --            (531)             6.08
Terminated.......................        (12)            16.00            (191)            13.08
                                       -----                             -----
Balance at end of year...........      2,813              8.54           2,509              9.89
                                       =====                             =====
</TABLE>

                                      F-24
<PAGE>   62
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     The following table summarizes information about options at December 31,
1997.

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
                        ----------------------------------------------------   ---------------------------------
                                             WEIGHTED AVG.     WEIGHTED AVG.                       WEIGHTED AVG.
       RANGE OF             NUMBER AT          REMAINING         EXERCISE          NUMBER AT         EXERCISE
   EXERCISE PRICES      DECEMBER 31, 1997   CONTRACTUAL LIFE       PRICE       DECEMBER 31, 1997       PRICE
   ---------------      -----------------   ----------------   -------------   -----------------   -------------
                         (IN THOUSANDS)        (IN YEARS)                       (IN THOUSANDS)
<S>                     <C>                 <C>                <C>             <C>                 <C>
$4.00.................          945               8.7             $ 4.00               783            $ 4.00
$9.16-$12.13..........          740               7.9              10.35               235             10.50
$14.88-$16.00.........          676               8.4              15.74               206             16.00
$18.00-$20.38.........          148               9.4              18.55                --                --
                              -----                                                  -----
                              2,509               8.5               9.89             1,224              7.26
                              =====                                                  =====
</TABLE>

     In September 1994, the Company adopted an Incentive Compensation Plan (the
"Incentive Compensation Plan"). Under the Incentive Compensation Plan, the
Members Committee was authorized to grant awards ("Incentive Awards") to those
employees of the Company whose responsibilities and decisions, in the Members
Committee's opinion, affect the long-term sustained growth and profitability of
the Company.

     Each Incentive Award entitles the recipient thereof to receive a cash
payment on the date specified in the corresponding award agreement. To date, all
Incentive Awards granted under the Incentive Compensation Plan are payable on
the third anniversary of the grant thereof. At the discretion of the Members
Committee, participating employees may borrow a portion of the total amount of
their Incentive Awards.

     As of December 31, 1994 and 1995, 20 and 60 employees, respectively, had
been granted Incentive Awards under the Incentive Compensation Plan. No new
grants were made in 1996 or 1997. Compensation expense accrued in connection
with the distribution of the value of vested Incentive Awards was $635,000,
$541,000, and $409,000 for the years ended December 31, 1995, 1996, and 1997,
respectively, which has been included in obligations under incentive plans, net
of current portion in the accompanying consolidated balance sheets.

(16) LEASE COMMITMENTS

     The Company leases office facilities and certain equipment, principally in
the United States, under operating leases expiring on various dates over the
next ten years. The lease agreements include renewal options and provisions for
rental escalations based on the Consumer Price Index and require the Company to
pay for executory costs such as taxes and insurance. The lease agreements also
allow the Company to elect an early out provision by giving notice and paying
certain lease termination penalties.

     Benefits associated with a rent abatement period and certain lease
incentives for office facilities are reflected ratably over the period of the
lease. For leases which have been terminated (see below), the applicable portion
of the benefit has been offset against the lease termination penalty. The total
deferred rent benefit was approximately $351,000 and $289,000 at December 31,
1996 and 1997, respectively.

     In November 1995 and December 1996, the Company gave notice of early lease
termination to two of its landlords and recorded the lease termination penalties
thereon in its calendar 1995 and 1996 financial statements. In May 1996, the
Company entered into 10-year and 5-year facility lease agreements effective
March 1, 1997 and July 1, 1997, respectively.

                                      F-25
<PAGE>   63
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     Future minimum rental payments under non-cancelable operating leases,
excluding executory costs, are as follows:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
                                                              --------------
<S>                                                           <C>
1998........................................................     $ 3,655
1999........................................................       3,679
2000........................................................       3,726
2001........................................................       3,732
2002........................................................       3,706
Thereafter..................................................      15,500
                                                                 -------
                                                                 $33,998
                                                                 =======
</TABLE>

     Rent expense under operating leases was approximately $3.5 million, $5.0
million and $5.3 million for the years ended December 31, 1995, 1996, and 1997,
respectively.

(17) CONTINGENCIES

     The Company is party to various legal proceedings and claims incidental to
their business. Management does not believe that these matters will have a
material adverse effect on the consolidated results of operations or financial
condition of the Company.

(18) EARNINGS PER SHARE

     During 1997 the Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128
supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share" and
its related interpretations and promulgates new accounting standards for the
computation and manner of presentation of the Company's earnings per share data.
Under SFAS No. 128 the Company is required to present basic and diluted earnings
per share. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that shared in the earnings of the Company. The
reconciliation of the basic and diluted earnings per share computations for the
years ended December 31, 1995, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
                                            1995                             1996                          1997
                               ------------------------------   ------------------------------   ------------------------
                               PRO FORMA                        PRO FORMA                                           PER
                                  NET               PER SHARE      NET               PER SHARE    NET              SHARE
                                INCOME     SHARES    AMOUNT      (LOSS)     SHARES    AMOUNT     INCOME   SHARES   AMOUNT
                               ---------   ------   ---------   ---------   ------   ---------   ------   ------   ------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                            <C>         <C>      <C>         <C>         <C>      <C>         <C>      <C>      <C>
BASIC EPS
  Net income (loss) available
    to common shareholders...   $4,729     11,364     $0.42     $(20,769)   12,211    $(1.70)    $7,575   14,740   $0.51
                                                      =====                           ======                       =====
EFFECT OF DILUTIVE SECURITIES
  Convertible debt...........      816      2,841                     --        --                   --       --
  Stock option plans.........       --         --                     --        --                   --    1,215
                                ------     ------               --------    ------               ------   ------
DILUTIVE EPS
    Net income (loss)
      available to common
      stockholders and
      assumed conversions....   $5,545     14,205     $0.39     $(20,769)   12,211    $(1.70)    $7,575   15,955   $0.47
                                ======     ======     =====     ========    ======    ======     ======   ======   =====
</TABLE>

                                      F-26
<PAGE>   64
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     The Company's convertible subordinated debt, which is exchangeable into 2.8
million shares of the Company's Class A Common Stock, was outstanding during
calendar 1996 and 1997, but was not included in the computation of diluted
earnings per share because the effect of which would have been anti-dilutive.
Options to purchase 2.8 million shares of Class A Common Stock were outstanding
during 1996 but were not included in the computation of diluted earnings per
share because the effect of which would have been anti-dilutive.

