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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                        COMMISSION FILE NUMBER: 0-21213
 
                            LCC INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
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<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)
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       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  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
23, 1999, the aggregate market value of the common stock held by non-affiliates
of the registrant is $26,756,787.*
 
     As of March 23, 1999, the registrant had outstanding 7,181,532 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 25, 1999 (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 to the wireless telecommunications
industry. The Company has provided these services to operators of more than 200
wireless systems in more than 50 countries. In January 1997, the Company,
through its subsidiary, Microcell Management, Inc. ("Microcell"), began
constructing, owning and managing telecommunications towers. The Company
recently announced a new strategy to focus on its core telecommunications
services business and leverage this core business to expand its position in the
telecommunications tower ownership and management business. This will enable the
Company to offer wireless network operators a more expansive integrated solution
for accomplishing many of the significant tasks involved in system design,
buildout and operation. As part of this strategy, the Company has adopted a plan
to divest itself of its software tools and field measurement and analysis
equipment businesses (the "Products Businesses"). The Company believes that the
foregoing actions will increase its long-term value to the Company's
shareholders.
 
     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, Bell South
Cellular Corporation, Lucent Technologies and Pacific Bell Mobile Services;
operators of iDEN 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 Communications) during one or more of fiscal years 1991
through 1998. 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 46.0% in 1998).
 
     A substantial number of new wireless network licenses have been awarded
worldwide over the last several 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. 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 and program management services and provide new opportunities for
tower construction, acquisition and management.
 
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     The Company's approximately 400 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 Company
provides services 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.
 
     The Company believes that its involvement in the early stages of wireless
system development, coupled with its site development experience and its
relationships with telecommunications vendors, uniquely positions it to identify
and obtain opportunities in the tower ownership and management business. The
Company seeks to capitalize on these advantages, along with the trend toward
collocation and independent tower ownership in the telecommunications industry,
to expand this business through Microcell as well as other avenues. As of
December 31, 1998, Microcell owned 65 completed telecommunications towers (each
with at least one contractually committed tenant) and was in the process of
acquiring sites for, or undertaking construction of, another 132
telecommunications towers (127 of which had a contractually committed tenant).
The Company's tower customers represent a broad base of wireless communications
providers that include AT&T Wireless, PrimeCo., Centennial Communications,
Carolina PCS, Sprint Spectrum and Nextel Communications.
 
COMPANY 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. This 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. The Company made
a loan of $3.5 million to Telcom Ventures to assist Telcom Ventures in paying
certain
 
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taxes due in connection with the MCI Note Assumption. Interest accrues on this
note at the rate of LIBOR plus 1.75% and, together with 20.0% of the original
principal amount, 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, approximately $11.85 million to fund a portion of
the ETP Acquisition (defined below) purchase price, and the remainder for
working capital and general corporate purposes.
 
     In December 1996, through its newly formed subsidiary, Microcell, the
Company acquired the business of Microcell Management, L.L.C., which, through
the participation of the Company and others, consisted of the acquisition,
development, lease and management of telecommunications towers. As consideration
therefor, Microcell paid $290,000, $200,000 of which was used by Microcell,
L.L.C. to pay an outstanding loan from the Company. The Company issued 16.25% of
the stock of Microcell to then current members of management and two financial
investors, and has advanced Microcell approximately $22 million under an
intercompany credit facility.
 
     In July 1998 the Company acquired 66.7% of the outstanding membership
interests in Koll Telecommunications Services, L.L.C. ("Koll"), bringing its
total ownership in Koll to 100%. Koll provides site acquisition and construction
management services to operators of wireless communications systems in the
United States. In the transaction, Koll redeemed the membership interests of one
member in exchange for that member's assumption of certain contract rights and
associated assets and liabilities. It also redeemed the membership interests of
another member in exchange for an earn-out agreement entitling that member to
40.0% of the pre-tax income, after certain adjustments, derived by Koll from its
existing contracts.
 
RECENT DEVELOPMENTS
 
     On March 26, 1999, the Board of Directors of the Company approved a plan of
divestiture of the Products Businesses, including the operations of its
subsidiary, LCC Europe AS, which acquired the hardware and software products
business of European Technology Partners AS in December 1996 ("ETP
Acquisition"). This decision was the result of an analysis of the Company's
businesses conducted by management and certain members of the Company's Board of
Directors during the past several months. The Company believes that the
long-term financial interests of the Company's shareholders would be best served
by pursuing a strategy which focuses on the Company's core telecommunications
services business along with the telecommunications tower ownership and
management business to provide wireless operators with a more expansive
complement of the services required for the development and operation of their
systems. The Company has engaged an investment banking firm to assist it in the
disposition of the Products Businesses. Pending such disposition, the Company
intends to operate its field measurement and analysis products business
consistent with past practice, subject to implementation of various cost savings
measures, and intends to reduce significantly the operations of its software
tools business if such business is not sold in the near future.
 
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 iDEN
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. These technologies all
require radio frequency engineering for system design, build-out and
optimization, and use telecommunications towers to carry their signals.
 
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  Types of Wireless Communications
 
     The wireless communications industry encompasses a broad range of
technologies and applications from cellular phones to mobile radio and paging
systems. Each technology requires antennae mounted on either roof tops or on
towers to enable the system to send and receive radio signals. These radio
signals operate within portions of the spectrum designated by the FCC
specifically for each technology. The rapid development of cellular wireless
technology used for telephone service has practically depleted the availability
of this portion of the spectrum throughout the United States. Originally two
carriers were licensed to operate a network in each metropolitan statistical
area. In order to promote competition in the provision of services to consumers,
in recent years the FCC has opened up previously unavailable portions of the
spectrum for commercial use. This has led to the development of new technologies
using these additional portions of the spectrum, which can service
geographically the same area as services using other portions of the spectrum;
with the advent of PCS, there is now the potential for three to five additional
competitors in each metropolitan statistical area. New technologies overlapping
geographically are expected to increase the demand for use of telecommunications
tower space. The key technologies in the communications industry today are as
follows:
 
     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. As the cellular market migrates from an analog based
transmission technology to a digital ("analog" and "digital" refer to different
methodologies by which "packets" of information are transmitted) based
transmission technology, demand is expected to increase as prices decline. To
increase network capacity and improve service quality and to reduce prices,
cellular carriers must re-engineer their networks, increase the number of cells
and therefore the number of antennae. The antennae are mounted principally on
rooftops in urban areas and on towers in suburban and rural areas along
interstate highways. The increased demand for tower space, coupled with
environmental, zoning, safety and aesthetic restrictions on new tower
construction in suburban areas, is making the rental of tower space an
increasingly attractive option to wireless carriers.
 
     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. The
principal difference between PCS and traditional cellular service is that PCS
systems operate at a higher frequency range and have a more limited transmission
range requiring more cell sites than cellular to obtain equivalent geographic
coverage. Licenses to operate PCS networks were awarded in the United States
through auctions conducted during 1995, 1996 and 1997. Several PCS licenses have
been awarded outside of the United States. Due to the reduced coverage of a PCS
signal, it is expected that PCS operators will require a large number of new
towers to deploy PCS networks.
 
     iDEN.  iDEN is a mobile communication service that relies on specialized
mobile radio ("SMR") 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, iDEN operators have
begun to design and deploy digital mobile networks that increase the frequency
capacity of iDEN systems to a level that is 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
iDEN two-way radio channels in their respective operating areas and are offering
wireless voice services over their networks. A derivative SMR technology known
as "TETRA" or "Terrestrial Trucking Radio" is becoming an increasingly popular
technology in Europe.
 
     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. The infrastructure equipment utilized by
 
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a paging company is not as elaborate as the infrastructure equipment which must
be installed to transmit a cellular or PCS signal. A tower, therefore, can
usually accommodate more paging antennae than cellular or PCS antennae.
 
     LMDS and Other Services.  Local Multipoint Distribution System ("LMDS") is
a fixed broadband point-to-multipoint system which provides an alternative for
offering local exchange service, wireless telephony, data, internet access,
video and other broadband services. LMDS services, wireless cable, wireless
local loop (a system that eliminates need for a wire loop connecting users to
the public switched telephone network), digital audio radio satellite systems
and 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. In the United States, Teligent, Winstar and ARTS are operating the first
stages of their LMDS networks, and plan to construct nationwide networks in the
near future.
 
  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.
 
     There is currently underway an initiative by the International
Telecommunications Union ("ITU") and regional standards bodies to define a
single next generation technology standard for the Americas, Europe, Japan,
Korea and China, to be known as "3G." This next generation of service will
enable carriers to deploy key capabilities that current so-called "2G" wireless
technologies such as TDMA, CDMA and GSM are unable to support, provide open
standards and architecture and lower cost, higher capacity and improved
performance. Anticipated 3G capabilities include wireline quality voice service,
collaborative working between multimedia and high speed data, user customization
allowing the subscriber better control over features such as voicemail routing,
announcements and call screening, mobility-enabled services such as vehicular
navigation and emergency services, wireless local loop capabilities, seamless
global roaming, zone identification and billing and satellite interworking. The
ITU has received numerous proposals from several countries and standards groups
recommending specifications for the new standard and has formed an operators'
standards forum for the purpose of forging a consensus with respect to the new
standard among operators, vendors and standards groups. It is anticipated that
the adoption of 3G will create additional licensing activity globally to
allocate spectrum for implementation of these new technologies and services.
 
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  Operation of Two-Way Wireless Systems
 
     Two-way mobile 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, located on a telecommunications
tower. 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. 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. Since each
cell site requires a telecommunications tower and engineering and site
acquisition services, growth in the number of cell sites is one of the key
drivers of demand for the Company's telecommunications services and
telecommunications towers.
 
     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 designed 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 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.
 
  Wireless System Life Cycle
 
     Set forth below is a description of the life cycle of a typical wireless
system.
 
     Phase 1.  In Phase 1, the operator is pursuing 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.
 
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     Phase 2.  Phase 2 involves 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.
As part of this process desirable cell site locations are identified and a site
acquisition team will identify potential telecommunications towers or parcels
for construction of a telecommunications tower within the desired geographic
area, obtain rights, including required regulatory permits, for the operator to
utilize existing towers or construct new towers and, in the case of tower
construction, oversee the construction process. 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 engineering
services and often rely on outside parties to oversee the site acquisition and
construction process. 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 over a period of 12 to 24 months. The Company believes that globally
the number of RF engineers available on an outsourcing basis is limited.
 
     Phase 3.  As the number of subscribers handled by the wireless system
increases, the system enters Phase 3, the expansion of 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 and the external site acquisition team, such as the Company, to design
and implement the expansion and make optimization adjustments to the existing
system.
 
     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 iDEN system by Nextel Communications,
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 for the Wireless Industry
 
     The planning, geographic layout, build out and operation of a wireless
network requires significant RF engineering work. The RF engineers 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. Based on these initial technical
guidelines, desired cell site locations are identified. This process is known as
identifying "search rings."
 
     The RF engineering work performed in connection with both initial system
design and buildout and subsequent system redesign and expansion must be
coordinated with cell site acquisition activities. A site acquisition team
identifies those potential sites within a given search ring (i) which most
closely match the RF engineering specifications; (ii) can be leased; (iii) are
suitable for construction; and (iv) are amenable to obtaining zoning and other
required permits. The most desirable sites fitting these criteria are further
analyzed by the RF engineers in the context of demographics, traffic patterns
and signal characteristics. If necessary, the RF engineers may re-design their
initial search rings to identify other suitable target locations.
 
     After a suitable site has been identified, the site acquisition team
obtains either (i) a long-term lease for a rooftop or tower site, or (ii) in the
case of a tower site, an option to purchase the property. In the case of a tower
site, the site acquisition team will also obtain a title report on the site,
conduct a survey of the site, obtain an environmental survey of the site and
conduct a soil analysis of the site.
 
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     The site acquisition team will also prepare all necessary zoning
applications, attend any necessary zoning hearings and obtain necessary land use
permits to begin construction or install equipment. Once the necessary site
acquisition steps have been completed, materials to construct a multi-tenant
tower are ordered from a tower fabricator. During this phase of development,
construction budgets and schedules are prepared, sub-contractors are hired where
necessary and construction begins. Construction involves, in the case of a tower
site, clearing the site, laying foundations, bringing in utility lines
(including interconnection with a local telephone provider) and constructing the
multi-tenant tower, and, in some cases, shelters or buildings to house
electronic equipment and, in the case of a rooftop site, assembling the
necessary equipment.
 
  Use of Telecommunications Towers
 
     Telecommunications towers are one of the primary infrastructure components
for wireless communications services such as cellular, PCS, SMR, iDEN, microwave
and paging. Wireless communications networks include transmission equipment such
as antennae, transmitters and receivers placed at various locations throughout
the covered area. These locations, or communications sites, utilize towers,
rooftops and other structures upon which such equipment is placed. Antennae are
typically placed on rooftops and other high structures in urban areas and on
towers in suburban and rural areas and along major interstate highways.
 
     There are three types of towers, "lattice" and "monopole," which are both
self-supporting, and "guyed," which is supported by a series of cables attached
to the tower and anchored in the ground at points around the tower. A lattice
tower is usually tapered from the bottom up and can have three or four sides of
open-framed steel supports. A monopole is a free-standing tubular structure.
Lattice towers can reach up to 1000 feet, monopoles typically range in height
from 50-200 feet and guyed towers can reach 2000 feet or more. Guyed towers
require significantly more land and encounter more resistance in obtaining
zoning approvals. The height of the tower is an important factor in determining
the number of tenants that may use the tower. A typical tower of 200 feet can
accommodate three to four cellular, iDEN or PCS operators and four to six LMDS
or paging operators. A tower five or ten times as high can accommodate a
proportionately greater number of tenants. The type of multi-tenant tower being
constructed may determine whether a zoning application will be readily approved.
Due to their tubular low profile design, monopole towers are generally preferred
by local zoning boards in comparison to guyed and lattice towers. Guyed towers
encounter the most resistance because of their height and site size
requirements.
 
     Regardless of type or size, towers are fixed structures that require only
minimal maintenance to prevent rust and corrosion and to maintain warning
lighting for aircraft. Tower operators generally have little customer turnover
since tenants generally do not relocate their antennae given the significant
costs associated with re-engineering and relocation and the operation and
maintenance of towers requires minimal on-site inspections. Furthermore, towers
are not subject to significant obsolescence risks because all types of wireless
communication require antennae that must be attached to towers, rooftops or
other high structures.
 
     Wireless carriers generally own the towers used in their networks and
historically have not made space available to other carriers, except where
required by local conditions. However, wireless carriers have begun to outsource
the ownership and management of the communication towers contained in their
networks in an effort to conserve their capital and focus their operations
primarily on activities that build subscriber growth. Accordingly, industry
analysts believe that wireless carriers will seek to sell the approximately
30,000 towers located in the United States they currently own to independent
tower companies. Several contracts for large tower sales were announced in 1998
and early 1999. Furthermore, in order to speed new network deployment or
expansion and to generate efficiencies, carriers are increasingly collocating
transmission equipment with that of other network operators. The need for
collocation has also been driven by regulatory restrictions and the growing
trend by municipalities to slow the proliferation of towers by requiring that
towers accommodate multiple tenants.
 
     During the mid-to-late 1980's, a number of independent owners of towers
began to emerge. These independent tower operators focused on owning and
managing towers with multiple tenants by adding lessees to existing and
reconstructed towers. These operators were mostly small business owners with a
small number of local towers. In the last few years, several larger independent
tower operators have emerged as demand for
 
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wireless services has continued to grow and as additional high frequency
licenses have been awarded for wireless services (including PCS, narrowband
paging and wireless local loop), each requiring networks with extensive tower
infrastructure. These independent tower operators have sought to acquire smaller
operators as well as suitable clusters of towers formerly owned by carriers and
broadcasters in order to establish regional and national "tower footprints."
 
     The Company believes that, in addition to the favorable growth and
outsourcing trends in the wireless communications industry, independent tower
owners benefit from a number of favorable characteristics: (i) the ability to
efficiently increase the pace of the deployment of new networks, (ii) the
ability to avoid costly zoning and licensing disputes entailed by citizen
opposition and to obtain approval from local zoning/planning authorities, who
favor single towers with multiple tenants for safety, environmental and
aesthetic reasons; (iii) the ability to lease sites to multiple wireless
operators at costs otherwise not obtainable for a single tenant; (iv) the
ability to have a predictable and stable recurring revenue stream; and (v) the
ability to add additional tenants to existing towers and increase operating
revenues without increasing operating costs.
 
TELECOMMUNICATIONS SERVICES AND TOWER OWNERSHIP AND 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. In order to distinguish itself
from a competitive standpoint, as a complement to the foregoing activities, the
Company expanded its service offerings in 1994 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. The Company further expanded the range of its
offerings to wireless network operations in January 1997 to include
telecommunication tower ownership and management offered by Microcell. This
affords wireless network operations the opportunity to finance and outsource the
ownership and maintenance of the transmission towers utilized in their networks.
 
     The Company recently announced a new strategy to focus on its core
telecommunications services business and leverage this core business to expand
its position in the tower ownership and management business, thereby enabling it
to offer wireless network operators a more expansive integrated solution for
accomplishing many of the significant tasks involved in system design, buildout
and operation. As part of this strategy the Company has decided to divest itself
of the Products Businesses.
 
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<PAGE>   11
 
  Telecommunications Services
 
     RF Engineering and Program Management Services.  Through its Telecom
Services Group the Company provides a variety of RF engineering and program
management 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.
     The Company has assisted in preparing winning applications in several
     (approximately nine) license tender processes worldwide, including the
     second nationwide cellular license in Germany, the first cellular license
     in Bombay, India and, most recently, a license in Belgium. 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.  The Company offers a full range of deployment
     services including analysis of customer expectations for network coverage,
     capacity and other requirements, analysis of interference and other
     technical factors affecting coverage, capacity and performance,
     identification and rank of desirable cell sites, preparation of regulatory
     filings (FCC, FAA, zoning, land use and others) required for system
     deployment and attendance at regulatory hearings, assistance with systems
     deployment, including identification and site acquisition and construction
     management services, measurement of network performance and optimization of
     systems.
 
          Phase 3 Services.  The Company's services are used by existing system
     operators to plan system expansions to accommodate subscriber growth,
     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.
 
          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 system analysis and network management, including redistribution or
     elimination of cell sites, cost management, measurement of network
     performance, including "benchmarking" performance against that of
     competitors, and technology and network upgrades.
 
     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. Finally, the Company believes that its
involvement in various Phase 1 activities affords it superior opportunities to
identify the likely participants, including potential operators and equipment
vendors, in a network and to market its telecommunications services and tower
ownership and management business to those entities.
 
     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
 
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<PAGE>   12
 
revenues also include reimbursement for expenses, including the living expenses
of engineers on customer sites.
 
     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. 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 telecommunications services represented approximately 99.0%
of revenues for 1998.
 
  Telecommunications Tower Ownership and Management
 
     Tower Ownership.  Since January 1997, the Company has been offering
wireless network operators the following arrangements with respect to the
transmission towers utilized in their networks: (i) build a multi-tenant tower
to suit the initial committed network operator's specifications or requirements
(including site location), lease space to that operator on a long term basis and
seek to lease space to other operators, (ii) purchase existing towers from
network operators, lease back space to the existing users and seek to lease
space to new operators or (iii) lease space on an existing tower owned by it or
to be built to its own specifications.
 
     Build to Suit.  To date, the Company has constructed most of its towers on
a build-to-suit basis. The Company constructs towers after signing an antennae
site lease agreement with an anchor tenant and determining that the Company's
capital investment will deliver adequate returns based on a number of factors,
including collocation opportunities, zoning and permitting issues, cost of
construction and land lease costs. Operators of new wireless networks, or
networks that are being expanded, have been willing to enter into long term
leases for towers constructed to meet their requirements.
 
     Tower Acquisitions.  The Company plans to pursue acquisitions of existing
domestic and international telecommunications towers. The Company evaluates
acquisitions based on the location of the tower, the ability to add tenants, the
purchase price, competitive conditions and the expected rate of return. The
Company believes that the domestic multi-tenant tower acquisition market is
highly competitive in comparison to most foreign markets and that the purchase
price for towers outside the U.S. will be more favorable. As a result, the
Company believes some of its acquisitions will be of international towers. The
Company believes that its on-site presence in providing telecommunications
services to its global customer base will enable it to identify or create tower
acquisition and build to suit opportunities.
 
     Constructing without Anchor Leases.  On occasion, the Company has built new
multi-tenant towers prior to obtaining written lease commitments in areas where
it believes wireless network expansion is likely to occur in the near future.
 
     Existing Tower Portfolio.  At December 31, 1998, the Company, through
Microcell, owned 65 completed telecommunications towers (each with at least one
contractually committed tenant), and was in the process of acquiring sites for,
or undertaking construction of, another 132 telecommunications towers (127 of
which had a contractually committed tenant). These towers are located primarily
in North Carolina, South Carolina, Virginia, Indiana and Michigan.
 
     Tower Construction.  The Company, directly or through subcontractors,
construct multi-tenant towers for the purpose of owning and operating such
multi-tenant towers for the production of rental income. Construction of
multi-tenant towers includes: (i) RF engineering and design; (ii) site
identification; (iii) site acquisition; (iv) zoning and permitting; and (v) site
construction.
 
     Tower Leasing.
 
     Tenants.  The Company leases available antennae space on its towers. The
number of tenants on a multi-tenant tower depends on the size of the tower, the
terrain and the wireless technologies employed by the users. A typical 200 foot
tower can accommodate three cellular/PCS/iDEN tenants and four to six paging,
private radio and LMDS tenants. The number of tenants that can be accommodated
increases proportionately
 
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<PAGE>   13
 
with the height and the engineered wind loading characteristics of the tower.
The Company can lease antennae space to any wireless carrier, with any frequency
spectrum allocation, using any type of technology. As a result, the Company
believes that a tower business is well positioned to benefit from the growth in
wireless communications regardless of which particular technologies or
applications are successful.
 
     Leases.  The Company generally receives monthly lease payments from
customers under written site leases. A significant portion of the Company's
outstanding customer leases are for an initial term of ten years and provides
the tenant with three renewal options of five years each. The industry has
recently favored leases with an the initial lease term of five years and with
four renewal options of five years each.
 
     Pricing Plans.  The Company offers its anchor tenant (i.e., the tenant from
whom the tower was acquired or for whom the tower was constructed) three pricing
options: (i) a variable rate plan; (ii) a flat rate plan; and (iii) a fixed rate
plan. Under the variable rate plan, an anchor tenant's initial base rent is
determined based on the build cost and the ground rent of the tower site. This
initial base rental is reduced as other tenants are added to the tower. Rent for
non-anchor tenants is based on prevailing market rates. The non-anchor tenants
are not eligible to participate in the rental reduction program available to
anchor tenants under this option. Under the flat rate plan, the base rent of the
anchor tenant is determined by the build cost and land rent but is not reduced
as other tenants are added to the tower. The Company also offers a fixed rate
pricing plan where the monthly rental charge for an anchor tenant is not based
on the build cost or land rent applicable to a specific tower site. Under this
pricing plan, the monthly rental payment for the anchor tenant is determined in
light of (i) the size, number and weight of the antennae; (ii) the location of
the tower; (iii) the competitive environment; (iv) the height requirements of
the specific tower. Pricing for all subsequent non-anchor tenants is market
driven.
 
     Low Tenant Turnover Rates.  The Company has not encountered and does not
believe that it will encounter any significant tenant turnover since a tenant
desiring to relocate to a new tower must redesign and reconfigure the network
the aggregate cost of which is far greater than any potential savings in site
rental expense.
 
     Increase Utilization of Tower Capacity.  The Company seeks to increase the
number of tenants that may be served on a tower. Because most tower costs are
fixed, leasing additional space results in minimal additional expenses
generating significant increases in operating cash flow. Once the Company has
identified a site for construction or entered into a binding tower acquisition
agreement, the Company immediately commences marketing activities to potential
tenants.
 
     Tower Management and Maintenance.  The Company generally owns, operates and
manages all of the multi-tenant towers it has acquired or constructed. The
Company provides its tenants with routine tower maintenance. Typically, these
services are performed by subcontractors; however, where clusters of towers
exist, the Company may hire personnel to provide site maintenance services.
 
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 iDEN systems, including
Nextel Communications; and operators of two-way messaging systems. 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.
 
     In 1998, Nextel Communications and Bell South accounted for approximately
17.2% and 15.9%, 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
 
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<PAGE>   14
 
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 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, The Netherlands, Belgium,
            France, Italy, Portugal, Malaysia and other nations.
 
          - The Company has designed, or is currently designing, iDEN 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.
 
     The Company is constructing towers for Centennial Communications and
Carolina PCS and anticipates that it will build to suit up to 118 towers during
1999.
 
  Backlog
 
     The Company has entered into long-term contracts with customers for the
provision of the Company's services. As of December 31, 1998 the Company had a
total backlog of $15.2 million, consisting of $6.9 million relating to services
and $8.3 million relating to tower ownership and management. 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 $4.1 million (or 27.0%) of the
overall backlog. 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 $6.9 million of its overall backlog in 1999. 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
 
  Telecommunications Services
 
     The Company markets its telecommunications services to operators of
wireless telecommunications networks in North America, Europe, the Middle East,
Africa, Asia-Pacific and Latin America. The Company markets primarily through
its executives, project managers and RF engineers and other technical
professional staff. Customers generally have 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 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 British
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. The Company's
managers are compensated in part on revenues generated compared to revenues
forecasted and receivables collected.
 
                                       14
<PAGE>   15
 
     Additional business from existing customers is pursued through the joint
efforts of both the project manager, 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 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. 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 do not meet the customer's particular needs. Therefore, large
procurements of the Company's services involve lengthy selling cycles, often as
long as nine months.
 
  Telecommunications Tower Ownership and Management Business
 
     The Company markets its telecommunications tower ownership and management
business primarily through its executives with assistance from independent sales
agents outside the U.S. where business practices or customs make it most
effective to proceed through local companies. As part of its new strategy the
Company intends to use its sales capabilities more effectively to generate new
business opportunities.
 
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.
 
  Telecommunications Services
 
     Engineering Services.  The Company's competition in the provision of RF
engineering services consists of (i) companies such as Wireless Facilities,
Inc., Metapath Software International, Inc., Moffett, Larson & Johnson P.C.,
Teleworx, Inc. and Comsearch, Inc., which provide a full range of RF engineering
services, (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 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 services. The Company has been less successful
in competing where the customer has a strong internal staff of
 
                                       15
<PAGE>   16
 
wireless network operators or where RF engineering services are packaged with
large equipment procurements supported by vendor financing.
 
     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.
 
  Telecommunications Tower Ownership and Management Business
 
     Competition in the telecommunications tower ownership and management
business is becoming increasingly competitive with the emergence of several
large independent transmission tower owners and operators, such as American
Tower Corp., Crown Castle International, SpectraSite and Pinnacle Holdings,
which own, or will own, significant tower portfolios. The Company competes for
tenants and acquisition of tower and site opportunities with (i) other tower
companies, (ii) wireless service providers that own and operate their own tower
networks, (iii) broadcasters and (iv) site development companies which acquire
antennae space on existing towers for wireless service providers, manage new
tower construction and provide site development services. Other tower companies
and wireless service providers that own and operate their own tower networks (in
particular) generally are substantially larger and have greater financial
resources than the Company. The Company believes that competition for tower
acquisitions and new tower construction opportunities will increase and that
additional competitors will enter the tower market. Some of these additional
competitors have or are expected to have greater financial resources than the
Company. The Company faces stiff competition in connection with (1) the
procurement of tenants; (2) the acquisition of towers; and (3) the acquisition
of suitable tower sites.
 
     A tower company's ability to attract tenants depends on the location of its
towers and its leasing rates. Some tower companies own clusters of towers in
areas where the Company conducts its operations and seeks to expand. Due to the
location of these towers, some of these tower companies may be able to offer
potential tenants more expansive coverage than the Company in a particular
region. Some of these tower companies may also be able to offer potential
tenants more desirable pricing options. Nevertheless, the Company believes that
its ability to provide "turnkey" services using its RF engineering and other
capabilities will distinguish the Company from other tower companies and may
ultimately attract potential tenants notwithstanding the services and pricing
options offered by its competitors.
 
     Many U.S. tower companies are competing for domestic acquisition
opportunities. Most of these competitors are larger and have greater financial
resources than the Company. The Company believes that competition for domestic
acquisitions will increase and that the purchase prices for domestic towers may
increase, thereby reducing the return to the owner. For this reason, the Company
also intends to pursue international acquisition opportunities.
 
     The Company competes for sites with tower operators, including wireless
communication operators and other tower companies. Some of the larger
independent multi-tenant tower companies and the wireless carriers which own and
operate their own tower networks have greater financial resources than the
Company, possess larger in-house site acquisition teams than the Company and
have cultivated affiliations with commercial real estate firms to assist and
support their site acquisition endeavors. The Company believes that tower
location, capacity and cost have been and will continue to be the most
significant competitive factors affecting tower companies.
 
REGULATORY MATTERS AFFECTING THE TELECOMMUNICATIONS TOWER OWNERSHIP AND
MANAGEMENT BUSINESS
 
  Federal Regulation
 
     Both the FCC and the FAA regulate towers used for wireless communication
transmitters and receivers. Such regulations control the siting, marking and
lighting of towers and may, depending on the characteristics of particular
multi-tenant towers, require licensing of tower facilities. Wireless
communication devices
 
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<PAGE>   17
 
operating on towers are separately regulated and independently licensed based
upon the particular frequency used.
 
     Regulations of both the FCC and the FAA require that any person proposing
to construct or alter an object that may affect the navigable airspace give
adequate notice to the FAA Administrator if the construction or alteration meets
certain conditions. The FAA will use this information as the basis to evaluate
the effect of the construction or alteration on aeronautical operational
procedures, to determine the hazardous effect of the proposed construction or
alteration on air navigation, to recommend the appropriate means to mark or
light the facility being constructed or altered, to determine the appropriate
measures to be taken for the continued safety of air navigation, and to notify
airmen of the construction or alteration. Failure to comply with this
notification requirement may lead to the assessment of civil monetary penalty.
 
     The FCC and the FAA have developed standards to be used when considering
proposals for new or modified antenna structures. These standards mandate that
the FCC and the FAA consider the height of a proposed antenna structure, the
relationship of the height of the structure to the ground level of the structure
and the proximity of the antenna structure to airways, airports, runways and the
aircraft departure or approach paths from and to these airports and runways. All
proposals to construct or to modify an existing antenna structure are reviewed
by both the FCC and the FAA to ensure the structure will not be an obstruction
to air navigation. If the FAA determines that, absent special lighting and
paint, the structure would constitute a hazard to air navigation, the FCC will
require special lighting and painting to maximize the visibility of the
structure. Owners of telecommunication towers must maintain painting and
lighting to conform to FAA standards. In certain situations specified by FAA
regulations, there is a requirement that the FAA be notified within five days
after the construction or alteration reaches its greatest height. Tower owners
must also notify the FAA of any tower lighting malfunction or outage that lasts
more than 30 minutes if that malfunction or outage affects the top
steady-burning, or any flashing, light. Failure to comply with these
requirements may lead to civil penalties. The Company generally indemnifies its
customers against any failure by the Company to comply with regulatory standards
applicable to the telecommunications towers owned by it.
 
     The Telecommunication Act of 1996 (the "Telecom Act") amended the
Communications Act of 1934 by giving state and local zoning authorities
jurisdiction over the construction, modification and placement of towers. The
new law preserves local zoning authority but clarifies preemption of such
authority by the FCC. The Telecom Act prohibits any action that would (i)
discriminate between different providers of personal wireless services or (ii)
ban altogether the construction, modification or placement of radio
communication towers. Finally, the Telecom Act requires the federal government
to help licensees for wireless communication services gain access to preferred
sites for their facilities. This may require that federal agencies and
departments work directly with licensees to make federal property available for
tower facilities.
 
     All antenna structures must comply with the National Environmental Policy
Act of 1969 as well as other federal environmental statutes. The FCC's
environmental rules place responsibility on each applicant to investigate any
potential environmental effects of operations and to disclose any significant
effects on the environment in an environmental assessment prior to constructing
a tower. In the event the FCC determines the proposed tower would have a
significant environmental impact based on the standards the FCC has developed,
the FCC would be required to prepare an environmental impact statement. This
process could significantly delay the licensing of a particular tower site.
 
  Local Regulation.
 
     Local zoning boards govern the approval of new tower construction.
Currently, there are hundreds of moratoria on tower construction in local
communities nationwide. Industry experts estimate there have been in excess of
100 lawsuits filed by wireless carriers as a result of community actions taken
to prevent wireless build-out. In addition, several local authorities are
mandating co-location on new and existing towers, where possible.
 
                                       17
<PAGE>   18
 
  International Operations
 
     The development of the Company's international operations will require the
Company to obtain the necessary approvals and remain compliant with the
applicable local regulations.
 
ENVIRONMENTAL MATTERS
 
     Under various federal and local environmental laws, ordinances and
regulations, an owner of real estate or a lessee conducting operations thereon
may become liable for the costs of investigation, removal or remediation of soil
and groundwater contaminated by certain hazardous substances or wastes. Certain
of such laws impose cleanup responsibility and liability without regard to
whether the owner or operator of the real estate or operations thereon knew of
or was responsible for the contamination, and whether or not operations at the
property have been discontinued or title to the property has been transferred.
The owner or operator of contaminated real estate also may be subject to common
law claims by third parties based on damages and costs resulting from off-site
migration of the contamination. In connection with its former and current
ownership or operation of its properties, the Company may be potentially liable
for environmental costs such as those discussed above.
 
     The Company believes it is in compliance in all material respects with all
applicable material environmental laws. The Company has not received any written
notice from any governmental authority or third party asserting, and is not
otherwise aware of, any material environmental non-compliance, liability or
claim relating to hazardous substances or wastes or material environmental laws.
However, no assurance can be given (i) that there are no undetected
environmental conditions for which the Company might be liable in the future or
(ii) that future regulatory action, as well as compliance with future
environmental laws, will not require the Company to incur costs that could have
a material adverse effect on the Company's financial condition and results of
operations.
 
RESEARCH AND DEVELOPMENT
 
     The Company intends to continue developing new services and enhance
existing ones to maintain its position as a leader in RF engineering and
wireless network design. Such services include benchmarking, optimization and
fixed network engineering services.
 
DISCONTINUED OPERATIONS
 
     On March 26, 1999, the Board of Directors of the Company approved a plan of
divestiture of the Products Businesses. This decision was the result of an
analysis of the Company's businesses conducted by management and certain members
of the Company's Board of Directors during the past several months. The Company
believes that the long-term financial interests of the Company's shareholders
would be best served by pursuing a strategy which focuses on the Company's core
telecommunications services business along with the telecommunications tower
ownership and management business to provide wireless operators with a more
expansive integrated solution for accomplishing many of the significant tasks
involved in system design, buildout and operation. The Company has engaged an
investment banking firm to assist it in the disposition of the Products
Businesses and expects to complete such disposition in 1999. Pending such
disposition, the Company intends to operate its field measurement and analysis
products business consistent with past practice, subject to implementation of
various cost saving measures, and intends to reduce significantly the operations
of its software tools business if such business is not sold in the near future.
The Company currently anticipates that any gain on the sale of the Product
Businesses would be sufficient to offset operating losses of such businesses to
the date of sale, though there can be no assurance that this will be the case.
 