(19) GEOGRAPHIC DATA

     The Company maintains subsidiaries in France, Germany, Brazil, Norway,
Columbia and the United Kingdom. Net revenues generated by these subsidiaries
was $4.6 million, $2.7 million and $15.5 million during calendar 1995, 1996 and
1997, respectively. The remaining sales to Europe and principally all of the
export sales to Latin America, Middle East-Africa and Asia-Pacific are U.S.
services and products.

     Export sales by geographic region are as follows:

<TABLE>
<CAPTION>
                                                    1995      1996      1997
                                                   -------   -------   -------
                                                         (IN THOUSANDS)
<S>                                                <C>       <C>       <C>
North America....................................  $ 3,330   $ 2,965   $ 3,302
Latin America....................................    8,200    10,588     8,703
Europe...........................................    9,290     9,715     9,713
Middle East-Africa...............................    3,310     1,473     1,404
Asia-Pacific.....................................   16,730    17,598    19,156
                                                   -------   -------   -------
Total export sales...............................  $40,860   $42,339   $42,278
                                                   =======   =======   =======
</TABLE>

                                      F-27
<PAGE>   65
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

(20) QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           1996
                                                        ------------------------------------------
                                                          1ST        2ND        3RD         4TH
                                                        QUARTER    QUARTER    QUARTER     QUARTER
                                                        --------   --------   --------   ---------
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                     <C>        <C>        <C>        <C>
Revenues..............................................  $27,088    $33,276    $37,856    $ 43,350
Operating income (loss)...............................    2,561      1,854      2,644     (29,965)
Income (loss) before income taxes.....................    3,187      1,603      2,569     (30,014)
Net income (loss).....................................    2,479        542     10,881     (25,184)
Pro forma net income (loss) per share:
  Basic...............................................  $  0.17    $  0.08    $  0.13    $  (1.73)
                                                        =======    =======    =======    ========
  Diluted.............................................  $  0.15    $  0.08    $  0.12    $  (1.73)
                                                        =======    =======    =======    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                           1997
                                                        ------------------------------------------
                                                          1ST        2ND        3RD         4TH
                                                        QUARTER    QUARTER    QUARTER     QUARTER
                                                        --------   --------   --------   ---------
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                     <C>        <C>        <C>        <C>
Revenues..............................................  $34,370    $37,300    $40,493    $ 43,085
Operating income......................................    1,111      2,609     10,437          60
Income before income taxes............................      770      2,006      9,911         123
Net income............................................      390      1,129      5,583         473
Net income per share:
  Basic...............................................  $  0.03    $  0.08    $  0.38    $   0.03
                                                        =======    =======    =======    ========
  Diluted.............................................  $  0.02    $  0.07    $  0.32    $   0.03
                                                        =======    =======    =======    ========
</TABLE>

See note 9 with respect to the special charge recorded by the Company in
December 1996 and note 3 with respect to the additional allowance for doubtful
accounts recorded by the Company in December 1997 as a result of the economic
downturn in the Asia-Pacific region.

(21) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following table presents the carrying amount and estimated fair value
of the Company's financial instruments in accordance with SFAS No. 107
"Disclosure about Fair Value of Financial Instruments".

<TABLE>
<CAPTION>
                                                            1996                         1997
                                                  -------------------------   --------------------------
                                                  CARRYING   ESTIMATED FAIR   CARRYING   ESTIMATED FAIR
                                                   AMOUNT        VALUE         AMOUNT         VALUE
                                                  --------   --------------   --------   ---------------
                                                                      (IN THOUSANDS)
<S>                                               <C>        <C>              <C>        <C>
Assets:
  Notes receivable -- long term.................  $   602       $   602       $    --        $    --
  Notes receivable from shareholder.............    3,500         3,500         2,800          2,800
Liabilities:
  Note payable..................................   10,445        10,445            --             --
  Convertible subordinated debt.................   50,000        52,560        50,000         41,196
Off balance sheet -- letters of credit..........       69            76            67             77
</TABLE>

                                      F-28
<PAGE>   66
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

     The carrying amounts of financial instruments, including cash and cash
equivalents, accounts and notes receivable, the note payable as of December 31,
1997 and accounts payable approximated fair value as of December 31, 1996 and
1997 because of the relatively short duration of these instruments.

     Notes receivable from shareholder -- the carrying value of the note
receivable approximated the fair value as the receivable is treated as a deemed
dividend.

     Convertible subordinated debt -- the fair value at December 31, 1996 and
1997 is based on the fair market value of the Class A Common Stock assuming
conversion into 2,841,099 shares.

     Letters of credit -- the fair value of letters of credit was estimated
based on fees currently charged for similar agreements or the estimated cost to
terminate or settle the obligations.

     Financial guarantees are conditional commitments issued by the Company to
guarantee the payment of certain liabilities of unconsolidated affiliates. No
such guarantees were outstanding at December 31, 1996 or 1997.

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

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Reference is made to the information set forth under the caption "Election
of Directors" appearing in the Proxy Statement to be filed within 120 days after
the end of the Company's fiscal year, which information is incorporated herein
by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     Reference is made to the information set forth under the caption "Election
of Directors -- Executive Compensation" appearing in the Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year, which
information is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Reference is made to the information set forth under the caption
"Beneficial Ownership of Common Stock" appearing in the Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year, which
information is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Reference is made to the information set forth under the caption "Election
of Directors -- Compensation Committee Interlocks and Insider Participation"
and -- "Certain Relationships and Related Transactions" appearing in the Proxy
Statement to be filed within 120 days after the end of the Company's fiscal
year, which information is incorporated herein by reference.

                                      F-29
<PAGE>   67

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)(1) The following consolidated financial statements of registrant and
            its subsidiaries and report of independent auditors are included in
            Item 8 hereof.

             Report of Independent Auditors.

             Consolidated Statements of Operations -- Years Ended December 31,
1995, 1996, and 1997.

             Consolidated Balance Sheets as of December 31, 1996 and 1997.

             Consolidated Statements of Shareholders' Equity (Deficit) -- Years
             Ended December 31, 1995, 1996 and 1997.

             Consolidated Statements of Cash Flows -- Years Ended December 31,
1995, 1996 and 1997.

             Notes to Consolidated Financial Statements.

     (a)(2) Except as provided below, all schedules for which provision is made
            in the applicable accounting regulations of the Securities and
            Exchange Commission either have been included in the Consolidated
            Financial Statements or are not required under the related
            instructions, or are inapplicable and therefore have been omitted.