     The Products Businesses consist of software tools and field measurement and
analysis products. Revenues from the Products Businesses were $33.8 million for
the year ended December 31, 1998, approximately 27.9% of the Company's total
1998 revenues.
 
                                       18
<PAGE>   19
 
     The Company's software tools, which include databases for virtually all of
the U.S. and many other parts of the world containing 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, 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. As these software tools are
used by the Company's engineers, a database for the particular customer network
is generated based upon the actual design. The software and database are used by
the customer pursuant to a license, and in many cases related maintenance
support, 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 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's line of 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.
 
     Each of the principal field measurement and analysis products 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. 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 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 supports its field measurement and analysis products with
software packages which provide 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 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.
 
     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 Metapath Software 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'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. The Company
believes that its experience in providing a range of engineering and network
services gives it an advantage in developing software and 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.
 
                                       19
<PAGE>   20
 
     The Company intends to continue to use, and make available to its customers
for use, these software tools, including databases, and field measurement and
analysis products, as well as tools and products of other vendors, following the
disposition of the Products Businesses. As part of such disposition, the Company
intends to seek a license, a supply agreement or other contractual arrangement
for such use from the acquirors of the Products Businesses as well as to enter
into arrangements with other vendors. Although there can be no assurance that
the Company will be able to make such arrangements on favorable terms, the
Company expects to be able to make such arrangements on satisfactory terms. In
addition, the Company anticipates that the software tools and field measurement
and analysis products which will be available to it in the marketplace in the
foreseeable future will be adequate for its requirements in performing
telecommunications services.
 
RISK FACTORS
 
  WE MAY NEED ADDITIONAL FINANCING TO FUND OUR OPERATIONS.
 
     In order to conduct each of our telecommunications services business, tower
ownership and management business and the Products Businesses as currently
planned, we will require outside sources of financing. We currently have in
place the credit facility with Chase under which we can draw up to the lesser of
$10 million and our receivables borrowing base plus up to an additional $12.5
million assuming that Dr. Rajendra Singh, one of our founders and Interim
President and Chief Executive Officer, provides specified collateral to secure
such advances. Dr. Singh is not contractually committed to provide any
collateral to Chase. Telcom Ventures has assured us that it intends to provide
us with funding to cover any cash shortfalls we may have during 1999 in an
amount not to exceed $12.5 million less the sum of amounts drawn under the
credit facility in excess of $10 million plus amounts received through
additional financings or the sale of the Products Businesses. These assurances
are subject to the satisfaction of certain conditions, including reaching
agreement with us on applicable financing documents, and will apply only as long
as Telecom Ventures directly or indirectly owns at least 40% of our outstanding
common stock, other than any stock issued to MCI upon conversion of the MCI
notes. We believe that the foregoing funding sources will be sufficient to cover
our funding requirements for 1999. However, in the event that our actual
requirements exceed our estimated requirements, the full $22.5 million is not
available under the credit facility or the conditions to obtaining financing
from Telcom Ventures are not satisfied and we are unable to find other sources
of funding to cover any shortfalls resulting from the occurrence of any one or
more of these events, we may need to scale back the scope of our overall
operations.
 
  WE MAY NOT BE ABLE TO COMPLETE SALES OF THE PRODUCTS BUSINESSES ON FAVORABLE
TERMS
 
     As part of our new strategy, we have decided to dispose of the Products
Businesses. We may not receive a favorable price or terms within a reasonable
period of time in a disposition transaction. We will continue to rely on the
software tools and field measurement and analysis equipment produced by these
businesses, and we intend to seek a license and a supply contract to use these
tools and equipment as part of a disposition of the businesses. However, we may
not be able to obtain a license or a supply contract on favorable terms. If we
receive equity or other property for our businesses, we will be subject to the
risks that the equity or property may not provide the expected value or level of
return. Finally, the uncertainty among our employees and customers about the
future that is generated by our decision to dispose of the Products Businesses
may have an adverse effect on these businesses.
 
  WE MAY NOT BE ABLE TO COLLECT OUR ACCOUNT RECEIVABLES
 
     We are subject to credit risk with respect to our trade account
receivables. As of December 31, 1998, we had trade account receivables, net of
allowances for doubtful accounts, of $13.0 million. Although our existing and
potential customer base is diverse, our dependence on significant customers
increases the possibility of incurring material losses due to concentrations of
credit risk. We incurred a substantial loss and took a special charge of $28.9
million in 1996 from the financial difficulties of Pocket and NextWave, two PCS
license winners.
 
                                       20
<PAGE>   21
 
     In addition, the economic downturn and exchange rate fluctuations in the
Asia-Pacific region has caused some customers in that region to experience
difficulty in paying us in a timely fashion, either because of the need for
additional financing or lack of hard currency to satisfy U.S. dollar denominated
liabilities to us. As a result of the uncertainty associated with the collection
of amounts due, we recorded additional reserves of approximately $1.5 million
during 1997 to cover our potential Asia-Pacific region exposure.
 
     Wireless communications companies generally must make substantial capital
investments and incur high fixed costs in order to enter new markets or offer
new technologies or services. As a result, many of our customers operate with
substantial leverage. This increases the risk that these customers may be unable
to make all scheduled payments or may delay these payments. We frequently cannot
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. We try to use U.S. style payment terms in our international
contracts, but many of our foreign customers will not agree to pay or do not pay
their suppliers on these terms.
 
  THERE ARE POSSIBLE ADVERSE CONSEQUENCES OF OUR LEVEL OF INDEBTEDNESS
 
     We had $52.4 million of debt obligations as of December 31, 1998 consisting
of the notes held by MCI, and $2.4 million under our credit facility. The two
MCI notes, which are due in 2000, are exchangeable for common stock. We have
previously deferred the exercise of our option to cause the notes to be
converted into 2,841,099 shares of common stock, and will not have another
opportunity to effect an exchange until August 1999. If we default under the MCI
notes prior to this exchange (i.e. fail to pay principal or interest or become
involved in bankruptcy proceedings), or if we default under the credit facility,
there may be a material adverse effect on our business. The credit facility
prohibits us from incurring additional debt and contains numerous other
restrictive covenants. Some of the restrictions are described under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Existing Indebtedness" in Item 7.
 
  WE EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS AND
  UNCERTAINTIES RELATING TO BACKLOG
 
     Our 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 our revenues depend on a number of factors, some of
which are beyond our control. These factors include, among others:
 
          - the timing of receipt of new licenses or financing by potential
            customers;
 
          - the length of sales cycles;
 
          - changes in pricing policy by us or our competitors;
 
          - the timing of contracts; and
 
          - customer budget changes.
 
     Even after contracts are entered into, the timing of delivery of services
depends in part on our customer's readiness to receive the services and the pace
of the build-out of our customer's network. The timing of build-out in turn
depends on many business decisions by our customer and provision of services and
equipment by providers other than us. We significantly reduced our backlog in
early 1997 as a result of the cessation and reduction of the services to be
provided to Pocket and NextWave. We generally establish our expenditure levels
for other operating expenses based in large part on our expected future
revenues. If revenues fall below our expectations, our operating results likely
would be adversely affected.
 
                                       21
<PAGE>   22
 
  AN UNFAVORABLE OUTCOME IN THE MICROCELL SHAREHOLDER LITIGATION MAY HAVE AN
  ADVERSE IMPACT ON OUR BUSINESS.
 
     In February 1999 the minority shareholders of Microcell filed suit against
us, the directors appointed by us to the Microcell Board and Microcell itself,
seeking rescission of the shareholders' agreement between the Company and the
minority shareholders (which concerns management of Microcell, funding
commitments and other matters), the appointment of a custodian or receiver and
unspecified monetary damages. While we believe that the case is without merit
and we intend to contest this action vigorously, the outcome of any litigation
is always subject to uncertainty. An unfavorable outcome may have an adverse
impact on our business.
 
  WE DEPEND ON KEY PERSONNEL
 
     Our success depends to a significant degree upon the contribution of our
executive officers and other key personnel. We have had two chief executive
officers resign since December 1997. None of our executive officers has an
employment agreement with us, other than an agreement terminable at will. We may
not be able to retain our key managerial and other key personnel or to attract
suitable replacements or additional personnel if required.
 
  WE DEPEND ON OUR PROFESSIONAL STAFF
 
     We receive the majority of our revenues from the efforts of approximately
400 professionals. The success of our business therefore depends on our ability
to retain professional staff. Moreover, to achieve our present plans, we need to
attract additional RF engineers and other technical professionals. There are a
limited number of RF engineers, and many RF engineering companies and wireless
network operators want to hire them. Intense competition for such personnel has
at times made it difficult to recruit and retain qualified technical personnel.
In the program management area, although the number of available professionals
is greater, we have less experience in hiring and retaining qualified employees
or professionals. We may experience difficulties in retaining and increasing our
professional staff.
 
  DEMAND FOR TELECOMMUNICATIONS SERVICES MAY DECREASE
 
     The wireless telecommunications industry is undergoing significant changes
that has reduced, and may continue to reduce, the demand for our services. Those
changes include:
 
          - operators of mature wireless networks may use their own engineers
            instead of hiring us;
 
          - equipment vendors may offer design services and financing bundled
            with their equipment; and
 
          - delays in the deployment of networks.
 
     Operators of mature wireless networks may use their own engineers instead
of hiring us.  Over the last few years, operators of several mature wireless
networks have reduced the amount of engineering services they buy from us and
have been using their own engineers. We expect this trend to continue and to
affect other types of wireless networks in the U.S. and internationally.
 
     Equipment vendors may offer design services and financing bundled with
their equipment.  Wireless network operators, particularly PCS operators and new
international licensees, depend increasingly on wireless telecommunications
equipment vendors to supply and to finance entire wireless networks. Those
vendors only make financing available for services or products that the vendors
do not provide directly if they have the right to select the providers of those
services and products, including RF engineering and network design.
 
     We believe that the need of PCS and other wireless operators for vendor
financing and the packaging of services by equipment vendors is turning some
equipment vendors into competitors (since the vendors are providing engineering
services, generally through a subcontract arrangement). It is also turning other
vendors into customers, instead of the operators being our customers. We have
established relationships with some major telecommunications equipment vendors
and we provide services and products for wireless telecommunications projects in
which they act as prime contractors. However, these arrangements are often less
profitable for us than direct sales to the end user because the vendor generally
submits a comparatively lower bid for the
 
                                       22
<PAGE>   23
 
engineering work to secure or increase its profits on equipment sales. In
addition, working through a prime contractor weakens our relationship with the
network operator and may reduce our ability to obtain continuing business from
the network operator.
 
     Delays in deployment of networks.  We believe that demand for our services
has been and will continue to be affected by delays or difficulties in
deployment of networks in the U.S. and internationally. We generate a
significant portion of our revenues from designing and building out networks for
new licensees. In the U.S. the pace of PCS network deployment has been slower
than expected, mainly because of the difficulties experienced by holders of PCS
licenses in raising the necessary financing. We had agreements with Pocket and
NextWave, the two top bidders in the C-block broadband PCS auction, to provide
services and products totaling $115 million between 1996 and 2001. Both of them
failed to pay us substantial amounts owing with respect to services and products
we provided them and, in April 1997 and June 1998, Pocket and Next Wave,
respectively voluntarily sought court protection under Chapter 11 of the U.S.
Bankruptcy Code. We suspended all work with respect to Pocket and NextWave, but
we have not been able to collect a large portion of the amounts they owed us.
Our total revenues for 1998 decreased 4.5% from total revenues for 1997. The
decrease is primarily the result of a 16.9% decrease in engineering design
services revenue caused by increased competition and a reduction in new system
deployment in the United States. Thus, orders for network design and deployment
from PCS licensees are subject to uncertainty.
 
  WE FACE INTENSE COMPETITION
 
     Telecommunications Services.  We face intense competition in the market for
wireless network design and program management services. Many other companies
offer these services, and we believe that the number of other independent firms
providing these services to wireless network operators throughout the world is
increasing. Wireless operators themselves and system equipment vendors are also
developing capabilities competitive with those we provide.
 
     Some of our competitors have greater resources than ours. Also, some of our
competitors have been founded by or have recruited senior engineering executives
from our current or potential customers and may have better relationships with
those customers than we may be able to develop. Increased competition
contributed to the 16.9% decrease in engineering design services revenues from
1997 to 1998. The intense competition may continue to adversely affect our
business.
 
     Towers.  The telecommunications tower ownership and management business is
also becoming increasingly competitive. We compete for tenants and acquisition
of tower and site opportunities with:
 
          - other tower companies;
 
          - wireless service providers that own and operate their own tower
            networks;
 
          - broadcasters; and
 
          - site development companies which acquire antennae space on existing
            towers for wireless service providers, manage new tower construction
            and provide site development services.
 
     Other tower companies and wireless service providers that own and operate
their own tower networks are generally substantially larger than us and have
greater financial resources than we do. Since the tower business requires
significant investment, having greater financial resources gives these companies
a competitive advantage. We believe that competition for tower acquisitions and
new tower construction opportunities will increase and that additional
competitors will enter the tower market. Some of these additional competitors
have or are expected to have greater financial resources than we do. If
competition for tower acquisitions increases, we may have fewer opportunities to
acquire towers and we may have to pay higher prices to acquire towers.
 
  WE DEPEND ON SIGNIFICANT CUSTOMERS AND LARGE CONTRACTS
 
     We derived approximately 74.4% of our revenues from our ten largest
customers in the year ended December 31, 1998. Nextel Communications, our
largest customer in the year ended December 31, 1998,
 
                                       23
<PAGE>   24
 
accounted for approximately 17.2% of our revenues. Bell South accounted for an
additional 15.9% of our revenues. Although our major customers generally have
differed from year to year as we complete work under existing contracts and
begin providing services under new contracts, we depend on having large
contracts from some customers each year to meet our expected revenues. We may
not continue to receive large contracts from customers. In addition, our
contracts typically have provisions that permit customers to terminate their
contracts under various circumstances, which include our nonperformance or
unsatisfactory performance. Customers under long-term contracts may attempt to
cancel or renegotiate those contracts.
 
     We derive a significant portion of our tower business revenues from a small
number of customers. During 1998, our three largest customers accounted for
approximately 69.0% of our revenues. AT&T, our largest customer for the year
ended December 31, 1998, accounted for 40.2% of our revenues during this period.
If we lose one or more of these major customers, or they reduce their
utilization of our tower rental space and related network services, the
prospects, financial condition or results of operations for our tower business
may experience a material adverse effect.
 
  OUR LENGTHY SALES CYCLES RESULT IN HIGH COSTS FOR NEW BUSINESS GENERATION
 
     Purchases of our services by customers often entail a lengthy
decision-making process for the customer. Selecting wireless network deployment
services involves substantial costs and has strategic implications. 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
services do not meet the customer's particular needs. Therefore, large
procurements of our services involve lengthy selling cycles, resulting in a
relatively high cost of new business generation.
 
  FLUCTUATIONS FROM OUR INTERNATIONAL OPERATIONS MAY HAVE AN ADVERSE RESULT ON
OUR BUSINESS
 
     Approximately 46.0% of our revenues for 1998 were generated outside of the
United States, and we expect this segment of our business to increase as a
percentage of our revenues. Selling services in foreign countries are subject to
various risks inherent in international business activities. Risks include:
 
          - the 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;
 
          - management of a geographically diverse organization; and
 
          - difficulties in complying with a variety of foreign laws and
            regulations.
 
     In addition, 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 our services and products.
 
     Providing services outside the United States carries the additional risk of
currency fluctuations and foreign exchange controls imposed by certain
countries. In particular, the economic downturn and exchange rate fluctuations
in the Asia-Pacific region has resulted in certain of our customers experiencing
difficulty in paying us in a timely fashion and obtaining hard currency to
satisfy U.S. dollar denominated liabilities to us. As a result of the
uncertainty associated with the collection of amounts due, we recorded
additional reserves of approximately $1.5 million during 1997 to cover our
potential Asia-Pacific region exposure. In addition, during the two month period
ended February 28, 1999, we recognized total foreign currency transaction losses
of approximately $2.1 million related to our 1998 Latin American operations. The
majority of these losses were from our Brazilian operations.
 
                                       24
<PAGE>   25
 
  OUR OPERATIONS ARE SUBJECT TO FEDERAL, STATE, LOCAL AND FOREIGN GOVERNMENT
  REGULATION
 
     The Company's services must comply with federal, state, local and foreign
laws and regulations. Local regulations, particularly city or other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers, typically require tower owners to obtain approval from local
officials or community standards organizations prior to tower construction.
These local regulations can delay or prevent new tower construction or site
upgrade projects, and may increase costs associated with new tower construction.
Existing regulatory policies may adversely affect the timing or cost of new
tower construction, and additional regulations may be adopted which increase
delays or result in additional costs to us. Our management cannot predict the
legislation and regulations that will be enacted in the future, how existing or
future laws or regulations will be enforced, or the cost to comply with new laws
or regulations. Our customers may also become subject to new regulations or
regulatory policies which adversely affect the demand for telecommunications
sites.
 
  THE ACQUISITION AND CONSTRUCTION OF TOWERS COULD HAVE ADVERSE RESULTS
 
     Our tower operations have limited operating history and have generated
operating losses and negative cash flow
 
     We began tower operations in 1997 with our purchase of Microcell and have
only a limited operating history in that business. As a result of operating
expenses and development expenditures, we have incurred operating and net losses
to date. Operating losses for 1997 and 1998 were approximately $1.0 million and
$3.3 million, respectively. At December 31, 1998, we had an accumulated deficit
of $5.4 million. We expect to incur significant operating losses and to generate
negative cash flows from our tower operations during the next several years
while we develop this business and implement our tower acquisition and build-out
strategy. The revenues from the tower operations may not grow or be sustained in
future periods and we may not be able to achieve or sustain operating
profitability or positive cash flow from operations in any future period.
 