             Schedule II -- Valuation and Qualifying Accounts

     (a)(3) The following exhibits are either provided with this Report or are
            incorporated herein by reference:

<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                            EXHIBIT DESCRIPTION
          -------                           -------------------
          <C>      <S>  <C>
             3.1   --   Restated Certificate of Incorporation of the Company.*
             3.2   --   Amended and Restated Bylaws of the Company.*
             4.1   --   Form of Class A and Class B Common Stock certificates.*
             4.2   --   LCC International, Inc. 1996 Directors Stock Option Plan.*
             4.3   --   LCC International, Inc. 1996 Employee Stock Option Plan.*
             4.4   --   LCC International, Inc. 1996 Employee Stock Purchase Plan.*
             4.5   --   Amendment No. 1 to LCC International, Inc. Employee Stock
                        Purchase Plan**
            10.1   --   [Intentionally omitted]
            10.2   --   [Intentionally omitted]
            10.3   --   [Intentionally omitted]
            10.4   --   [Intentionally omitted]
            10.5   --   1994 LCC, L.L.C. Incentive Compensation Plan.*
            10.6   --   [Intentionally omitted]
            10.7   --   [Intentionally omitted]
            10.8   --   Subordinated Note due 2000 by Telcom Ventures, L.L.C.
                        payable to MCI Telecommunications Corporation dated June 28,
                        1994.*
            10.9   --   Subordinated Note due 2000 by LCC, L.L.C. payable to MCI
                        Telecommunications Corporation dated June 28, 1994.*
          +10.10   --   Agreement dated November 15, 1994 by and between LCC, L.L.C.
                        and Pacific Bell Mobile Services.*
</TABLE>

                                      F-30
<PAGE>   68

<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                            EXHIBIT DESCRIPTION
          -------                           -------------------
          <C>      <S>  <C>
          ++10.11  --   Amended and Restated Service Agreement, dated as of October
                        1, 1996, by and between TSI, a division of LCC
                        International, Inc., and Nextel Communications, Inc.****
          ++10.12  --   Amended and Restated Software License Agreement, dated as of
                        October 1, 1996 by and between LCC, a division of LCC
                        International, Inc., and Nextel Communications, Inc.****
           10.13   --   Amended and Restated Shareholders' Rights Agreement dated
                        February , 1996 between NextWave Telecom Inc. and LCC,
                        L.L.C.*
           10.14   --   Letter Agreement dated March   , 1996 between NextWave
                        Telecom, Inc. and LCC, L.L.C.*
          +10.15   --   Letter Agreement dated March 12, 1996 between NextWave
                        Telecom, Inc. and LCC, L.L.C.*
           10.16   --   Subscription Agreement dated March , 1996 between NextWave
                        Telecom, Inc. and LCC, L.L.C.*
           10.17   --   [Intentionally omitted]
           10.18   --   Convertible Loan and Investment Agreement dated March 20,
                        1996 by and between LCC, L.L.C. and DCR Communications,
                        Inc.*
          +10.19   --   Letter Agreement dated March 20, 1996 by and between LCC,
                        L.L.C. and DCR Communications, Inc.*
           10.20   --   Agreement dated May 17, 1996, between LCC, L.L.C. and
                        West*Park Associates Limited Partnership for office space at
                        7925 Jones Branch Drive, McLean, Virginia, 22102.*
           10.21   --   Agreement dated May 17, 1996, between LCC, L.L.C. and
                        West*Park Associates Limited Partnership for office space at
                        7927 Jones Branch Drive, McLean, Virginia, 22102.*
           10.22   --   Letter Agreement dated May 31, 1996 between LCC
                        International, Inc. and Arno Penzias.*
           10.23   --   [Intentionally omitted]
           10.24   --   Security Agreement dated June 14, 1996 among LCC, L.L.C.,
                        LCC Design Services, L.L.C. and LCC Development Company,
                        L.L.C., in favor of The Chase Manhattan Bank (National
                        Association).*
           10.25   --   Intellectual Property Security Agreement dated June 14, 1996
                        by LCC, L.L.C. in favor of The Chase Manhattan Bank
                        (National Association).*
           10.26   --   Pledge Agreement dated June 14, 1996 among LCC, L.L.C., LCC
                        Design Services, L.L.C. and LCC Development Company, L.L.C.,
                        in favor of The Chase Manhattan Bank (National
                        Association).*
           10.27   --   Intercompany Agreement dated as of August 27, 1996 among
                        Telcom Ventures, L.L.C., LCC, L.L.C., LCC International,
                        Inc., Cherrywood Holdings, Inc., Rajendra Singh, Neera
                        Singh, certain trusts for the benefit of members of the
                        Singh family, Carlyle-LCC Investors I, L.P., Carlyle-LCC
                        Investors II, L.P., Carlyle-LCC Investors III, L.P.,
                        Carlyle-LCC IV (E), L.P., MDLCC, L.L.C. and TC Group,
                        L.L.C.*
           10.28   --   Registration Rights Agreement dated July 25, 1996 among LCC
                        International, Inc., RF Investors, L.L.C. and MCI
                        Telecommunications Corporation.*
</TABLE>

                                      F-31
<PAGE>   69

<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                            EXHIBIT DESCRIPTION
          -------                           -------------------
          <C>      <S>  <C>
           10.29   --   Form of Indemnity Agreement between LCC International, Inc.
                        and each of Rajendra Singh, Neera Singh, Piyush Sodha, Mark
                        D. Ein, Arno A. Penzias, J. Michael Bonin, Kathryn M.
                        Condello, Peter A. Deliso, Richard Hozik, Frank F.
                        Navarrete, Donald R. Rose, Gerard L. Vincent and Louis R.
                        Olsen.*
           10.30   --   Overhead and Administrative Services Agreement dated August
                        27, 1996 between LCC International, Inc. and Telcom
                        Ventures, L.L.C.*
           10.31   --   Agreement of Merger dated September 15, 1996 between LCC,
                        L.L.C. and LCC International, Inc.*
           10.32   --   Form of LCC International, Inc. Directors Stock Option Plan
                        stock option agreement for directors who will receive Class
                        B Common Stock.*
           10.33   --   Amended and Restated Securityholders Agreement dated July
                        25, 1996 among Telcom Ventures, L.L.C., LCC, Incorporated,
                        TC Group, L.L.C., LCC, L.L.C. and MCI Telecommunications
                        Corporation.*
           10.34   --   Amendment to Subordinated Note due 2000 by Telcom Ventures,
                        L.L.C. payable to MCI Telecommunications Corporation dated
                        July 25, 1996.*
           10.35   --   Amendment to Subordinated Note due 2000 by LCC, L.L.C.
                        payable to MCI
           10.36   --   Telecommunications Corporation dated July 25, 1996.* Form of
                        Promissory Note by Telcom Ventures, L.L.C. to LCC
                        International, Inc.*
           10.37   --   Form of Stock Option Agreement between LCC International,
                        Inc. and the Carlyle Option Designees.*
           10.38   --   Form of LCC International, Inc. 1996 Employee Stock Option
                        Plan incentive stock option agreement.*
           10.39   --   Form of LCC International, Inc. 1996 Employee Stock Option
                        Plan non-incentive stock option agreement.*
           10.40   --   Form of LCC International, Inc. 1996 Employee Stock Option
                        Plan non-incentive stock option agreement (for employees who
                        had been eligible to participate in the LCC, L.L.C. 1994
                        Phantom Membership Plan or the LCC, L.L.C. 1996 Employee
                        Option Plan).*
           10.41   --   Form of LCC International, Inc. Directors Stock Option Plan
                        stock option agreement for directors who will receive Class
                        A Common Stock (other than Mark D. Ein).*
           10.42   --   Form of LCC International, Inc. Directors Stock Option Plan
                        stock option agreement for Mark D. Ein.*
           10.43   --   Form of Phantom Membership Plan Exchange Agreement.*
           10.44   --   Revolving Credit Note dated June 14, 1996 by LCC, L.L.C. to
                        The Chase Manhattan Bank (National Association) in the
                        amount of $12,500,000.*
           10.45   --   Term Note dated June 14, 1996 by LCC, L.L.C. to The Chase
                        Manhattan Bank (National Association) in the amount of
                        $7,500,000.*
           10.46   --   Letter Agreement dated August 22, 1996 between LCC
                        International, Inc. and Arno Penzias.*
           10.47   --   [Intentionally omitted]
           10.48   --   Form of Notice of Assignment of Subordinated Note Due 2000
                        from Telcom Ventures, L.L.C. and LCC International, Inc. to
                        MCI Telecommunications Corporation.*
</TABLE>

                                      F-32
<PAGE>   70

<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                            EXHIBIT DESCRIPTION
          -------                           -------------------
          <C>      <S>  <C>
           10.49   --   Form of Second Amendment to Subordinated Note Due 2000 by
                        Telcom Ventures, L.L.C. and LCC International, Inc. payable
                        to MCI Telecommunications Corporation.*
           10.50   --   Form of Third Amendment to Subordinated Note Due 2000 by
                        Telcom Ventures, L.L.C. and LCC International, Inc. payable
                        to MCI Telecommunications Corporation.*
           10.51   --   Amendment to Amended and Restated Securityholders Agreement
                        dated September 19, 1996 among Telcom Ventures, L.L.C., LCC,
                        Incorporated, TC Group, L.L.C., LCC, L.L.C. and MCI
                        Telecommunications Corporation.*
           10.52   --   Series D Convertible Debenture Due March 27, 2001 by DCR
                        Communications, Inc. dated March 27, 1996.*
           10.53   --   Series D Convertible Debenture Due May 10, 2001 by DCR
                        Communications, Inc. dated May 10, 1996.*
           10.54   --   Form of Amended and Restated Credit Agreement dated as
                        September   , 1996 among LCC International, Inc., LCC Design
                        Services, L.L.C., LCC Development Company, L.L.C., The
                        Lenders Signatory hereto and The Chase Manhattan Bank as
                        Administrative Agent.*
           10.55   --   Form of $20 Million Revolving Credit Note of LCC,
                        International, Inc. to The Chase Manhattan Bank dated
                        September   , 1996.*
           10.56   --   Form of Subordination and Intercreditor Agreement dated as
                        of September   , 1996 by and among The Chase Manhattan Bank,
                        as administrative agent, MCI Telecommunications Corporation
                        and LCC International, Inc.*
           10.57   --   Asset Purchase Agreement, dated as of December 30, 1996,
                        between European Technology Partner AS and LCC International
                        AS***
           10.58   --   First Amendment Agreement, dated as of December 30, 1996,
                        among LCC International, Inc., LCC Design Services, L.L.C.,
                        LCC Development Company, L.L.C., The Lenders Signatory
                        Thereto and The Chase Manhattan Bank as Administrative
                        Agent.****
           10.59   --   Second Amendment to Subordinated Note Due 2000 and Amendment
                        to Registration Rights Agreement, dated October 23, 1997, by
                        and between the Company and MCI as to the Note amendment,
                        and among the Company, MCI and RF Investors as the
                        Registration Rights Agreement amendment.*****
           10.60   --   Fourth Amendment to Subordinated Note Due 2000 and Amendment
                        to Registration Rights Agreement, dated October 23, 1997, by
                        and between the Company and MCI as to the Note amendment,
                        and among the Company, MCI and RF Investors as the
                        Registration Rights Agreement amendment.*****
           10.61   --   Employment Agreement dated as of January 15, 1998 by and
                        between the Company and Geoffrey Carroll.******
           10.62   --   Form of LCC International, Inc. 1996 Employee Stock Option
                        Plan Non-Incentive Stock Option Agreement for Geoffrey
                        Carroll.******
           10.63   --   Second Amended and Restated Credit Agreement dated as of
                        December 15, 1997 among LCC International, Inc., LCC Europe
                        AS, LCC Design Services, L.L.C., LCC Development Company,
                        L.L.C., Microcell Management, Inc., The Lenders Signatory
                        Thereto and The Chase Manhattan Bank as Administrative
                        Agent.
</TABLE>

                                      F-33
<PAGE>   71

<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                            EXHIBIT DESCRIPTION
          -------                           -------------------
          <C>      <S>  <C>
              11   --   Calculation of Pro Forma Net Income (Loss) Per Share.
              21   --   Subsidiaries of the Company.
            23.1   --   Consent of KPMG Peat Marwick LLP.
              27   --   Financial Data Schedule.
</TABLE>

---------------
      * Incorporated by reference to the Exhibits on the Company's Registration
        Statement on Form S-1 (Registration No. 333-6067)

     ** Incorporated by reference to the Exhibits to the Company's Registration
        Statement on Form S-8 (File No. 333-17803) which was filed with the
        Securities and Exchange Commission on December 13, 1996.

   *** Incorporated by reference to the Exhibits to the Company's Current Report
       on Form 8-K which was filed with the Securities and Exchange Commission
       on January 14, 1997.