     We need significant additional financing to pursue tower construction and
acquisitions
 
     We currently estimate that Microcell will have at least $26.5 million of
capital expenditures during 1999 for the acquisition and construction of
telecommunications towers. There is approximately $13 million of additional
availability under Microcell's revolving line of credit and security agreement
with the Company. Therefore, to carry out its business plan, Microcell will need
additional sources of debt or equity capital prior to the end of 1999. If
Microcell cannot raise the necessary financing (from the Company or third party
sources), it will need to scale back the scope of its planned tower build-out.
 
     Many factors may affect the construction of new towers
 
     Our ability to construct new towers can be affected by a number of factors
beyond our control, including zoning and local permitting requirements, FAA
considerations, availability of tower components and construction equipment and
skilled construction personnel and bad weather conditions. Some communities have
placed restrictions on new tower construction or have delayed granting permits
required for construction. We may not be able to overcome these barriers to new
construction in particular cases. Some of our anchor tenant leases contain
penalty or forfeiture provisions in the event we do not complete the towers
within specified time periods.
 
     Tower acquisitions may have adverse results
 
     We may not be able to identify, finance and complete future tower
acquisitions on acceptable terms. We may not be able to manage and market
available space on our towers profitably. These results may have a material
adverse effect on our prospects, financial condition or results of operations.
 
     We may not be able to manage and implement our tower expansion strategy
successfully
 
     Our pursuit and integration of acquisitions, build-to-suit prospects,
investments, joint ventures and strategic alliances as part of our expansion
strategy may impose significant strains on our management, operating systems and
financial resources. We also anticipate that our operating expenses may increase
 
                                       25
<PAGE>   26
 
significantly as we implement our strategy. If we fail to manage our growth or
we encounter unexpected difficulties in carrying out our tower expansion
strategy, the prospects, financial condition or results of operations for our
tower business may experience a material adverse effect.
 
     Our towers are subject to natural disasters
 
     Our towers are subject to risks associated with natural disasters such as
tornadoes, hurricanes and earthquakes. Although we maintain insurance to cover
the estimated cost of replacing damaged towers and to protect us from liability
to third parties, this insurance is subject to certain limits. A tower accident
for which we are uninsured or underinsured, or damage to a tower or group of
towers, may have a material adverse effect on our tower business.
 
  TITLE TO OUR REAL PROPERTY MAY BE CHALLENGED
 
     Our real property interests in our tower sites include fee interests,
leasehold interests, private easements and licenses, easements and rights-of-way
granted by government entities. For sites purchased in tower acquisitions, we
generally obtain title insurance only on the most valuable fee properties and
rely on title warranties from sellers with respect to other acquired properties.
Our ability to protect our rights against persons claiming superior rights in
tower sites depends on our ability to (i) recover under title policies, the
policy limits of which may be less than the purchase price of a particular tower
site; (ii) in the absence of title insurance coverage, realize on title
warranties given by tower sellers, which warranties often terminate after the
expiration of a specific period (typically one to three years); and (iii)
realize on title covenants from landlords contained in lease agreements. Changes
in law may affect the terms on which governmental entities have granted rights
to us.
 
  WE MAY HAVE SIGNIFICANT EXPENDITURES TO COMPLY WITH ENVIRONMENTAL LAWS
 
     Our operations are subject to federal, state, local and foreign
environmental laws, ordinances and regulations regarding the use, storage,
disposal, emission, release and remediation of hazardous and nonhazardous
substances, materials or wastes. Under certain of these environmental laws, an
owner of real estate or a lessee conducting operations on real estate may become
liable for the costs of investigation, removal or remediation of soil and
groundwater contaminated by hazardous substances or wastes.
 
     Certain environmental laws also impose cleanup responsibility and liability
without regard to whether the owner or operator of the real estate knew of or
was responsible for the contamination. Liability may exist whether or not
operations at the property have been discontinued or title to the property has
been transferred. The owner or operator of contaminated real estate also may be
subject to claims by third parties for damages and costs resulting from off-site
migration of the contamination. As an owner and operator of real property, we
may be liable for environmental costs. The costs of compliance with existing or
future environmental laws and any related liability may have a material adverse
effect on our prospects, financial condition or results of operations.
 
  WE WILL DEPEND ON PROPRIETARY TECHNOLOGY OF OTHERS
 
     After we dispose of the Products Businesses, we will not own the rights to
the technology embodied in our software products. Instead, we will license
certain technologies from third parties pursuant to agreements which may not be
perpetual in duration. The termination of one or more of these licenses, their
renewal on terms materially less favorable to us or any other loss of the right
to use such technologies (including loss of intellectual property rights by a
licensor) could adversely affect our business.
 
     In addition, effective copyright, trademark or trade secret protection may
be unavailable to our licensors or limited in certain circumstances. Third
parties may assert infringement claims against us in the future that may require
us to enter into royalty arrangements or result in costly litigation, damages or
injunctive relief against us for which we may not be compensated by our
licensors.
 
                                       26
<PAGE>   27
 
  YEAR 2000 ISSUES
 
     The year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year (the
"Year 2000 Issue"). Software, hardware or firmware may recognize a date using
"00" as the year 1900, rather than the year 2000. Such an inability of computer
programs to recognize a year that begins with "20" could result in system
failures, miscalculations or errors causing disruptions of operations or other
business problems, including, among others, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
 
     We have undertaken a program to address the Year 2000 Issue with respect to
the following: (i) our information technology and operating systems; (ii) our
non-information technology systems (such as buildings, plant, equipment and
other infrastructure systems that may contain embedded microcontroller
technology); (iii) certain systems of our major vendors and material service
providers (insofar as they relate to our business activities with such parties);
and (iv) our material clients (insofar as the Year 2000 Issue relates to our
ability to provide services to such clients). We believe that we have
substantially completed our Year 2000 modifications on mission critical
applications.
 
     Internal Systems.  We have invested in the implementation and maintenance
of accounting and reporting systems and equipment that are intended to enable us
to provide adequately for our information and reporting needs and which are also
Year 2000 compliant. Substantially all of our internal systems have already been
certified as Year 2000 compliant through testing or other mechanisms and we have
not delayed any systems projects due to the Year 2000 Issue. We believe that the
future costs associated with Year 2000 Issues for our internal systems will be
insignificant and therefore not impact our business, financial condition and
results of operations.
 
     Company Products.  Our technical personnel have completed their assessment
of the impact of the Year 2000 Issue on our products and determined that all
active products determined to be non-compliant will be modified to be Year 2000
compliant or placed on our list of discontinued products. However, there can be
no guarantee that the systems of other companies on which our systems rely will
be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on our business, financial condition and results of operations.
 
     Third Party Systems.  We initiated formal communications with all of our
significant suppliers and large customers to determine the extent to which we
are vulnerable to those third parties' failure to remediate their own Year 2000
Issue. We have received responses regarding Year 2000 compliance from some of
such third parties. The third parties that responded have indicated that their
hardware and/or software is or is expected to be Year 2000 compliant.
 
     Contingency Plans.  We are in the process of considering possible general
contingency plans for Year 2000 failures. We intend to complete its
determination of worst case scenarios after we have received and analyzed
responses to substantially all of the inquiries we have made of third parties.
As we progress in this process, we will develop remedial and contingency plans
to address such risks. We expect to complete its contingency plans by June 30,
1999.
 
     Costs.  We have utilized both internal and external resources to reprogram,
or replace, and test software for Year 2000 modifications. We have not
separately tracked the costs incurred in connection with the Year 2000 effort,
however, total cost associated with the required modifications and conversions
is not material to our consolidated results of operations and financial
position. The total costs of the program is being funded through operating cash
flows.
 
     Risks.  Although our Year 2000 efforts are intended to minimize the adverse
effects of the Year 2000 Issue on our business and operations, the actual
effects of the issue and the success or failure of our efforts described above
cannot be known until the year 2000. Failure by us or our major vendors, other
material service providers or material clients to address adequately our and
their respective Year 2000 issues in a timely manner could have a material
adverse effect on our business, results of operations and financial condition.
 
                                       27
<PAGE>   28
 
  RF INVESTORS' VOTING CONTROL MAY RESULT IN THE TAKING OF CERTAIN UNILATERAL
  ACTIONS
 
     RF Investors owns all of the outstanding shares our Class B Common Stock,
which represents 92.2% of the combined voting power of both classes of common
stock. Accordingly, RF Investors, its parent company Telcom Ventures and its
equity holders are able, without your approval, to:
 
     - elect all of our directors;
 
     - amend our certificate of incorporation with respect to most matters or
       effect a merger, sale of assets, or other major corporate transaction;
 
     - defeat any non-negotiated takeover attempt;
 
     - sell its shares of common stock without your participation in the sale;
 
     - determine the amount and timing of dividends paid, if any, with respect
       to common stock; and
 
     - otherwise control our management and operations 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 (54.3% of the total outstanding shares of Class A Common
Stock on March 23, 1999) to determine the outcome of any vote 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, are directors or executive officers. Mark
Ein, a designee of the Carlyle Investors, 25% owners of Telcom Ventures, is also
one of our directors.
 
     The Telcom Ventures and RF Investors limited liability company agreements
provide that, for as long as the Carlyle Investors collectively owns at least 5%
of the total membership interests of Telcom Ventures, Telcom Ventures and RF
Investors must vote their stock in us:
 
     - to elect as our directors up to two persons recommended by the Carlyle
       Investors, upon the request of the Carlyle Investors; and
 
     - not to take any of the following actions without the consent of the
       Carlyle Investors:
 
          (a) approve any amendment to our certificate of incorporation or
              bylaws;
 
          (b) approve our incurrence of any debt (or the granting of security
              relating to the incurrence of debt) if as a result of the debt
              incurrence, our debt to equity ratio exceeds 6:1 or, if as a
              result of the debt incurrence, our total outstanding debt exceeds
              $50 million plus or minus, as the case may be, our cumulative net
              income or our net losses after January 1994;
 
          (c) approve any new affiliated party transactions with RF Investors,
              Telcom Ventures or the Singh family in excess of $150,000 or
              modifications to existing transactions, subject to certain limited
              exceptions;
 
          (d) approve the appointment as our independent accountants of a firm
              other than one of the "big five" accounting firms; or
 
          (e) approve certain events relating to our bankruptcy or insolvency.
 
     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 over us.
 
                                       28
<PAGE>   29
 
  OUR RELATIONSHIP WITH TELCOM VENTURES MAY RESULT IN POTENTIAL CONFLICTS OF
  INTEREST
 
     Telcom Ventures, RF Investors' parent company, is principally engaged in
making investments in wireless system operators and emerging wireless
technologies. Directors of Telcom Ventures and its subsidiaries who are also our
directors or officers have certain fiduciary obligations to each organization.
Telcom Ventures and directors of Telcom Ventures and its subsidiaries who are
also our directors and officers may be subject to conflicts of interest in
transactions concerning us.
 
     We have entered, and will enter, into arrangements with Telcom Ventures and
certain of Telcom Ventures' subsidiaries which provide for transactions and
relationships between the parties or which otherwise affect us. Our company, RF
Investors, Telcom Ventures, and the Telcom Ventures owners (the Singh family
(including companies they own) and the Carlyle Investors) have entered into an
intercompany agreement, by which, among other things, (i) the Singh Family group
is limited in its ability to compete with us in our traditional lines of
business and (ii) Telcom Ventures is limited in its ability to invest in
entities whose primary business is to compete with us in our traditional lines
of business, in each case until the earlier of (i) the date on which those
owners no longer possess 51% or more of the outstanding voting power of our
company or (ii) the occurrence of certain termination events specified in the
intercompany agreement.
 
     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 us in
our traditional line of business (excluding the program management and tower
businesses) until the earlier of (i) the date on which the Carlyle Investor no
longer owns, directly or indirectly, an interest in us or (ii) the occurrence of
certain termination events specified in the intercompany agreement.
 
     We are free to pursue investment opportunities on our own, but we are
obligated to refer to Telcom Ventures investment opportunities prior to offering
the opportunities to any other third party. If Telcom Ventures does not elect to
pursue the investment opportunity within five days, we will then be free to
offer the opportunity to third parties. The intercompany agreement may not
eliminate or reduce conflicts of interest or inconsistent fiduciary obligations.
 
EMPLOYEES
 
     As of December 31, 1998, the Company employed approximately 700 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
 
     On December 31, 1998 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
subleases approximately 28% of this space to third parties. 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 term of this lease is five-years with three five-year renewal
options. In January 1997 and June 1998 the Company signed amendments to the
lease to expand into additional office space, bringing the total space leased at
this property to approximately 35,500 square feet, with an annualized rent in
1998 of approximately $600,900. In February 1999, the Company agreed to return
approximately 6000 square feet of leased space to the landlord. The Company has
occupied a portion of the overall space at this location since May 1996 and
since October 1997 has subleased additional portions thereof to other tenants.
The Company believes that its facilities will be adequate for its needs for the
foreseeable future.
 
ITEM 3.  LEGAL PROCEEDINGS
 
     The Company is party to various non-material legal proceeding and claims
incidental to its business.
 
                                       29
<PAGE>   30
 
     On February 12, 1999, the minority shareholders of the Company's
majority-owned Microcell subsidiary filed a suit against the Company, the
directors appointed by the Company to the Microcell Board and Microcell itself,
seeking rescission of the shareholders' agreement between the Company and the
minority shareholders (which concerns management of Microcell, funding
commitments and other matters), the appointment of a custodian or receiver and
unspecified monetary damages. On February 16, 1999, the plaintiffs filed a
motion to expedite and a motion for appointment of a receiver or custodian. The
suit alleges breach of a fiduciary duty, usurpation of corporate opportunities,
and waste of Microcell's corporate assets, tortious interference with
Microcell's prospective business relations, and violations of the shareholders'
agreement. The Company believes the case is without merit and intends to contest
this action vigorously. Microcell and the Company have filed a motion to dismiss
and have filed a separate action against certain of the minority shareholders
for breach of fiduciary duties, tortious interference with business relations,
defamation and commercial disparagement.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None
 
                                       30
<PAGE>   31
 
                                    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, 1999, there were 111 stockholders of record of the Class
A Common Stock and, in excess of 3,000 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 1997 and 1998 as reported on the Nasdaq National Market:
 
<TABLE>
<S>                                                           <C>
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
QUARTER ENDED:                                                       1998
--------------                                                ------------------
March 31....................................................  $8.063 to $20.625
June 30.....................................................  $14.625 to $22.50
September 30................................................   $4.75 to $17.25
December 31.................................................   $3.00 to $4.8125
</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.
 
                                       31
<PAGE>   32
 
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, 1998, 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,
                                                      ---------------------------------------------------
                                                      1994(2)   1995(2)    1996(2)    1997(2)    1998(2)
                                                      -------   --------   --------   --------   --------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>       <C>        <C>        <C>        <C>
Revenues:
  Service...........................................  $41,063   $ 64,016   $ 93,156   $ 91,289   $ 86,328
  Tower ownership and management....................       --         --         --         --        860
                                                      -------   --------   --------   --------   --------
    Total revenues..................................   41,063     64,016     93,156     91,289     87,188
                                                      -------   --------   --------   --------   --------
Cost of revenues:
  Service...........................................   29,185     45,682     61,581     62,263     66,238
  Tower ownership and management....................       --         --         --         --        521
                                                      -------   --------   --------   --------   --------
    Total cost of revenues..........................   29,185     45,682     61,581     62,263     66,759
                                                      -------   --------   --------   --------   --------
Gross profit........................................   11,878     18,334     31,575     29,026     20,429
                                                      -------   --------   --------   --------   --------
Operating expenses:
  Sales and marketing...............................      445        446      1,200      2,466      3,843
  General and administrative........................    5,971      7,139     13,030     18,314     22,063
  Special charge (credit)...........................       --         --     28,920     (3,894)        --
  Restructuring charge..............................       --         --         --         --      1,256
  Non-cash compensation.............................    3,114      4,362      6,831        514        362
  Depreciation and amortization.....................    1,358      2,003      2,330      3,410      2,409
                                                      -------   --------   --------   --------   --------
    Total operating expenses........................   10,888     13,950     52,311     20,810     29,933
                                                      -------   --------   --------   --------   --------
Operating income (loss).............................      990      4,384    (20,736)     8,216     (9,504)
                                                      -------   --------   --------   --------   --------
Other income (expense)
  Interest, net.....................................     (221)    (2,193)    (2,125)    (2,553)    (1,397)
  Other.............................................      703      1,027      2,385      1,275       (618)
                                                      -------   --------   --------   --------   --------
    Total other income (expense)....................      482     (1,166)       260     (1,278)    (2,015)
                                                      -------   --------   --------   --------   --------
Income (loss)from continuing operations before
  income taxes......................................    1,472      3,218    (20,476)     6,938    (11,519)
  Provision (benefit) for income taxes..............      428      1,283     (8,745)     1,548     (4,561)
                                                      -------   --------   --------   --------   --------
Income (loss) from continuing operations............    1,044      1,935    (11,731)     5,390     (6,958)
Income (loss) from discontinued operations net of
  tax provision (benefit)...........................    3,926      2,805        447      2,185    (17,785)
                                                      -------   --------   --------   --------   --------
Net income (loss)...................................  $ 4,970   $  4,740   $(11,284)  $  7,575   $(24,743)
                                                      =======   ========   ========   ========   ========
Income (loss) per share:
Continuing operations:
  Basic.............................................                                  $   0.37   $  (0.45)
                                                                                      ========   ========
  Diluted...........................................                                  $   0.34   $  (0.45)
                                                                                      ========   ========
Discontinued operations:
  Basic.............................................                                  $   0.15   $  (1.15)
                                                                                      ========   ========
  Diluted...........................................                                  $   0.14   $  (1.15)
                                                                                      ========   ========
Net income (loss) per share:
  Basic.............................................                                  $   0.51   $  (1.60)
                                                                                      ========   ========
  Diluted...........................................                                  $   0.47   $  (1.60)
                                                                                      ========   ========
</TABLE>
 
                                       32
<PAGE>   33
 
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                      ---------------------------------------------------
                                                      1994(2)   1995(2)    1996(2)    1997(2)    1998(2)
                                                      -------   --------   --------   --------   --------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>       <C>        <C>        <C>        <C>
Unaudited Pro Forma Data:
  Pro forma income (loss) from continuing
    operations......................................            $1,931(1)  $(18,693)(1)
                                                                ========   ========
  Pro forma income (loss) from discontinued
    operations......................................            $2,798(1)  $ (2,076)(1)
                                                                ========   ========
  Pro forma net income (loss).......................            $4,729(1)  $(20,769)(1)
                                                                ========   ========
Pro forma income (loss) per share:
Continuing operations:
  Basic.............................................            $   0.17   $  (1.53)
                                                                ========   ========
  Diluted...........................................            $   0.19   $  (1.53)
                                                                ========   ========
Discontinued operations:
  Basic.............................................            $   0.25   $  (0.17)
                                                                ========   ========
  Diluted...........................................            $   0.20   $  (0.17)
                                                                ========   ========
Pro forma net income (loss)
  Basic.............................................            $ 0.42(1)  $  (1.70)(1)
                                                                ========   ========
  Diluted...........................................            $ 0.39(1)  $  (1.70)(1)
                                                                ========   ========
Consolidated Balance Sheet Data (at year-end):
  Working capital...................................  $23,942   $ 22,808   $ 49,840   $ 59,155   $ 14,471
  Intangibles, net..................................       --         --        354        368        572
  Total assets......................................   52,727     55,325     89,363     95,420     84,204
  Long term obligations.............................   23,930     28,627     50,807     50,210     50,115
  Equity (deficit)..................................   13,938       (244)     8,477     20,202        229
</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%. The total
    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>
 
(2) In March 1999, the Company's Board of Directors adopted a Plan to dispose of
    the operations comprising its hardware and software segments (see note 4 to
    the Consolidated Financial Statements). Prior year balances have been
    restated to reflect these segments as discontinued operations.
 