  **** Incorporated by reference to the Exhibits to the Company's Annual Report
       on Form 10-K which was filed with the Securities and Exchange Commission
       on April 15, 1997.

 ***** Incorporated by reference to the Exhibits to the Company's Current Report
       on Form 8-K which was filed with the Securities and Exchange Commission
       on October 27, 1997.

****** Incorporated by reference to the Exhibits to the Company's Current Report
       on Form 8-K which was filed with the Securities and Exchange Commission
       on January 21, 1998.

      + Confidential treatment has been granted for certain portions of this
        document. The copy filed as an exhibit omits the information subject to
        the confidential treatment request.

      ++ Confidential treatment has been granted for certain portions of this
         document. The copy filed as an exhibit omits the information subject to
         the confidential treatment request.

      ++ (b) Financial Statement Schedules.
             Schedule II -- Valuation and Qualifying Accounts

     Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

   (b) None.

   (c) Exhibits to this Form 10-K are attached or incorporated by reference as
stated above.

   (d) None.

                                      F-34
<PAGE>   72

                               GLOSSARY OF TERMS

     "A-block auction " -- An auction held by the FCC to award 30 MHz PCS
licenses for 51 MTAs. The A-block auction, held in conjunction with the B-block
auction, was concluded in March 1995, and licenses were awarded on June 23,
1995.

     "alphanumeric " -- A message or other type of readout containing both
letters ("alphas") and numbers ("numerics"). In cellular, "alphanumeric memory
dial" is a special type of dial-from-memory option that displays both the name
of the individual and that individual's phone number on the cellular phone
handset. The name also can be recalled by using the letters on the phone keypad.
By contrast, standard memory dial recalls numbers from number-only locations.

     "AMPS " -- Advanced Mobile Phone Service. The United States analog cellular
standard.

     "analog " -- A method of storing, processing and transmitting information
through the continuous variation of a signal.

     "antenna " -- A device for transmitting and/or receiving signals.

     "B-block auction " -- An auction held by the FCC to award 30 MHz PCS
licenses for 51 MTAs. The B-block auction, held in conjunction with the A-block
auction, was concluded in March 1995, and licenses were awarded on June 23,
1995.

     "base station " -- A central radio transmitter/receiver that maintains
communications with the mobile phone within a specified range.

     "Broadband PCS " -- High frequency, next generation wireless services.

     "BTA " -- Basic Trading Area. A service area designed by Rand McNally and
adopted by the FCC to promote the rapid deployment and ubiquitous coverage of
PCS and providers. There are 493 BTAs in the United States.

     "C-block auction " -- An auction held by the FCC to award 30 MHz PCS
licenses for 493 BTAs to entrepreneurial businesses having gross revenues of
less than $125 million in each of the last two years and total assets of less
than $500 million. Bidding credits and installment payment options were granted
to small businesses having average gross revenues for the preceding three years
of less than $40 million. The C-block auction was concluded in May 1996.
Licenses were awarded in late 1996 and early 1997.

     "CDMA " -- Code Division Multiple Access. A digital wireless transmission
technology for use in wireless telephone communications. CDMA is a spread
spectrum technology in which calls are assigned a pseudo random code to encode
digital bit streams. The coded signals are then transmitted over the air on a
frequency between the end user and a cell site, where they are processed by a
base station. CDMA allows more than one wireless user to simultaneously occupy a
single RF band.

     "cell " -- The basic geographic area covered by a single
transmitter/receiver in a wireless phone system.

     "cellular network " -- A telephone system based on a grid of "cells"
deployed primarily at 800 and 900 MHz. Each cell contains transmitters,
receivers and antennas, and is connected to switching gear and control
equipment.

     "cell-splitting " -- Adding a cell to overlap coverage of an existing site,
which adds capacity to the area served by that existing site.

     "channel " -- A single path, either RF or voice, for transmitting
electrical signals.

     "D-block auction " -- An auction held by the FCC to award 10 MHz PCS
licenses for 493 BTAs. The D-block auction, held in conjunction with the E-block
and F-block auctions, was concluded on January 14, 1997.

     "DCS " -- Digital Communications Service. A GSM-based system in the
1800/1900 band.

                                      F-36
<PAGE>   73

     "digital " -- A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission/switching technologies employ a
sequence of discrete, distinct pulses to represent information, as opposed to
the continuously variable analog signal.

     "digital protocols " -- Methodologies that serve to manage the
communication for digital signal transmission. CDMA and TDMA are examples of
high level digital protocols.

     "E-block auction " -- An auction held by the FCC to award 10 MHz PCS
licenses for 493 BTAs. The E-block auction, held in conjunction with the D-block
and F-block auctions, was concluded on January 14, 1997.

     "ESMR " -- Enhanced Specialized Mobile Radio is a radio communications
system that employs digital technology with a multi-site configuration that
permits frequency reuse but used in the SMR frequencies, offering enhanced
dispatch services to traditional analog SMR users.

     "ETACS " -- Enhanced Total Access Cellular System. The European analog
cellular standard.

     "F-block auction " -- An auction held by the FCC to award 10 MHz PCS
licenses for 493 BTAs. The F-block auction, held in conjunction with the D-block
and E-block auctions, was concluded on January 14, 1997.

     "FCC " -- Federal Communications Commission. The government agency
responsible for regulating telecommunications in the United States.

     "frequency " -- The number of cycles per second, measured in hertz, of a
periodic oscillation or wave in radio propagation.

     "Global Positioning System " -- A satellite-based network provided by the
U.S. government which allows the user thereof to pinpoint precisely his or her
location at any place in the world.

     "GSM " -- Global System for Mobile Communications. A distributed open
networking architecture standard for digital wireless systems world-wide. GSM is
a TDMA technology which assigns calls into multiple time slots.

     "hand-off " -- The act of transferring communication with a mobile unit
from one base station to another. A hand-off transfers a call from the current
base station to the new base station.

     "hertz " -- A measurement of electromagnetic energy, equivalent to one
"wave" or cycle per second.

     "iDEN " -- Integrated Dispatch Enhanced Network. iDEN is a technology and a
network solution for providing communications services in the SMR spectrum.

     "INFLEXION " -- A technology for providing voice narrowband PCS developed
by Motorola.

     "infrastructure equipment " -- Fixed infrastructure equipment consisting of
base stations, base station controllers, antennas, switches, management
information systems and other equipment making up the backbone of the wireless
communication system that receives, transmits and processes signals from and to
subscriber equipment and/or between wireless systems and the public switched
telephone network.

     "IS-54 " -- The first U.S. Digital Cellular Standard, based on TDMA and
adopted by the CTIA in 1990.

     "IS-136 " -- North American Interim Standard-digital TDMA system
specification.

     "KHz " -- Kilohertz (one thousand hertz).

     "LMDS " -- Local Multipoint Distribution System. A fixed broadband
point-to-multipoint system. Initially designed as an alternative multichannel
video programming service, LMDS has emerged as an alternative for offering local
exchange service, wireless telephony, data, internet access, video and other
broadband services.

     "MHz " -- Megahertz (millions of hertz).

                                      F-37
<PAGE>   74

     "microcells " -- Cell sites with small coverage radius. Antenna heights are
generally low, being 40 feet in height or less and typically have a service area
of 1/4 to 2 miles.

     "microcell site " -- comprised of a microcell base station and electrical
and transmission termination equipment. This equipment provides the radio
interface between the PCS network and the customer's handset, and differs from
the mini base station in its reduced physical dimensions and included integrated
antennas. These units are the size of a medium-sized suitcase, allowing mounting
on walls and poles.

     "MTA " -- Major Trading Area. A PCS area designed by Rand McNally and
adopted by the FCC. There are 51 MTAs in the United States.

     "MTSO " -- Mobile Telephone Switching Office. The central computer that
connects a wireless phone call to the public switching telephone network (PSTN).
The MTSO controls the entire system's operations, including monitoring calls,
billing and handoffs.

     "Narrowband PCS " -- Identifier given by the FCC for PCS spectrum in the
900 MHz frequency range. 50/50 KHz (paired), 50/12.5 KHz (paired) and 50 KHz
(unpaired) were recently auctioned by the FCC and purchased by companies such as
PageNet, Inc., Mtel, and AT&T Corporation. Narrowband PCS is expected to provide
advanced data and voice communications for devices traditionally known as radio
pagers, including acknowledgment and two-way paging capability.

     "network equipment " -- The fixed infrastructure consisting of base
stations, base station controllers, mobile switching centers and related
information processing control points that manages communications between the
mobile unit and the public switched telephone network.

     "PCS " -- Personal Communications Services. FCC terminology describing
intelligent, digital wireless, personal two-way communications systems at the
1900 MHz band.

     "PCS 1900 " -- 1900 MHz GSM-based digital cellular radio technology.

     "Public Switched Telephony Network " -- The wireline telephone network.

     "REFLEX(TM) " -- Two way narrowband PCS protocol developed by Motorola.

     "RF " -- Radio frequency. Frequencies of the electromagnetic spectrum that
are associated with radio wave propagation.

     "SMR " -- Specialized Mobile Radio, referring to systems that serve
non-public special mobile communication markets (for example, taxi cabs). Recent
FCC rulings have permitted these operators to offer cellular-like services to
the public.

     "switch " -- A central facility capable of routing calls from one point to
another. Usually a point of connection to the PSTN.

     "TDMA " -- Time Division Multiple Access. A digital wireless transmission
technology that converts analog voice signals into digital data and puts more
than one voice channel on a single RF channel by separating the users in time.

     "UNIX " -- A multiuser, multitasking operating system.

     "uplink " -- The radio path from a handset or mobile user to the cell site.

     "wireless " -- A radio-based system allowing transmission of telephone
and/or data signals through the air without a physical connection, such as a
metal wire or fiber optic cable.

     "wireless local loop " -- A system that eliminates the need for a wire loop
connecting users to the public switched telephone network, which is used in
conventional wired telephone systems, by transmitting voice messages over radio
waves for the "last mile" connection between the location of the customer's
telephone and a base station connected to the network equipment.

                                      F-38
<PAGE>   75

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized as of the      th day
of March, 1998.

                                          LLC INTERNATIONAL, INC.

                                          By:       /s/ RICHARD HOZIK
                                            ------------------------------------
                                                       Richard Hozik
                                              Senior Vice President, Treasurer
                                                and Chief Financial Officer

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

<TABLE>
<CAPTION>
                    SIGNATURES                                   TITLE                    DATE
                    ----------                                   -----                    ----
<C>                                                   <S>                            <C>

              /s/ GEOFFREY S. CARROLL                 President and Chief            March 30, 1998
---------------------------------------------------     Executive Officer
                Geoffrey S. Carroll                     (Principal Executive
                                                        Officer) and Director

                 /s/ RICHARD HOZIK                    Senior Vice President,         March 30, 1998
---------------------------------------------------     Treasurer and Chief
                   Richard Hozik                        Financial Officer
                                                        (Principal Financial
                                                        Officer)

                /s/ RAJENDRA SINGH                    Chairperson of the Board of    March 30, 1998
---------------------------------------------------     Directors
                  Rajendra Singh

                  /s/ NEERA SINGH                     Director                       March 30, 1998
---------------------------------------------------
                    Neera Singh

                  /s/ MARK D. EIN                     Director                       March 30, 1998
---------------------------------------------------
                    Mark D. Ein

                /s/ ARNO A. PENZIAS                   Director                       March 30, 1998
---------------------------------------------------
                  Arno A. Penzias
</TABLE>

                                      F-39
<PAGE>   76

                                                                     SCHEDULE II

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           COLUMN C
                                                              -----------------------------------
               COLUMN A                      COLUMN B                      ADDITIONS                  COLUMN D        COLUMN E
--------------------------------------  -------------------   -----------------------------------   -------------   -------------
                                            BALANCE AT            CHARGED TO         CHARGES TO                      BALANCE AT
             DESCRIPTION                BEGINNING OF PERIOD   COSTS AND EXPENSES   OTHER ACCOUNTS   DEDUCTIONS(1)   END OF PERIOD
--------------------------------------  -------------------   ------------------   --------------   -------------   -------------
<S>                                     <C>                   <C>                  <C>              <C>             <C>
Year ended December 31, 1995
  Allowance for doubtful accounts.....        $ 2,796              $   622              $--            $  287          $ 3,131
Year ended December 31, 1996
  Allowance for doubtful accounts.....          3,131               15,942               --             1,131           17,942
Year ended December 31, 1997
  Allowance for doubtful accounts.....         17,942                4,115               --             6,631           15,426
</TABLE>

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

(1) Deduction for write-off of receivables to allowance account.