    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 to the wireless telecommunications
industry. The Company has provided these services to operators of more than 200
wireless systems in more than 50 countries. In 1996 the Company entered the
tower ownership and management business, which consists of acquiring, developing
and managing telecommunications towers.
 
     The Company's revenues are generated through contracts for RF engineering
and program management services, and lease revenue from its tower ownership and
management business. 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
 
                                       33
<PAGE>   34
 
management services on a time and materials or fixed price basis. The Company's
service revenues also include reimbursement for expenses, including the living
expenses of engineers on customer sites.
 
     In March 1999, the Company's Board of Directors adopted a plan to dispose
of the operations comprising its software and hardware segments. Software
products develops software and data which support the design and operation of
wireless communication systems. Hardware products are used in the
implementation, testing and maintenance of wireless communication systems. The
Company has engaged an investment banking firm to assist in the marketing and
sale of these segments. The sale of the product segments are expected to be
completed during 1999. (See note 4 to the Consolidated Financial Statements).
The Company currently anticipates that any gain on sale of the segments would be
sufficient to offset operating losses to date of sale.
 
     Service revenues consist of revenues from engineering design services and
program management services. Tower ownership and management revenues consist of
lease revenue from the leasing of space on telecommunications towers to wireless
communication carriers. The leases generally have initial terms of 5 to 11 years
and generally include multiple options to renew upon similar terms at the option
of the leasee. In general, the lease terms include periodic adjustments to base
rent. The Company derives a significant portion of its total revenues from its
international customers (approximately 32.4% and 46.0% in 1997 and 1998,
respectively). To date, its tower ownership and management revenues have come
exclusively from the leasing of RF transmission towers in the United States.
 
     Cost of revenues consists of costs associated with engineering design and
program management services and direct costs related to the tower ownership and
management business. 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).
 
     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, program management and tower ownership and management services.
 
RESULTS OF OPERATIONS
 
     Continuing 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, 1996, 1997, and 1998. 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
 
                                       34
<PAGE>   35
 
should be read in conjunction with the consolidated financial statements and
accompanying notes thereto included elsewhere herein.
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               1996      1997      1998
                                                              ------    ------    ------
<S>                                                           <C>       <C>       <C>
Revenues:
  Service...................................................  100.0%    100.0%     99.0%
  Tower ownership and management............................     --        --       1.0
                                                              -----     -----     -----
          Total revenues....................................  100.0     100.0     100.0
Cost of revenues............................................   66.1      68.2      76.6
                                                              -----     -----     -----
Gross profit................................................   33.9      31.8      23.4
                                                              -----     -----     -----
Operating expenses:
  Sales and marketing.......................................    1.3       2.7       4.4
  General and administrative................................   14.0      20.1      25.3
  Special charge (credit)...................................   31.0      (4.3)       --
  Restructuring charge......................................     --        --       1.4
  Non-cash compensation.....................................    7.4       0.6       0.4
  Depreciation and amortization.............................    2.5       3.7       2.8
                                                              -----     -----     -----
          Total operating expenses..........................   56.2      22.8      34.3
                                                              -----     -----     -----
Operating (loss) income.....................................  (22.3)      9.0     (10.9)
                                                              -----     -----     -----
Other income (expense):
  Interest income...........................................    1.0       0.8       1.0
  Interest expense..........................................   (3.3)     (3.6)     (2.6)
  Other.....................................................    2.6       1.4      (0.7)
                                                              -----     -----     -----
          Total other income (expense)......................    0.3      (1.4)     (2.3)
                                                              -----     -----     -----
Income (loss) from continuing operations before income
taxes.......................................................  (22.0)      7.6     (13.2)
Provision (benefit) for income taxes........................   (9.4)      1.7      (5.2)
                                                              -----     -----     -----
Income (loss) from continuing operations....................  (12.6)%      5.9%    (8.0)%
                                                              =====     =====     =====
</TABLE>
 
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
 
     Revenues.  Revenues for 1998 were $87.2 million compared to $91.3 million
for 1997, a decrease of $4.1 million or 4.5%. The decrease is primarily the
result of a $13.8 million or 16.9% decrease in engineering design services
revenue offset by a $8.8 million or 91.3% increase in program management
services revenue and a $0.9 million increase in tower ownership and management
revenue. The decrease in engineering design services revenue is primarily due to
a decrease in billable hours between years as a result of increased competition,
a slowdown in network deployment in the United States and a lack of effective
sales and marketing efforts. North American and Asian revenue decreased, but
were partially offset by increases in Europe and Latin America. The increase in
Latin America is the result of new system deployment and the increase in Europe
is the result of an increased Company presence in the region. The increase in
program management services revenues is primarily a result of ceasing all work
from Pocket and NextWave during the first quarter of 1997 as well as an
increased volume of work in Latin America in 1998.
 
     Cost of Revenues.  Cost of revenues was $66.8 million for 1998, compared to
$62.3 million for 1997, an increase of $4.5 million or 7.2%. As a percentage of
total revenues, cost of revenues was 76.6% and 68.2% for 1998 and 1997,
respectively. The dollar increase is due primarily to an increase in program
management services volume. The increase in cost of revenues as a percentage of
total revenues is due to increased design engineering costs primarily as a
result of decreased chargeability between years.
 
     Gross Profit.  Gross profit was $20.4 million, compared to $29.0 million
for the prior year, a decrease of $8.6 million or 29.6%. As a percentage of
total revenues, gross profit was 23.4% and 31.8% for 1998 and 1997,
 
                                       35
<PAGE>   36
 
respectively. The decrease in gross profit was due primarily to a decrease in
chargeability related to the engineering design services business, offset by an
increase in program management services and tower ownership and management
volume.
 
     Sales and Marketing.  Sales and marketing expenses were $3.8 million,
compared to $2.5 million for the prior year, an increase of $1.3 million or
55.8%. The increase was due primarily to increased business development costs
year over year as a result of the continued regionalization of the Company's
business on a world wide basis.
 
     General and Administrative.  General and administrative expenses were $22.1
million compared to $18.3 million for the prior year, an increase of $3.8
million or 20.5%. The increase was primarily due to costs associated with the
growth of the Company's tower ownership and management business ($2.2 million),
unsuccessful merger & acquisition activities, including the Company's proposed
exchange of its hardware products business, and costs related to the office of
the former Chief Executive of the Company and related changes thereto during
1998.
 
     Special (credit).  During September 1997, the Company recognized an
approximate $3.9 million recovery of the special charge recorded in December
1996 related to Pocket Communications, Inc. and NextWave Telecom, Inc.
 
     Restructuring Charge.  In October 1998, the Company's Board of Directors
approved a restructuring plan that resulted in a total fourth quarter charge of
approximately $2.5 million, including approximately $1.2 million related to
continuing operations. The restructuring charge included $0.1 million related to
the Company's services business, $1.1 million related to corporate general and
administrative expenses, and $1.3 million related to the Company's products
businesses. The charge was taken to cover the one-time costs associated with the
closure of the Company's office in Dusseldorf, Germany, a reduction of
approximately 70 non-billable full and part-time employees and the termination
of approximately 30 contractors.
 
     Non-Cash Compensation.  Non-cash compensation was $0.4 million for 1998,
compared to $0.5 million for the prior year, a decrease of $0.1 million or
29.6%. The decrease is the result of certain awards becoming fully vested and
related expense recognition completed.
 
     Depreciation and Amortization.  Depreciation and amortization expense was
$2.4 million for 1998 compared to $3.4 million for the prior year, a decrease of
$1.0 million or 29.4%. The decrease is a result of certain equipment, primarily
computer and related equipment, becoming fully depreciated.
 
     Interest Income.  Interest income was $0.9 million for 1998 compared to
$0.7 million for the prior year, an increase of $0.2 million or 22.0%. The
increase is due primarily to earnings on funds held by the Company's overseas
operations, offset by a decrease in earnings on funds held domestically.
 
     Interest Expense.  Interest expense was $2.3 million for 1998 compared to
$3.3 million for the prior year, a decrease of $1.0 million or 30.2%. The
decrease is due primarily to a reduction in interest rates on the MCI
convertible subordinated debt. 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.
 
     Other Income (Expense).  Other income (expense) was $(0.6) million for 1998
compared to other income of $1.2 million for the prior year. The decrease is due
primarily to foreign currency transaction losses in 1998, the expiration of the
24-month distribution rights arrangement granted with the sale of the Company's
50.0% interest in Telemate S.A. in January 1996 and a reduction in income
recognized from the Company's 33.3% joint venture with KTS. In July 1998, the
Company acquired the remaining 66.7% membership interest in KTS, bringing its
total membership interest to 100.0%.
 
     Provision (Benefit) for Income Taxes.  The (benefit) for income taxes was
$(4.6) million for 1998 compared to a provision of $1.5 million for the prior
year. The benefit for income taxes was recorded in 1998 using a consolidated
effective income tax rate of approximately 40.0%. The provision for income taxes
was recorded in 1997 based on a consolidated effective income tax rate of
approximately 22.3%. The reduced rate in 1997 is a result of a reduction in
valuation reserves previously established as it was determined that the reserve
was no longer required.
 
                                       36
<PAGE>   37
 
     Income (Loss) from Continuing Operations.  Income (loss) from continuing
operations was a loss of $(7.0) million in 1998 compared to income of $5.4
million for the prior year. Adjusting for the recovery of the special charge in
1997, non-cash compensation and the restructuring charge in 1998, income (loss)
from continuing operations would have been $(6.0) million compared to $2.8
million for the prior year.
 
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
 
     Revenues.  Revenues for 1997 were $91.3 million, compared to $93.2 million
for 1996, 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 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 billable hours.
 
     Cost of Revenues.  Cost of revenues were $62.3 million for 1997, compared
to $61.6 million for 1996, an increase of $0.7 million or 1.1%. As a percentage
of total revenues, cost of revenues was 68.2% and 66.1% for 1997 and 1996,
respectively. The increase is due primarily to an increase in engineering design
services volume offset, in part, by a decrease in program management work.
 
     Gross Profit.  Gross profit was $29.0 million, compared to $31.6 million
for the prior year, a decrease of $2.6 million or 8.1%. As a percentage of total
revenues, gross profit was 31.8% and 33.9% for 1997 and 1996, respectively. The
dollar decrease is due to a decline in program management services volume as a
result of ceasing all work for Pocket and NextWave in 1997. The percentage
decrease was due to a decline in program management margins due to decreased
utilization.
 
     Sales and Marketing. Sales and marketing expense was $2.5 million, compared
to $1.2 million for the prior year, an increase of $1.3 million. The increase
was due primarily to increased marketing efforts for the service businesses
(including a $0.2 million increase in agent commissions) and the creation of a
formal global business development effort.
 
     General and Administrative.  General and administrative expenses were $18.3
million, compared to $13.0 million for the prior year, an increase of $5.3
million or 40.6%. The increase was primarily the result of costs associated with
the Company's tower ownership and management business ($0.9 million) which was
established in December 1996, costs related to becoming a public company ($1.2
million), office relocation costs related to the move of the Company's
headquarter operations ($0.4 million), the establishment of a strategic
initiatives function ($0.5 million), 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 ($1.5 million). The economic downturn and
exchange rate fluctuations in the Asia-Pacific region 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 $1.5 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.
 
     Special Charge (credit).  During September 1997, the Company recognized an
approximate $3.9 million recovery of the $28.9 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"). During
calendar 1998, NextWave also sought court protection under Chapter 11 of the
U.S. Bankruptcy Code.
 
     Non-Cash Compensation.  Non-cash compensation was $0.5 million, compared to
$6.8 million for the prior year, a decrease of $6.3 million or 92.5%. 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,
 
                                       37
<PAGE>   38
 
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.
 
     Depreciation and Amortization.  Depreciation and amortization expense was
$3.4 million, compared to $2.3 million for the prior year, an increase of $1.1
million or 46.4%. The increase was primarily the result of a generally higher
capital asset base as compared to the prior year, in part as a result of the
capitalization of $2.9 million for telecommunications towers.
 
     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
20.1%. 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 $1.3 million in 1997, compared to $2.4
million in 1996, a decrease of $1.1 million or 46.5%. The decrease is primarily
due to the gain recorded on the sale of the Company's 50% 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 KTS in 1997 as compared to
the prior year.
 
     Provision (Benefit) for Income Taxes.  The provision for income taxes was
$1.5 million in 1997, compared to a benefit of $8.7 million for the prior year.
The provision for income taxes was recorded in 1997 based on an effective income
tax rate of 22.3%. The provision for income taxes was recorded through September
26, 1996 assuming that the Company was a limited liability company. In addition,
the Company recorded a one-time deferred tax benefit of $8.7 million in 1996
($7.5 million related to continuing operations) as a result of its conversion
from a limited liability company 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.
 
     Income (Loss) from Continuing Operations.  Income (loss) from continuing
operations was $5.4 million in 1997 compared to a loss of ($11.7) million for
the prior year. As a percentage of total revenues, income (loss) from continuing
operations increased to 5.9% from (12.6%) in the prior year. Adjusting for the
special charge recorded by the Company in 1996, non-cash compensation, the
recovery of special charge in 1997 and assuming an effective tax rate of 40.0%
in 1996, income from continuing operations would have been $2.8 million compared
to $9.2 million for the prior year.
 
DISCONTINUED OPERATIONS
 
     In March 1999, the Company's Board of Directors adopted a plan to
discontinue the operations comprising its products businesses (see note 4 to the
Consolidated Financial Statements).
 
     Product revenues for 1998 were $33.8 million compared to $64.0 million for
1997, a decrease of $30.2 million or 47.2%. The decrease is primarily a result
of customer spending constraints due to cost cutting measures in the face of
increased competition, the continued economic downturn in the Asia-Pacific
region and a softness in the U.S. domestic market. In addition, release of the
Company's next generation network propagation modeling tool has been delayed
resulting in a significant reduction in software sales. Product gross profit was
$11.4 million compared to $32.4 million for the prior year, a decrease of $21.0
million or 64.8%. The decrease in gross profit is due primarily to the decrease
in volume between years. Operating losses were $24.8 million compared to income
of $6.0 million in the prior year, a decrease of $30.8 million. The decrease was
due primarily to the shortfall in revenue discussed above as well as a write-off
of software development costs. The loss from discontinued operations was $17.8
million in 1998 compared to income of $2.2 million in 1997.
 
     Product revenues for 1997 were $64.0 million compared to $48.4 million for
the prior year, an increase of $15.6 million or 32.1%. The increase was
primarily due to an increase in field measurement and network
 
                                       38
<PAGE>   39
 
analysis product revenues due to strong sales in North America, the ETP
Acquisition in December 1996 and new product introductions during 1997. Product
gross profit was $32.4 million compared to $22.0 million for the prior year, an
increase of $10.4 million or 47.0%. The increase is due primarily to the
increase in field measurement and network analysis product revenues. Operating
income was $6.0 million compared to a loss of $2.2 million for the prior year.
The prior year loss is due primarily to $5.6 million of in-process research and
development costs recorded as a result of the ETP Acquisition in December 1996.
Income from discontinued operations was $2.2 million compared to $0.4 million
for the prior year. Prior year income from discontinued operations resulted
primarily from a tax benefit recorded related to the hardware products business.
 
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
 
     Additions to property and equipment were $16.7 million for 1998, compared
to $6.7 million for 1997 and $2.2 million for 1996. Substantially all of the
$10.0 million increase from 1997 to 1998 represents expenditures by Microcell
related to the acquisition and development of telecommunications towers. Of the
$4.5 million increase from 1996 to 1997, approximately $1.5 million was due to
the move of the Company's headquarter operations (see below) 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 telecommunications 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, Credit
Facility (see below) and other financing sources. 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.
 
     In order to conduct each of the telecommunications services business, the
tower ownership and management business and the Products Businesses as currently
planned, the Company will require outside sources of financing. The Credit
Facility allows the Company to draw up to the lesser of $10 million and its
receivables borrowing base plus up to an additional $12.5 million assuming that
Dr. Singh provides the specified collateral to secure such advances. Dr. Singh
is not contractually committed to provide any collateral to Chase. Telcom
Ventures has assured the Company that it intends to provide the Company with
funding to cover any cash shortfalls the Company may have during 1999 in an
amount not to exceed $12.5 million less the sum of amounts drawn under the
Credit Facility in excess of $10 million plus amounts received through
additional financings or the sale of the Products Businesses. These assurances
are subject to the satisfaction of certain conditions, including the parties
reaching agreement on applicable financing documents, and will apply only as
long as Telcom Ventures directly or indirectly owns at least 40% of the
Company's outstanding common stock, other than any stock issued to MCI upon
conversion of the MCI notes. The Company believes that the foregoing funding
sources will be sufficient to cover its funding requirements for 1999. However,
in the event that the Company's actual requirements exceed its estimated
requirements, the full $22.5 million is not available under the Credit Facility
or the conditions to obtaining financing from Telcom Ventures are not satisfied
and the Company is unable to find other sources of funding to cover any
shortfalls resulting from the occurrence of any one or more of these events, the
Company may need to scale back the scope of its overall operations.
 
FOREIGN CURRENCY
 
     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 $8.1 million and $12.1 million for
the years ended December 31, 1996 and 1997, respectively. The economic downturn
and exchange rate fluctuations in the Asia-Pacific region during the latter part
of calendar 1997 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 $1.5 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.
 
                                       39
<PAGE>   40
 
     During the two month period ended February 28, 1999, the Company recognized
total foreign currency transaction losses of approximately $2.1 million related
to its Latin American operations. The majority of the losses were from the
Company's 1998 Brazilian operations as a result of the devaluation of the Real
in 1999. The Company is in the process of exploring its options to limit any
future exposure from further exchange rate fluctuations.
 
CASH FLOWS
 
     Cash and cash equivalents were $4.2 million at December 31, 1998, a
decrease of $10.7 million from December 31, 1997. The decrease was primarily due
to cash used in continuing operations ($8.9 million) and additions to property
and equipment ($16.7 million), offset by sales of investment securities ($8.5
million), proceeds from the exercise of stock options and from the issuance of
shares under the Company's Employee Stock Purchase Plan ($3.4 million), cash
received from Telcom Ventures under the terms of the Company's $3.5 million loan
($0.9 million) and a net increase in cash and cash equivalents from discontinued
operations ($1.9 million). Cash and cash equivalents were $14.9 million at
December 31, 1997, an increase of $1.6 million from December 31, 1996. The
increase was due primarily to cash provided by continuing operations ($12.4
million), cash received from the exercise of stock options and from the issuance
of shares under the Company's Employee Stock Purchase Plan ($4.0 million) and
cash received from Telcom Ventures under the terms of the Company's $3.5 million
loan ($1.0 million), offset by additions to property and equipment ($6.7
million), the investment of available cash on hand ($1.7 million) and a net
decrease in cash and cash equivalents from discontinued operations ($7.5
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. All remaining amounts had been used for working capital at December
31, 1998.
 
     In December 1996, the Company, through its newly formed subsidiary,
Microcell, acquired certain of the assets and liabilities of Microcell
Management, LLC, which, through the participation of the Company and others,
consisted of the acquisition, development, lease and management of
telecommunications towers. Microcell offers a package to finance the
construction of telecommunications 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.
 
     Net cash used in continuing operations was $6.1 million for 1996. Net cash
used in investing activities was $11.0 million, consisting primarily of cash
paid for additions to property and equipment ($2.2 million), investment in joint
ventures ($0.8 million), net increase in short-term investments ($6.2 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 and October 1998, the
Company received payments of approximately $1.0 million from Telcom
 
                                       40
<PAGE>   41
 
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 or in 1998.
 
     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.
 
     On September 30, 1998, the Company sold its interest in CCS to CCS
management for $1.2 million. The $1.2 million is payable in two installments
consisting of (i) $600,000 due on May 31, 1999 and (ii) $600,000 due on November
30, 1999. Interest, equal to 9%, is due monthly on the first day of each month
beginning January 1, 1999. The initial interest payment is for the period from
October 1, 1998 to January 1, 1999. Payment of the foregoing obligation is
secured by a pledge of the transferred CCS stock and is guaranteed by CCS. As of
December 31, 1998 the Company has recorded a reserve of approximately $557,000
related to the transaction.
 
     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 were 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 $28.9 million pre-tax ($23.8
million after tax) at December 31, 1996. The $28.9 million special charge
consisted of a reserve against the Company's aggregate receivable exposure at
December 31, 1996 of $12.1 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 $5.3
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
 
                                       41
<PAGE>   42
 
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 May 15, 1998, 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 $28.9 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. During calendar 1998, NextWave also sought
court protection under Chapter 11 of the U.S. Bankruptcy Code.
 
     Working capital was $14.5 million at December 31, 1998, compared to $59.2
million at December 31, 1997, a decrease of $44.7 million. The decrease in
working capital was primarily a result of losses from continuing operations
($9.1 million pre-tax and excluding depreciation and amortization), a decrease
in net assets of discontinued operations ($19.7 million) and funds used to build
telecommunications towers. Capitalized cost related to telecommunications tower
development was $2.9 million and $17.5 million at December 31, 1997 and 1998,
respectively.
 
     Working capital was $59.2 million at December 31, 1997, compared to $49.8
million at December 31, 1996, an increase of $9.4 million or 18.7%, The increase
in working capital was primarily due to a net increase in cash and cash
equivalents and short-term investments primarily as a result of cash provided
from continuing operations, an increase in net assets of discontinued
operations, and a decrease in accounts payable and accrued expenses, all offset
by a net decrease in receivables and deferred income taxes.
 
     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 29, 1999, 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 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 and a
sale of substantially all of the Company's assets. The Company is considering
exercising its option in August 1999 to cause the notes to be exchanged into
Class A Common Stock. This could result in a significant taxable gain to the
Company. Events of default under the notes (which would cause such notes to
become due and payable) include non-payment and bankruptcy.
 
     In March 1999, the Company amended and restated its credit facility with
the Chase Manhattan Bank, as Administrative Agent ("Chase") (together with the
LCC Europe Credit Facility, the "Credit Facility") which was established in
1996. The Credit Facility, as presently in effect, consists of a revolving loan
and letter
 
                                       42
<PAGE>   43
 
of credit facility in an aggregate principal amount not to exceed $20.0 million
for the Company and $2.5 million for LCC Europe (the "LCC Europe Credit
Facility"). The maximum amount available for drawing under the Credit Facility
is the sum of (1) the lesser of $10.0 million or 85% of the amount of the
Company's receivables which are deemed "eligible" as a basis for obtaining
credit and (2) an aggregate amount, not to exceed $12.5 million, which is
secured by a collateralized guaranty of Dr. Rajendra Singh, Chairman and Interim
Chief Executive Officer of the Company, to the extent that Dr. Singh has
deposited the required collateral with Chase. Dr. Singh is not contractually
committed to provide any collateral to Chase. The revolving loan commitment will
expire in March 2000. 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 (other than the LCC Europe 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 plus, in each case, 0%, 0.25%
or 0.50% depending on the ratio of the Company's Consolidated Debt (as defined
in the credit agreement) to Consolidated EBITDA (as defined in the credit
agreement) for the most recently ended fiscal quarter (the "Cash Flow Leverage
Ratio") on the applicable date 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 1.0%, 1.5% or 2.0%
depending on the Company's Cash Flow Leverage Ratio on the applicable date.
Interest under the LCC Europe Credit Facility accrues at the Company's election
(subject to certain restrictions and limitations contained in the credit
agreement) at 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 or at which Norwegian krone are offered to
leading banks in the Norwegian interbank market, plus, in each case 1.0%, 1.5%
or 2.0% depending on the Company's Cash Flow Leverage Ratio on the applicable
date.
 
     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 in its subsidiaries (except that,
due to local regulatory restrictions, the assets of LCC Europe have been pledged
as security solely for the LCC Europe Credit Facility) and are guaranteed in
full by LCC Development Company, L.L.C., LCC Design Services, L.C.C. and Koll
Telecommunications Services, L.L.C., wholly-owned subsidiaries of the Company.
Such obligations are guaranteed by Microcell solely to the extent that Microcell
has outstanding borrowings under its revolving line of credit and security
agreement with the Company (the "Microcell Credit Facility"); any payments made
by Microcell to Chase under the Credit Facility shall reduce its outstanding
obligations under the Microcell Credit Facility on a dollar for dollar basis.
Any payments of principal by Microcell under the Microcell Credit Facility must
be used to prepay any outstanding loans under the Credit Facility and the amount
available under the Credit Facility shall be permanently reduced by the amount
of any such prepayment. The payment and performance obligations of the Company
under the Credit Facility are also guaranteed, up to a maximum amount of $12.5
million plus interest thereon, by Dr. Rajendra Singh, one of the Company's
founders and Interim Chief Executive Officer. All obligations arising under the
LCC Europe Credit Facility are guaranteed in full by the Company.
 
     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 maintain certain minimum liquidity
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 certain liens, certain
investments and acquisitions, sales of assets, declaration or payment of
dividends 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 changes, 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
insolvency of the Company. In addition, the
 
                                       43
<PAGE>   44
 
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.
 
     No amounts were outstanding under the Credit Facility at December 31, 1997
and 1998 with the exception of amounts outstanding under the LCC Europe Credit
Facility and outstanding letters of credit. Approximately $1.4 million and $2.4
million were outstanding under the LCC Europe Credit Facility at December 31,
1997 and 1998, respectively, and are included in net assets of discontinued
operations in the accompanying consolidated balance sheets. Outstanding letters
of credit were $2.1 million and $5.8 million at December 31, 1997 and 1998,
respectively.
 
     From January 1, 1999 to March 31, 1999 the Company borrowed a total of $3.4
million under the Credit Facility. Borrowings were made to fund construction of
telecommunications towers and operations of the Company. Also, in January 1999,
the Company entered into a $5.0 million convertible promissory note with Telcom
Ventures. Under the terms of the note, the entire principal balance and accrued
interest at a rate of 9.0% is due on April 30, 2000, or upon the occurrence of
certain events such as the sale of all or substantially all of the assets of the
Company. At anytime from August 1, 1999 either Telcom Ventures or the Company
may convert the then outstanding principal and accrued, but unpaid interest into
shares of the Company's Class A Common Stock based on a conversion price of
$6.22 per share, subject to adjustment for stock split, stock dividend,
recapitalization or similar events.
 
IMPACT OF THE YEAR 2000 ISSUE
 
     The year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year (the
"Year 2000 Issue"). Software, hardware or firmware may recognize a date using
"00" as the year 1900, rather than the year 2000. Such an inability of computer
programs to recognize a year that begins with "20" could result in system
failures, miscalculations or errors causing disruptions of operations or other
business problems, including, among others, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
 
     The Company has undertaken a program to address the Year 2000 Issue with
respect to the following: (i) the Company's information technology and operating
systems; (ii) the Company's non-information technology systems (such as
buildings, plant, equipment and other infrastructure systems that may contain
embedded microcontroller technology); (iii) certain systems of the Company's
major vendors and material service providers (insofar as they relate to the
Company's business activities with such parties); and (iv) the Company's
material clients (insofar as the Year 2000 Issue relates to the Company's
ability to provide services to such clients). The Company believes that it has
substantially completed its Year 2000 modifications on mission critical
applications.
 
     Internal Systems.  The Company has invested in the implementation and
maintenance of accounting and reporting systems and equipment that are intended
to enable the Company to provide adequately for its information and reporting
needs and which are also Year 2000 compliant. Substantially all of the Company's
internal systems have already been certified as Year 2000 compliant through
testing or other mechanisms and the Company has not delayed any systems projects
due to the Year 2000 Issue. Management believes that the future costs associated
with Year 2000 Issues for its internal systems will be insignificant and
therefore not impact the Company's business, financial condition and results of
operations.
 
     Company Products.  The Company's technical personnel have completed their
assessment of the impact of the Year 2000 Issue on the Company's products and
determined that all active products determined to be non-compliant will be
modified to be Year 2000 compliant or placed on the Company's list of
discontinued
 
                                       44
<PAGE>   45
 
products. 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 a material adverse effect on the Company.
 
     Third Party Systems.  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. The Company has received responses regarding Year
2000 compliance from some of such third parties. The third parties that
responded have indicated that their hardware and/or software is or is expected
to be Year 2000 compliant.
 
     Contingency Plans.  The Company is in the process of considering possible
general contingency plans for Year 2000 failures. The Company intends to
complete its determination of worst case scenarios after it has received and
analyzed responses to substantially all of its inquiries it has made of third
parties. As the Company progresses in this process, the Company will develop
remedial and contingency plans to address such risks. The Company expects to
complete its contingency plans by June 30, 1999.
 
     Costs.  The Company utilized both internal and external resources to
reprogram, or replace, and test software for Year 2000 modifications. The
Company has not separately tracked the costs incurred in connection with the
Year 2000 effort, however, total cost associated with the required modifications
and conversions is not material to the Company's consolidated results of
operations and financial position. The total costs of the program is being
funded through operating cash flows.
 
     Risks.  Although the Company's Year 2000 efforts are intended to minimize
the adverse effects of the Year 2000 Issue on the Company's business and
operations, the actual effects of the issue and the success or failure of the
Company's efforts described above cannot be known until the year 2000. Failure
by the Company and its major vendors, other material service providers and
material clients to address adequately their respective Year 2000 issues in a
timely manner could have a material adverse effect on the Company's business,
results of operations and financial condition.
 
                                       45
<PAGE>   46
 
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, 1997 and
1998, 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, 1998. 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, 1997 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, 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 LLP
 
Washington, D.C.
March 26, 1999
 
                                       46
<PAGE>   47
 
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   YEARS ENDED DECEMBER 31, 1996, 1997, 1998
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                1996      1997       1998
                                                              --------   -------   --------
<S>                                                           <C>        <C>       <C>
Revenues (notes 6 and 8):
 Service....................................................  $ 93,156   $91,289   $ 86,328
 Tower ownership and management.............................        --        --        860
                                                              --------   -------   --------
Total revenues..............................................    93,156    91,289     87,188
                                                              --------   -------   --------
Cost of revenues:
 Service....................................................    61,581    62,263     66,238
 Tower ownership and management.............................        --        --        521
                                                              --------   -------   --------
Total cost of revenues......................................    61,581    62,263     66,759
                                                              --------   -------   --------
Gross profit................................................    31,575    29,026     20,429
                                                              --------   -------   --------
Operating expenses:
 Sales and marketing........................................     1,200     2,466      3,843
 General and administrative.................................    13,030    18,314     22,063
 Special charge (credit) (note 8)...........................    28,920    (3,894)        --
 Restructuring charge(9)....................................        --        --      1,256
 Non-cash compensation (note 15)............................     6,831       514        362
 Depreciation and amortization..............................     2,330     3,410      2,409
                                                              --------   -------   --------
Total operating expenses....................................    52,311    20,810     29,933
                                                              --------   -------   --------
Operating income (loss).....................................   (20,736)    8,216     (9,504)
                                                              --------   -------   --------
Other income (expense):
 Interest income............................................       925       736        898
 Interest expense...........................................    (3,050)   (3,289)    (2,295)
 Other......................................................     2,385     1,275       (618)
                                                              --------   -------   --------
Total other income (expense)................................       260    (1,278)    (2,015)
                                                              --------   -------   --------
Income (loss) from continuing operations before income
 taxes......................................................   (20,476)    6,938    (11,519)
Provision (benefit) for income taxes (note 11)..............    (8,745)    1,548     (4,561)
                                                              --------   -------   --------
Income (loss) from continuing operations....................   (11,731)    5,390     (6,958)
Income (loss) from discontinued operations net of tax
 benefits...................................................       447     2,185    (17,785)
                                                              --------   -------   --------
Net income (loss)...........................................  $(11,284)  $ 7,575   $(24,743)
                                                              ========   =======   ========
Net income (loss) per share:
Continuing Operations
 Basic......................................................             $  0.37   $  (0.45)
                                                                         =======   ========
 Diluted....................................................             $  0.34   $  (0.45)
                                                                         =======   ========
Discontinued operations
 Basic......................................................             $  0.15   $  (1.15)
                                                                         =======   ========
 Diluted....................................................             $  0.14   $  (1.15)
                                                                         =======   ========
Net income (loss) per share:
 Basic......................................................             $  0.51   $  (1.60)
                                                                         =======   ========
 Diluted....................................................             $  0.47   $  (1.60)
                                                                         =======   ========
Pro forma income (loss) data (unaudited) (note 3):
 Income (loss) from continuing operations before income
   taxes....................................................  $(20,476)
 Pro forma provision (benefit) for income taxes (note 12)...    (1,783)
                                                              --------
 Pro forma net income (loss) from continuing operations.....   (18,693)
 Pro forma loss from discontinued operations, net of tax....    (2,076)
                                                              --------
 Pro forma net income (loss) (unaudited):...................  $(20,769)
                                                              ========
 Pro forma net income (loss) per share (unaudited):
   Continuing operations:
   Basic....................................................  $  (1.53)
                                                              ========
   Diluted..................................................  $  (1.53)
                                                              ========
   Discontinued operations:
   Basic....................................................  $  (0.17)
                                                              ========
   Diluted..................................................  $  (0.17)
                                                              ========
   Pro forma net income (loss):
   Basic....................................................  $  (1.70)
                                                              ========
   Diluted..................................................  $  (1.70)
                                                              ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                       47
<PAGE>   48
 