                                      F-40
<PAGE>   77

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                               EXHIBIT DESCRIPTION
-----------                            -------------------
<C>           <C>  <S>
    3.1        --  Restated Certificate of Incorporation of the Company.*
    3.2        --  Amended and Restated Bylaws of the Company.*
    4.1        --  Form of Class A and Class B Common Stock certificates.*
    4.2        --  LCC International, Inc. 1996 Directors Stock Option Plan.*
    4.3        --  LCC International, Inc. 1996 Employee Stock Option Plan.*
    4.4        --  LCC International, Inc. 1996 Employee Stock Purchase Plan.*
    4.5        --  Amendment No. 1 to LCC International, Inc. Employee Stock
                   Purchase Plan.**
   10.1        --  [Intentionally omitted]
   10.2        --  [Intentionally omitted]
   10.3        --  [Intentionally omitted]
   10.4        --  [Intentionally omitted]
   10.5        --  1994 LCC, L.L.C. Incentive Compensation Plan.*
   10.6        --  [Intentionally Omitted]
   10.7        --  [Intentionally Omitted]
   10.8        --  Subordinated Note due 2000 by Telcom Ventures, L.L.C.
                   payable to MCI Telecommunications Corporation dated June 28,
                   1994.*
   10.9        --  Subordinated Note due 2000 by LCC, L.L.C. payable to MCI
                   Telecommunications Corporation dated June 28, 1994.*
  +10.10       --  Agreement dated November 15, 1994 by and between LCC, L.L.C.
                   and Pacific Bell Mobile Services.*
 ++10.11       --  Amended and Restated Services Agreement, dated as of October
                   1, 1996, by and between TSI, a division of LCC
                   International, Inc., and Nextel Communications, Inc.****
 ++10.12       --  Amended and Restated Software License Agreement, dated as of
                   October 1, 1996 by and between LCC, a division of LCC
                   International, Inc., and Nextel Communications, Inc.****
   10.13       --  Amended and Restated Shareholders' Rights Agreement dated
                   February , 1996 between NextWave Telecom Inc. and LCC,
                   L.L.C.*
   10.14       --  Letter Agreement dated March , 1996 between NextWave
                   Telecom, Inc. and LCC, L.L.C.*
  +10.15       --  Letter Agreement dated March 12, 1996 between NextWave
                   Telecom, Inc. and LCC, L.L.C.*
   10.16       --  Subscription Agreement dated March , 1996 between NextWave
                   Telecom, Inc. and LCC, L.L.C.*
   10.17       --  [Intentionally omitted]
   10.18       --  Convertible Loan and Investment Agreement dated March 20,
                   1996 by and between LCC, L.L.C. and DCR Communications,
                   Inc.*
  +10.19       --  Letter Agreement dated March 20, 1996 by and between LCC,
                   L.L.C. and DCR Communications, Inc.*
   10.20       --  Agreement dated May 17, 1996, between LCC, L.L.C. and
                   West*Park Associates Limited Partnership for office space at
                   7925 Jones Branch Drive, McLean, Virginia, 22102.*
   10.21       --  Agreement dated May 17, 1996, between LCC, L.L.C. and
                   West*Park Associates Limited Partnership for office space at
                   7927 Jones Branch Drive, McLean, Virginia, 22102.*
   10.22       --  Letter Agreement dated May 31, 1996 between LCC
                   International, Inc. and Arno Penzias.*
   10.23       --  [Intentionally omitted]
   10.24       --  Security Agreement dated June 14, 1996 among LCC, L.L.C.,
                   LCC Design Services, L.L.C. and LCC Development Company,
                   L.L.C., in favor of The Chase Manhattan Bank (National
                   Association).*
</TABLE>

                                      F-41
<PAGE>   78

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                               EXHIBIT DESCRIPTION
-----------                            -------------------
<C>           <C>  <S>
   10.25       --  Intellectual Property Security Agreement dated June 14, 1996
                   by LCC, L.L.C. in favor of The Chase Manhattan Bank
                   (National Association).*
   10.26       --  Pledge Agreement dated June 14, 1996 among LCC, L.L.C., LCC
                   Design Services, L.L.C. and LCC Development Company, L.L.C.,
                   in favor of The Chase Manhattan Bank (National
                   Association).*
   10.27       --  Intercompany Agreement dated as of August 27, 1996 among
                   Telcom Ventures, L.L.C., LCC, L.L.C., LCC International,
                   Inc., Cherrywood Holdings, Inc., Rajendra Singh, Neera
                   Singh, certain trusts for the benefit of members of the
                   Singh family, Carlyle-LCC Investors I, L.P., Carlyle-LCC
                   Investors II, L.P., Carlyle-LCC Investors III, L.P.,
                   Carlyle-LCC IV (E), L.P., MDLCC, L.L.C. and TC Group,
                   L.L.C.*
   10.28       --  Registration Rights Agreement dated July 25, 1996 among LCC
                   International, Inc., RF Investors, L.L.C. and MCI
                   Telecommunications Corporation.*
   10.29       --  Form of Indemnity Agreement between LCC International, Inc.
                   and each of Rajendra Singh, Neera Singh, Piyush Sodha, Mark
                   D. Ein, Arno A. Penzias, J. Michael Bonin, Kathryn M.
                   Condello, Peter A. Deliso, Richard Hozik, Frank F.
                   Navarrete, Donald R. Rose, Gerard L. Vincent and Louis R.
                   Olsen.*
   10.30       --  Overhead and Administrative Services Agreement dated August
                   27, 1996 between LCC International, Inc. and Telcom
                   Ventures, L.L.C.*
   10.31       --  Agreement of Merger dated September 15, 1996 between LCC,
                   L.L.C. and LCC International, Inc.*
   10.32       --  Form of LCC International, Inc. Directors Stock Option Plan
                   stock option agreement for directors who will receive Class
                   B Common Stock.*
   10.33       --  Amended and Restated Securityholders Agreement dated July
                   25, 1996 among Telcom Ventures, L.L.C., LCC, Incorporated,
                   TC Group, L.L.C., LCC, L.L.C. and MCI Telecommunications
                   Corporation.*
   10.34       --  Amendment to Subordinated Note due 2000 by Telcom Ventures,
                   L.L.C. payable to MCI Telecommunications Corporation dated
                   July 25, 1996.*
   10.35       --  Amendment to Subordinated Note due 2000 by LCC, L.L.C.
                   payable to MCI Telecommunications Corporation dated July 25,
                   1996.*
   10.36       --  Form of Promissory Note by Telcom Ventures, L.L.C. to LCC
                   International, Inc.*
   10.37       --  Form of Stock Option Agreement between LCC International,
                   Inc. and the Carlyle Option Designees.*
   10.38       --  Form of LCC International, Inc. 1996 Employee Stock Option
                   Plan incentive stock option agreement.*
   10.39       --  Form of LCC International, Inc. 1996 Employee Stock Option
                   Plan non-incentive stock option agreement.*
   10.40       --  Form of LCC International, Inc. 1996 Employee Stock Option
                   Plan non-incentive stock option agreement (for employees who
                   had been eligible to participate in the LCC, L.L.C. 1994
                   Phantom Membership Plan or the LCC, L.L.C. 1996 Employee
                   Option Plan).*
   10.41       --  Form of LCC International, Inc. Directors Stock Option Plan
                   stock option agreement for directors who will receive Class
                   A Common Stock (other than Mark D. Ein).*
   10.42       --  Form of LCC International, Inc. Directors Stock Option Plan
                   stock option agreement for Mark D. Ein.*
   10.43       --  Form of Phantom Membership Plan Exchange Agreement.*
   10.44       --  Revolving Credit Note dated June 14, 1996 by LCC, L.L.C. to
                   The Chase Manhattan Bank (National Association) in the
                   amount of $12,500,000.*
   10.45       --  Term Note dated June 14, 1996 by LCC, L.L.C. to The Chase
                   Manhattan Bank (National Association) in the amount of
                   $7,500,000.*
   10.46       --  Letter Agreement dated August 22, 1996 between LCC
                   International, Inc. and Arno Penzias.*
   10.47       --  [Intentionally omitted]
   10.48       --  Form of Notice of Assignment of Subordinated Note Due 2000
                   from Telcom Ventures, L.L.C. and LCC International, Inc. to
                   MCI Telecommunications Corporation.*
</TABLE>