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                                    ASSETS:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1997       1998
                                                              -------   --------
<S>                                                           <C>       <C>
Current assets:
  Cash and cash equivalents (note 5)........................  $14,878   $  4,240
  Short-term investments (note 3)...........................    8,619        113
  Receivables, net of allowance for doubtful accounts of
     $11,929, and $10,453 at December 31, 1997 and 1998
     Trade accounts receivable (note 8).....................   10,216     13,028
     Due from related parties and affiliates (note 6).......    1,089        611
     Unbilled receivables (note 8)..........................    9,590      6,078
  Deferred income taxes, net (note 11)......................    9,874     12,050
  Prepaid expenses and other current assets.................    1,042      3,072
  Net assets of discontinued operations (note 4)............   28,855      9,139
                                                              -------   --------
          Total current assets..............................   84,163     48,331
Property and equipment, net (note 7)........................    7,691     22,132
Investments in joint ventures (note 10).....................    1,300         --
Deferred income taxes, net (note 11)........................    1,513     12,705
Other assets (note 8).......................................      753      1,036
                                                              -------   --------
                                                              $95,420   $ 84,204
                                                              =======   ========
 
                     LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
  Accounts payable..........................................  $   328   $  4,637
  Accrued expenses (note 8).................................    6,518      8,153
  Accrued employee compensation and benefits................    8,220      9,702
  Deferred revenue..........................................      801        277
  Income taxes payable (note 11)............................    7,507      7,894
  Obligations under incentive plans (note 15)...............    1,106         55
  Other current liabilities.................................      528      3,142
                                                              -------   --------
          Total current liabilities.........................   25,008     33,860
Convertible subordinated debt (note 13).....................   50,000     50,000
Other liabilities...........................................      210        115
                                                              -------   --------
          Total liabilities.................................   75,218     83,975
                                                              -------   --------
 
Commitments and contingencies (notes 1, 9 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; 6,644 shares and 7,180 shares
      issued and outstanding at December 31, 1997 and 1998,
      respectively..........................................       66         72
  Class B common stock; $.01 par value:
     20,000 shares authorized; 8,461 shares issued and
      outstanding at December 31, 1997 and 1998.............       85         85
  Paid-in capital...........................................   33,210     37,130
  Accumulated deficit.......................................   (8,847)   (33,590)
  Note receivable from shareholder (note 6).................   (2,800)    (2,100)
                                                              -------   --------
          Subtotal..........................................   21,714      1,597
Accumulated other comprehensive loss -- foreign currency
  translation adjustments...................................   (1,512)    (1,368)
                                                              -------   --------
          Total Shareholders' equity........................   20,202        229
                                                              -------   --------
                                                              $95,420   $ 84,204
                                                              =======   ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                       48
<PAGE>   49
 
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
 
                                                           COMMON STOCK                                                ACCUMULATED
                                                         -----------------                                                OTHER
                                             PREFERRED                       PAID-IN    COMPREHENSIVE   ACCUMULATED   COMPREHENSIVE
                                               STOCK     CLASS A   CLASS B   CAPITAL    INCOME (LOSS)    (DEFICIT)    INCOME (LOSS)
                                             ---------   -------   -------   --------   -------------   -----------   -------------
<S>                                          <C>         <C>       <C>       <C>        <C>             <C>           <C>
Balances at December 31, 1995..............     $--        $--      $ --     $     --                    $     --        $   (79)
 Dividends paid............................      --         --        --           --                          --             --
 Net income -- pre-merger (note 2).........      --         --        --           --                          --             --
 Cumulative foreign currency translation
   adjustment..............................      --         --        --           --                          --           (132)
 Loan to member............................      --         --        --        1,640                          --             --
 Repayment of loan to member...............      --         --        --           --                          --             --
 Assumption of subordinated debt (notes 2 &
   13).....................................      --         --        --      (30,000)                         --             --
 Merger of LCC, L.L.C. into LCC
   International, Inc. (note 2)............      --         --       114       (2,920)                         --            211
 Net proceeds of initial public offering
   (note 2)................................      --         61       (29)      44,725                          --             --
 Loan to shareholder (notes 2 and 6).......      --         --        --           --                          --             --
 Exercise/issuance of stock options (note
   15).....................................      --         --        --       14,908                          --             --
 Net (loss) -- post merger.................      --         --        --           --     $(16,422)       (16,422)            --
 Other comprehensive loss -- foreign
   currency translation adjustments........                                                   (100)                         (100)
                                                                                          --------
 Comprehensive loss........................      --         --        --           --     $(16,522)            --             --
                                                ---        ---      ----     --------     ========       --------        -------
Balances at December 31, 1996..............      --         61        85       28,353                     (16,422)          (100)
 Payment from Shareholder..................      --         --        --          261                          --             --
 Exercise/issuance of stock options........      --          5        --        4,148                          --             --
 Issuance of common stock..................      --         --        --          448                          --             --
 Net income................................      --         --        --           --     $  7,575          7,575             --
 Other comprehensive loss -- foreign
   currency translation adjustments........      --         --        --           --       (1,412)            --         (1,412)
                                                                                          --------
 Comprehensive loss........................      --         --        --           --     $  6,163             --             --
                                                ---        ---      ----     --------     ========       --------        -------
Balances at December 31, 1997..............      --         66        85       33,210                      (8,847)        (1,512)
 Payment from Shareholder..................      --         --        --          209                          --             --
 Exercise/issuance of stock options........      --          4        --        3,012                          --             --
 Issuance of common stock..................      --          2        --          699                          --             --
 Net (loss)................................      --         --        --           --     $(24,743)       (24,743)            --
 Other comprehensive income -- foreign
   currency translation adjustments........      --         --        --           --          144             --            144
                                                                                          --------
 Comprehensive loss........................      --         --        --           --     $(24,599)            --             --
                                                ---        ---      ----     --------     ========       --------        -------
Balances at December 31, 1998..............     $--        $72      $ 85     $ 37,130                    $(33,590)       $(1,368)
                                                ===        ===      ====     ========                    ========        =======
 
<CAPTION>
                                                NOTES
                                             RECEIVABLE
                                                FROM
                                             SHAREHOLDER   MEMBERS'
                                              (NOTE 6)     CAPITAL     TOTAL
                                             -----------   --------   --------
<S>                                          <C>           <C>        <C>
Balances at December 31, 1995..............    $(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)
 Loan to member............................     (7,568)          --     (5,928)
 Repayment of loan to member...............     16,950           --     16,950
 Assumption of subordinated debt (notes 2 &
   13).....................................         --           --    (30,000)
 Merger of LCC, L.L.C. into LCC
   International, Inc. (note 2)............         --        2,595         --
 Net proceeds of initial public offering
   (note 2)................................         --           --     44,757
 Loan to shareholder (notes 2 and 6).......     (3,500)          --     (3,500)
 Exercise/issuance of stock options (note
   15).....................................         --           --     14,908
 Net (loss) -- post merger.................         --           --    (16,422)
 Other comprehensive loss -- foreign
   currency translation adjustments........                               (100)
 Comprehensive loss........................         --           --         --
                                               -------     --------   --------
Balances at December 31, 1996..............     (3,500)          --      8,477
 Payment from Shareholder..................        700           --        961
 Exercise/issuance of stock options........         --           --      4,153
 Issuance of common stock..................         --           --        448
 Net income................................         --           --      7,575
 Other comprehensive loss -- foreign
   currency translation adjustments........         --           --     (1,412)
 Comprehensive loss........................         --           --         --
                                               -------     --------   --------
Balances at December 31, 1997..............     (2,800)          --     20,202
 Payment from Shareholder..................        700           --        909
 Exercise/issuance of stock options........         --           --      3,016
 Issuance of common stock..................         --           --        701
 Net (loss)................................         --           --    (24,743)
 Other comprehensive income -- foreign
   currency translation adjustments........         --           --        144
 Comprehensive loss........................         --           --         --
                                               -------     --------   --------
Balances at December 31, 1998..............    $(2,100)    $     --   $    229
                                               =======     ========   ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                       49
<PAGE>   50
 
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                1996       1997       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations....................  $(11,731)  $  5,390   $ (6,958)
Adjustments to reconcile income (loss) from continuing
  operations to net cash provided by (used in) operating
  activities:
  Depreciation and amortization.............................     2,330      3,410      2,409
  Provision for doubtful accounts...........................     1,661      3,206      2,047
  Non-cash compensation.....................................     6,831        514        362
  Special charge (credit)...................................    28,920     (3,894)        --
  (Income) loss from investments in joint ventures, net.....      (346)       350        267
  Gain on disposition of joint venture, net.................      (514)        --         --
  Changes in operating assets and liabilities:
    Trade, unbilled, and other receivables..................       274       (643)      (869)
    Accounts payable and accrued expenses...................    13,820     (6,953)     7,426
    Other current assets and liabilities....................   (37,578)    10,513     (2,780)
    Other noncurrent assets and liabilities.................    (9,806)       528    (10,796)
                                                              --------   --------   --------
Net cash (used in) provided by operating activities.........    (6,139)    12,421     (8,892)
                                                              --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of investment securities..............       558         --      8,506
  Purchase of investment securities.........................    (6,714)    (1,685)
  Purchases of property and equipment.......................    (2,208)    (6,684)   (16,735)
  Investment in joint ventures..............................      (787)        --        289
  Issuance of notes receivable..............................    (5,602)        --         --
  Proceeds from sale of investment in joint venture.........     3,800         --         --
                                                              --------   --------   --------
Net cash used in investing activities.......................   (10,953)    (8,369)    (7,940)
                                                              --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock, net...............    44,902        448        701
  Proceeds from exercise of options.........................        --      3,573      2,655
  Proceeds from line of credit/note.........................    10,000         --         --
  Payments on line of credit/note...........................   (20,000)                   --
  Distributions and loans to member.........................    (5,928)        --         --
  Repayment of loans to member..............................    16,950         --         --
  Payments of dividends.....................................   (16,950)        --         --
  Loan to shareholder.......................................    (3,500)        --         --
  Repayment of loan to shareholder..........................        --        961        909
                                                              --------   --------   --------
Net cash provided by financing activities...................    25,474      4,982      4,265
                                                              --------   --------   --------
Net increase (decrease) in cash and cash
  equivalents -- continuing operations......................     8,382      9,034    (12,567)
Net (decrease) increase in cash and cash
  equivalents -- discontinued operations....................    (1,065)    (7,469)     1,929
                                                              --------   --------   --------
Net increase (decrease) in cash and cash equivalents........     7,317      1,565    (10,638)
Cash and cash equivalents at beginning of period............     5,996     13,313     14,878
                                                              --------   --------   --------
Cash and cash equivalents at end of period..................  $ 13,313   $ 14,878   $  4,240
                                                              ========   ========   ========
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest................................................  $  3,749   $  3,286   $  2,250
    Income taxes............................................     3,535      1,317      1,995
Supplemental schedule of non-cash investing and financing
  activities:
  Assumption of convertible debt (notes 2 and 13)...........  $ 30,000   $     --   $     --
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
                                       50
<PAGE>   51
 
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
(1) DESCRIPTION OF OPERATIONS
 
     LCC International, Inc. and subsidiaries (also referred to herein as the
"Company") is a leading provider of integrated services relating to the design,
engineering and build-out of wireless communications systems. The Company's
businesses 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 program and
construction management services related to the build-out of wireless
communications systems.
 
  Towers
 
     Tower ownership and management -- The Company acquires, builds, owns and
manages multi-tenant telecommunications towers and leases space thereon to
wireless communication carriers.
 
     The Company operates in a highly competitive environment subject to rapid
technological change and emergence of new technologies. Future revenues are
dependent upon significant additional financing to pursue tower construction and
acquisitions, the successful implementation of a tower expansion strategy, 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 management and professional staff. Although the Company
believes that its services 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 14) are due to MCI Telecommunications Corporation
and are convertible at certain specified times, including during the 45 day
period commencing on June 27, 1999 ("Investor Conversion Right"), the 45 day
period commencing on August 27, 1999 ("Company Conversion Right") 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 is
considering exercising the Company Conversion Right in August 1999 to cause the
convertible subordinated debt to be converted into 2,841,099 shares of Class A
Common Stock. This could result in a significant taxable gain to the Company.
 
     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
                                       51
<PAGE>   52
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
company to a Subchapter C Corporation. The income tax benefit was 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 primarily 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 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, 1998 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 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, 1997 and 1998:
 
<TABLE>
<CAPTION>
                                                       1997        1998
                                                     --------    --------
                                                        (IN THOUSANDS)
<S>                                                  <C>         <C>
Latin America......................................   $  701      $3,887
Europe.............................................    1,428       4,776
Middle East........................................       --          29
Asia-Pacific.......................................    4,248       1,675
</TABLE>
 
     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, exchange rate fluctuations or other international developments (see
notes 8 and 19).
 
                                       52
<PAGE>   53
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     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, in 1997 the Company recorded
additional reserves of approximately $1.5 million to cover potential
Asia-Pacific region exposure.
 
     Revenues generated from one customer were approximately $12.9 million,
$16.0 million, and $15.0 million, or 13.8%, 17.5%, and 17.2% of total revenues
for 1996, 1997 and 1998 respectively. In addition, revenues from another
customer were approximately $11.9 million and $15.4 million, or 12.8% and 16.8%
of total 1996 and 1997 revenues, respectively. Revenues from another customer
were approximately $13.9 million or 15.9% of revenues in 1998.
 
  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 related assets. Furniture and equipment are
depreciated over useful lives which range from eighteen months to seven years.
RF transmission towers are depreciated over a useful life of 25 years. The costs
of leasehold improvements are capitalized and amortized using the straight-line
method over the shorter of their estimated useful lives or the terms of the
respective leases.
 
  Recovery of Long-Lived Assets
 
     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 undiscounted future cash flows is less than the carrying
amount of the asset.
 
  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, and lease revenues from its asset
management business. 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. Lease revenues from the ownership and management of RF transmission
towers are recognized over the term of the related lease. Revenues earned but
not yet billed are reflected as unbilled receivables in the accompanying
consolidated balance sheets. The Company expects substantially all unbilled and
billed receivables to be collected within one year.
 
  Income Taxes
 
     Deferred income taxes are determined in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109. Under this statement, temporary
differences arise as a result of the differences between
 
                                       53
<PAGE>   54
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
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.
 
     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 other comprehensive loss 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).
 
                                       54
<PAGE>   55
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
  Other Comprehensive Income (Loss)
 
     During 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income, which established standards for reporting and displaying comprehensive
income and its components in a financial statement that is displayed in equal
prominence as other financial statements. Comprehensive income is defined as net
income plus the changes in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. Other
comprehensive income refers to revenues, expenses, gains and losses that under
generally accepted accounting principles are included in comprehensive income,
but excluded from net income. Other comprehensive income (loss)consists solely
of foreign currency translation adjustments in 1996, 1997 and 1998. Changes in
components of other comprehensive income (loss) are reported net of income tax,
as follows (in thousands).
 
<TABLE>
<CAPTION>
                                   1996                              1997                             1998
                       -----------------------------   --------------------------------   -----------------------------
                       PRETAX   TAX EXPENSE    NET     PRETAX    TAX EXPENSE     NET      PRETAX   TAX EXPENSE    NET
                       AMOUNT    (CREDIT)     AMOUNT   AMOUNT     (CREDIT)      AMOUNT    AMOUNT    (CREDIT)     AMOUNT
                       ------   -----------   ------   ------    -----------    ------    ------   -----------   ------
<S>                    <C>      <C>           <C>      <C>       <C>           <C>        <C>      <C>           <C>
Foreign currency
  translation
  adjustments........  $(200)      $(100)     $(100)   $(2,179)     $(767)     $(1,412)    $222        $78        $144
                       =====       =====      =====    =======      =====      =======     ====        ===        ====
</TABLE>
 
  Reclassification of Prior-Years' Balances
 
     Prior-years' balances have been reclassified to conform with the
current-year presentation.
 
(4) DISCONTINUED OPERATIONS
 
     In March 1999, the Company's Board of Directors adopted a plan to
discontinue the operations comprising its software and hardware products
segments. Software products develops software and data which support the design
and operation of wireless communication systems. Hardware products are used in
the implementation, testing and maintenance of wireless communications systems.
The Company has engaged an investment banking firm to assist in the marketing
and sale of these segments. The sale of the product segments are expected to be
completed during 1999. The Company currently anticipates that any gain on the
sale of the product segments would be sufficient to offset operating losses of
such segments to the date of sale, though there can be no assurance that this
will be the case.
 
     Revenue from the Products businesses were $48.4 million, $64.0 million and
$33.8 million for the years ended December 31, 1996, 1997, and 1998,
respectively. Net income (loss) was $0.4 million, $2.2 million, and $(17.8)
million for the years ended December 31, 1996, 1997 and 1998, respectively.
 
                                       55
<PAGE>   56
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     The components of net assets of discontinued operations included in the
Consolidated Balance Sheets at December 31, 1997 and 1998 were as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                    1997        1998
                                                  --------    --------
<S>                                               <C>         <C>
Receivables, net:
     Trade accounts receivable..................  $ 20,427    $ 9,429
     Due from related parties...................       322         56
     Unbilled receivables.......................     2,105        801
Inventory.......................................     7,400      6,841
Prepaid expenses and other current assets.......       972        190
Property and equipment, net.....................     2,439      3,170
Software development costs, net.................     6,534      1,168
Other noncurrent assets, net....................     4,029      3,432
Note payable....................................    (1,395)    (2,368)
Accounts payable................................    (4,441)    (2,593)
Accrued expenses................................    (4,195)    (4,379)
Deferred revenue................................    (3,849)    (4,721)
Other liabilities...............................    (1,493)    (1,887)
                                                  --------    -------
                                                  $ 28,855    $ 9,139
                                                  ========    =======
</TABLE>
 
(5) CASH AND CASH EQUIVALENTS
 
     At December 31, cash and cash equivalents consisted of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                                    1997          1998
                                                                  --------      --------
<S>                                                               <C>           <C>
Cash in banks...............................................      $ 1,899        $2,120
Overnight repurchase agreements.............................        1,195         1,082
Short-term commercial paper.................................       11,699         1,000
Short-term money market funds...............................           85            38
                                                                  -------        ------
                                                                  $14,878        $4,240
                                                                  =======        ======
</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, 1997, and 1998 the Company provided services 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, 1997 and 1998 for services provided
to these customers were approximately $2.0 million, $1.1 million and $750,000,
respectively. Receivables from these related parties were $524,000 and $119,000
at December 31, 1997 and 1998, 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 $535,000 and
$381,000 at December 31, 1997 and 1998, respectively. During calendar 1997 and
through July 22, 1998, 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.
 