                                      F-42
<PAGE>   79

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                               EXHIBIT DESCRIPTION
-----------                            -------------------
<C>           <C>  <S>
   10.49       --  Form of Second Amendment to Subordinated Note Due 2000 by
                   Telcom Ventures, L.L.C. and LCC International, Inc. payable
                   to MCI Telecommunications Corporation.*
   10.50       --  Form of Third Amendment to Subordinated Note Due 2000 by
                   Telcom Ventures, L.L.C. and LCC International, Inc. payable
                   to MCI Telecommunications Corporation.*
   10.51       --  Amendment to Amended and Restated Securityholders Agreement
                   dated September 19, 1996 among Telcom Ventures, L.L.C., LCC,
                   Incorporated, TC Group, L.L.C., LCC, L.L.C. and MCI
                   Telecommunications Corporation.*
   10.52       --  Series D Convertible Debenture Due March 27, 2001 by DCR
                   Communications, Inc. dated March 27, 1996.*
   10.53       --  Series D Convertible Debenture Due May 10, 2001 by DCR
                   Communications, Inc. dated May 10, 1996.*
   10.54       --  Form of Amended and Restated Credit Agreement dated as
                   September   , 1996 among LCC International, Inc., LCC Design
                   Services, L.L.C., LCC Development Company, L.L.C., The
                   Lenders Signatory hereto and The Chase Manhattan Bank as
                   Administrative Agent.*
   10.55       --  Form of $20 Million Revolving Credit Note of LCC,
                   International, Inc. to The Chase Manhattan Bank dated
                   September   , 1996.*
   10.56       --  Form of Subordination and Intercreditor Agreement dated as
                   of September   , 1996 by and among The Chase Manhattan Bank,
                   as administrative agent, MCI Telecommunications Corporation
                   and LCC International, Inc.*
   10.57       --  Asset Purchase Agreement, dated as of December 30, 1996,
                   between European Technology Partner AS and LCC International
                   AS.***
   10.58       --  First Amendment Agreement, dated as of December 30, 1996,
                   among LCC International, Inc., LCC Design Services, L.L.C.,
                   LCC Development Company L.L.C., The Lenders Signatory
                   Thereto and The Chase Manhattan Bank as Administrative
                   Agent.****
   10.59       --  Second Amendment to Subordinated Note Due 2000 and Amendment
                   to Registration Rights Agreement, dated October 23, 1997, by
                   and between the Company and MCI as to the Note amendment,
                   and among the Company, MCI and RF Investors as the
                   Registration Rights Agreement amendment.*****
   10.60       --  Fourth Amendment to Subordinated Note Due 2000 and Amendment
                   to Registration Rights Agreement, dated October 23, 1997, by
                   and between the Company and MCI as to the Note amendment,
                   and among the Company, MCI and RF Investors as the
                   Registration Rights Agreement amendment.*****
   10.61       --  Employment Agreement dated as of January 15, 1998 by and
                   between the Company and Geoffrey Carroll.******
   10.62       --  Form of LCC International, Inc. 1996 Employee Stock Option
                   Plan Non-Incentive Stock Option Agreement for Geoffrey
                   Carroll.******
   10.63       --  Second Amended and Restated Credit Agreement dated as of
                   December 15, 1997 among LCC International, Inc., LCC Europe
                   AS, LCC Design Services, L.L.C., LCC Development Company,
                   L.L.C., Microcell Management, Inc., The Lenders Signatory
                   Thereto and The Chase Manhattan Bank as Administrative
                   Agent.
   11          --  Calculation of Pro Forma Net Income (Loss) Per Share.
   21          --  Subsidiaries of the Company.
   23.1        --  Consent of KPMG Peat Marwick LLP.
   27          --  Financial Data Schedule.
</TABLE>

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

      * Incorporated by reference to the Exhibits on the Company's Registration
        Statement on Form S-1 (Registration No. 333-6067)

     ** Incorporated by reference to the Exhibits to the Company's Registration
        Statement on Form S-8 (File No. 333-17803) which was filed with the
        Securities and Exchange Commission on December 13, 1996.

                                      F-43
<PAGE>   80

   *** Incorporated by reference to the Exhibits to the Company's Current Report
       on Form 8-K which was filed with the Securities and Exchange Commission
       on January 14, 1997.

  **** Incorporated by reference to the Exhibits to the Company's Annual Report
       on Form 10-K which was filed with the Securities and Exchange Commission
       on April 15, 1997.

 ***** Incorporated by reference to the Exhibits to the Company's Current Report
       on Form 8-K which was filed with the Securities and Exchange Commission
       on October 27, 1997.

****** Incorporated by reference to the Exhibits to the Company's Current Report
       on Form 8-K which was filed with the Securities and Exchange Commission
       on January 21, 1998.

      + Confidential treatment has been granted for certain portions of this
        document. The copy filed as an exhibit omits the information subject to
        the confidential treatment request.

      ++ Confidential treatment has been granted for certain portions of this
         document. The copy filed as an exhibit omits the information subject to
         the confidential treatment request.

                                      F-44