                                       56
<PAGE>   57
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     During 1997 and 1998 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, business insurances, interest and
foreign tax payments. At December 31, 1997 and 1998, outstanding amounts
associated with these payments totaling $30,000 and $111,000, respectively, are
included in due from related parties and affiliates within the accompanying
consolidated balance sheets.
 
     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 and October 1998, the Company
received payments of 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) PROPERTY AND EQUIPMENT
 
     At December 31, 1997 and 1998, property and equipment consisted of the
following:
 
<TABLE>
<CAPTION>
                                                                1997          1998
                                                              --------      --------
                                                                  (IN THOUSANDS)
<S>                                                           <C>           <C>
Computer equipment..........................................  $  8,294      $  8,756
Furniture and office equipment..............................     2,517         3,533
Purchased computer software.................................     4,125         4,696
Leasehold improvements......................................     2,910         3,019
RF transmission towers......................................     2,880        17,461
Vehicles....................................................        56           129
                                                              --------      --------
                                                                20,782        37,594
Less accumulated depreciation and amortization..............   (13,091)      (15,462)
                                                              --------      --------
                                                              $  7,691      $ 22,132
                                                              ========      ========
</TABLE>
 
(8) 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 $11.3 million, respectively, and related amounts
receivable were approximately $2.2 million and $9.6 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
 
                                       57
<PAGE>   58
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
prime plus 2%, and were payable upon maturity of the notes on March 31, 1997.
Both customers were 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 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
consequently recorded a special charge of $28.9 million pre-tax ($23.8 million
after tax or $1.95 per share) at December 31, 1996. The $28.9 million special
charge consisted of a reserve against the Company's aggregate receivable
exposure at December 31, 1996 of $12.1 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 $5.3
million related to loss contracts under which the Company was obligated to
perform at December 31, 1996.
 
     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 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 $28.9 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. During calendar 1998, NextWave also sought
court protection under Chapter 11 of the U.S. Bankruptcy Code.
 
(9) RESTRUCTURING CHARGE
 
     On October 20, 1998, the Company's Board of Directors approved a
restructuring plan that resulted in a total fourth quarter charge of
approximately $2.5 million, including approximately $1.2 million related to
continuing operations. The restructuring charge included $0.1 million related to
Company's Services businesses, $1.1 million related to corporate general and
administrative expenses and $1.3 million related to the Company's products
businesses. The charge was taken to cover the one-time costs associated with the
closure of the Company's office in Dusseldorf, Germany, a reduction in
non-billable positions of approximately
 
                                       58
<PAGE>   59
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
70 full and part-time employees and approximately 30 contractors. As of December
31, 1998, a total liability of $1.4 million remained, including approximately
$1.0 million related to continuing operations. The $1.0 million is included in
other current liabilities in the accompanying consolidated 1998 balance sheet.
 
(10) INVESTMENTS IN JOINT VENTURES
 
     The Company's investment in joint ventures at December 31, 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 $37,000 in 1997.
 
     The unaudited condensed financial statements of Koll as of and for the
years ended December 31, 1996 and 1997 were as follows:
 
<TABLE>
<CAPTION>
                                                                1996          1997
                                                              --------      --------
                                                                  (IN THOUSANDS)
<S>                                                           <C>           <C>
CONDENSED STATEMENTS OF OPERATIONS
  Revenues..................................................  $20,143        $8,422
  Cost and expenses.........................................   18,287         8,982
                                                              -------        ------
  Net income (loss).........................................  $ 1,856        $ (560)
                                                              =======        ======
CONDENSED BALANCE SHEETS
  Current assets............................................  $ 6,969        $3,826
  Noncurrent assets.........................................      329         2,608
  Current liabilities.......................................    2,487         2,799
  Stockholders' equity......................................    4,811         3,635
</TABLE>
 
     On July 20, 1998, the Company acquired the remaining 66.7% membership
interest in Koll bringing its total membership interest to 100.0%. Prior to the
acquisition, the Company owned 33.3% of the membership interest, Castle Rock
Telecommunications Co., LLC (CRT) held approximately 36.7% of the membership
interest, and Koll Management Services, Inc. (KMS), held the remaining 30.0%. In
the transaction, Koll redeemed the ownership interests of KMS in exchange for
KMS's assumption of certain contract rights and associated assets and
liabilities. Koll also redeemed the membership interests of CRT in exchange for
an earn-out agreement entitling CRT to 40.0% of the pre-tax income, after
certain adjustments, derived by Koll from certain contracts with specified
customers.
 
     The Company had a 50% 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. In January 1996, the Company sold its 50% 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.
 
                                       59
<PAGE>   60
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     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.
 
     On September 30, 1998, the Company sold its interest in CCS to CCS
Management for $1.2 million. The $1.2 million is payable in two installments
consisting of (i) $600,000 due on May 31, 1999 and (ii) $600,000 due on November
30, 1999. Interest, equal to 9%, is due monthly on the first day of each month,
beginning January 1, 1999. The initial interest payment is for the period from
October 1, 1998 to January 1, 1999. As of December 31, 1998, the Company has
recorded a reserve of approximately $557,000 related to the transaction.
 
(11) INCOME TAXES
 
     The provision (benefit) for income taxes from continuing operations
consists of the following:
 
<TABLE>
<CAPTION>
                                                           1996          1997          1998
                                                         --------      --------      --------
                                                                    (IN THOUSANDS)
<S>                                                      <C>           <C>           <C>
Current:
     Federal...........................................  $  2,355       $   --       $    --
     State and local...................................       329           --            --
     Foreign...........................................     3,562        1,284         1,582
                                                         --------       ------       -------
                                                            6,246        1,284         1,582
                                                         --------       ------       -------
Deferred:
     Federal...........................................   (13,329)        (308)       (5,782)
     State and local...................................    (1,662)         572          (361)
     Foreign...........................................        --           --            --
                                                         --------       ------       -------
                                                          (14,991)         264        (6,143)
                                                         --------       ------       -------
          Total........................................  $ (8,745)      $1,548       $(4,561)
                                                         ========       ======       =======
</TABLE>
 
     The 1997 and 1998 income tax provision related to continuing operations
does not include a $0.1 million tax benefit and a $0.4 million tax charge,
respectively, related to exercising stock options which was recorded directly to
paid-in capital.
 
                                       60
<PAGE>   61
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     Income (loss) before income taxes from continuing operations includes the
following components:
 
<TABLE>
<CAPTION>
                                                            1996       1997       1998
                                                          --------   --------   --------
                                                                  (IN THOUSANDS)
<S>                                                       <C>        <C>        <C>
Domestic................................................  $(26,071)   $1,544    $(16,203)
Foreign.................................................     5,595     5,394       4,684
                                                          --------    ------    --------
          Total.........................................  $(20,476)   $6,938    $(11,519)
                                                          ========    ======    ========
</TABLE>
 
     A reconciliation of the statutory Federal income tax rate and the effective
income tax rate from continuing operations for the years ended December 31,
1996, 1997 and 1998 follows.
 
<TABLE>
<CAPTION>
                                                        1996             1997           1998
                                                     -----------       ---------       ------
                                                      PRO FORMA
                                                     -----------
                                                     (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.................................      (1.2)             3.1           (2.0)
     Foreign.......................................       9.7             18.2           10.0
     Tax credits...................................      (9.7)           (18.2)         (10.0)
     Non deductible expenses.......................        --              7.4            9.0
     Other.........................................      (2.2)             2.1            1.1
     Valuation Allowance...........................      29.7            (25.3)         (12.7)
                                                        -----            -----         ------
Effective income tax rate..........................      (8.7)%           22.3%         (39.6)%
                                                        =====            =====         ======
</TABLE>
 
                                       61
<PAGE>   62
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     The tax effects of temporary differences that give rise to significant
portions of the net deferred tax assets at December 31, 1997 and 1998 are
presented below:
 
<TABLE>
<CAPTION>
                                                                 1997                     1998
                                                               --------                 --------
                                                                        (IN THOUSANDS)
<S>                                                            <C>           <C>        <C>
Deferred tax assets:
     Accounts receivable, principally due to allowance
       for doubtful accounts.............................      $ 4,242                  $ 3,610
     Special charge:
          Receivables...............................2,769                     2,769
          Investment................................1,884                     1,884
          Accruals................................... 371        5,024          138       4,791
                                                                              -----
     Inventory valuation method..........................          886                    1,117
     Property and equipment..............................          275                      340
     Non-cash compensation...............................        3,852                    2,484
     Accruals:
          Vacation................................... 428                       609
          Incentive compensation..................... 417                        20
          Accrued expenses..........................2,234        3,079        4,997       5,626
                                                                              -----
     Deferred revenue....................................          156                      215
     Net operating loss carry forward....................        2,191                    8,061
     Foreign tax credit carry forward....................        2,774                    5,739
     Foreign temporary differences.......................           --                      155
     Research tax credit carryover.......................           --                      108
     Other...............................................          205                      490
                                                               -------                  -------
Total gross deferred tax assets..........................       22,684                   32,736
     Less valuation allowance............................       (8,863)                  (7,443)
                                                               -------                  -------
     Deferred tax assets net of valuation allowance......       13,821                   25,293
                                                               -------                  -------
Deferred tax liabilities:
          Software development costs.....................       (2,311)                    (440)
          Other..........................................         (123)                     (98)
                                                               -------                  -------
     Total gross deferred liabilities....................       (2,434)                    (538)
                                                               -------                  -------
Net deferred tax assets..................................      $11,387                  $24,755
                                                               =======                  =======
</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, 1997 and
1998 as follows:
 
<TABLE>
<CAPTION>
                                                                1997           1998
                                                              --------       --------
<S>                                                           <C>            <C>
Current asset...............................................  $ 9,874        $12,050
Noncurrent asset............................................    1,513         12,705
                                                              -------        -------
                                                              $11,387        $24,755
                                                              =======        =======
</TABLE>
 
     At December 31, 1998, the Company had $21.4 million of U.S. Federal and
state operating loss carryforwards from continuing operations which expire
between 2011 and 2018 and foreign tax credits for U.S. tax purposes of $3.6
million which expire between 2001 and 2003.
 
     The Company also had $4.9 million of foreign operating loss carryforwards
from discontinued operations which expire between 2006 and 2008.
 
     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
 
                                       62
<PAGE>   63
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
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.
 
     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 from
continuing operations of $7.5 million (total of $8.7 million) due to the change
in tax status. The benefit is reflected in net income from continuing operations
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. The benefit is recorded as a
reduction of the net loss from discontinued operations 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 $5.1
million and a tax benefit from discontinued operations of $0.4 million, net of a
valuation allowance of $5.8 million (see note 9). The net benefit of $5.1
million is recorded as a reduction of the provision for income taxes from
continuing operations 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 provision(benefit) for income taxes presented in
the consolidated statements of operations for the year ended December 31, 1996,
represents an estimate of the taxes that would have been recorded had the
Company been a Subchapter C corporation as of January 1, 1996. The unaudited pro
forma (benefit) for income taxes for the year ended December 31, 1996 consists
of the following:
 
<TABLE>
<CAPTION>
                                                                        1996
                                                                   --------------
                                                                   (IN THOUSANDS)
                                                                     PRO FORMA
                                                                    (UNAUDITED)
                                                                   --------------
<S>                                                                <C>
Federal.....................................................          $(3,383)
State.......................................................             (393)
Foreign.....................................................            1,993
                                                                      -------
          Total.............................................          $(1,783)
                                                                      =======
</TABLE>
 
(12) NOTE PAYABLE
 
     In March 1999, the Company amended and restated the credit facility with
the Chase Manhattan Bank, as Administrative Agent ("Chase"), (together with the
LCC Europe Credit Facility the "Credit Facility") which was established in 1996.
The Credit Facility, as presently in effect, consists of a revolving loan and
letter of credit facility in an aggregate principal amount not to exceed $20.0
million for the Company and $2.5 million for LCC Europe (the "LCC Europe Credit
Facility"). The maximum amount available for
 
                                       63
<PAGE>   64
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
drawing under the Credit Facility is the sum of (1) the lesser of $10.0 million
or 85% of the amount of the Company's receivables which are deemed "eligible" as
a basis for obtaining credit and (2) an aggregate amount, not to exceed $12.5
million, which is secured by a collateralized guaranty of Dr. Rajendra Singh,
Chairman and Interim Chief Executive Officer of the Company, to the extent that
Dr. Singh has deposited the required collateral with Chase. Dr. Singh is not
contractually committed to provide any collateral to Chase. The revolving loan
commitment will expire in March 2000. 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 (other than the
LCC Europe 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 plus,
in each case, 0%, 0.25% or 0.50% depending on the ratio of the Company's
Consolidated Debt (as defined in the credit agreement) to Consolidated EBITDA
(as defined in the credit agreement) for the most recently ended fiscal quarter
(the "Cash Flow Leverage Ratio") on the applicable date, 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 1.0%, 1.5% or 2.0% depending on the Company's Cash Flow Leverage Ratio on
the applicable date. Interest under the LCC Europe Credit Facility accrues at
the Company's election (subject to certain restrictions and limitations
contained in the credit agreement) at the fixed rate for a designated period of
time (1,2,3 or 6 months) equal to the rate at which U.S. dollar offered to
leading banks in the London interbank market or at which Norwegian krone are
offered to leading banks in the Norwegian interbank market, plus, in each case
1.0%, 1.5% or 2.0% depending on the Company's Cash Flow Leverage Ratio on the
applicable date.
 
     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
(except that, due to local regulatory restrictions, the assets of LCC Europe
have been pledged as security solely for the LCC Europe Credit Facility) and are
guaranteed in full by LCC Development Company, L.L.C., LCC Design Services,
L.C.C. and Koll Telecommunications Services, L.L.C.,wholly-owned subsidiaries of
the Company. Such obligations are guaranteed by Microcell solely to the extent
that Microcell has outstanding borrowings under its revolving line of credit and
security agreement with the Company (the "Microcell Credit Facility"); any
payments made by Microcell to Chase under the Credit Facility shall reduce its
outstanding obligations under the Microcell Credit Facility on a dollar for
dollar basis. Any payments of principal by Microcell under its line of credit
facility with the Company must be used to prepay any outstanding loans under the
Credit Facility and the amount available under the Credit Facility shall be
permanently reduced by the amount of any such prepayment. The payment and
performance of the obligations of the Company under the Credit Facility are also
guaranteed, up to a maximum of $12.5 million plus interest thereon, by Dr.
Rajendra Singh, one of the Company's founders and Interim Chief Executive
Officer. All obligations arising under the LCC Europe Credit Facility are
guaranteed in full by the Company.
 
     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 maintain certain minimum liquidity
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 certain liens, certain
investments and acquisitions, sales of assets, declaration or payment of
dividends 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
 
                                       64
<PAGE>   65
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
cases) continues unremedied for 30 days, materially adverse changes, 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 insolvency 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.
 
     No amounts were outstanding under the Credit Facility at December 31, 1997
and 1998 with the exception of amounts outstanding under the LCC Europe Credit
Facility and outstanding letters of credit. Approximately $1.4 million and $2.4
million were outstanding under the LCC Europe Credit Facility at December 31,
1997 and 1998, respectively, and are included in net assets of discontinued
operations in the accompanying consolidated balance sheets. Outstanding letters
of credit were $2.1 million and $5.8 million at December 31, 1997 and 1998,
respectively.
 
(13) CONVERTIBLE SUBORDINATED DEBT
 
     In June 1994, the Company issued to 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 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 Company fully and
                                       65
<PAGE>   66
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
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
Telcom Ventures Subordinated Note from Telcom Ventures. As a result of this
assumption the Company has the exclusive right to exercise all Telcom Ventures'
rights under the Telcom 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.
 
(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 $317,000, $444,000 and
$652,000 for the years ended December 31, 1996, 1997, and 1998, 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, 1997, and 1998 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 income (loss) from continuing operations and income (loss) from
continuing operations per share would have been reduced to the pro forma amounts
indicated below.
 
<TABLE>
<CAPTION>
                                                           1996              1997              1998
                                                        -----------       -----------       -----------
                                                        (PRO FORMA)       (PRO FORMA)       (PRO FORMA)
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>               <C>               <C>
Income (loss) from continuing operations
     As reported......................................   $(18,693)          $5,390            $(6,958)
     Pro forma........................................    (19,023)           3,262             (9,312)
Income (loss) from continuing operations per share
     As reported:
          Basic.......................................   $  (1.53)          $ 0.37            $ (0.45)
          Diluted.....................................      (1.53)            0.34              (0.45)
     Pro forma:
          Basic.......................................   $  (1.56)          $ 0.22            $ (0.60)
          Diluted.....................................      (1.56)            0.20              (0.60)
</TABLE>
 
                                       66
<PAGE>   67
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     Income (loss) from continuing operations reflects only options granted in
1995, 1996, 1997 and 1998. 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, 1997 and 1998 was $4.25, $8.41 and $10.02, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions:
 
<TABLE>
<CAPTION>
                                                 1996        1997        1998
                                               ---------   ---------   ---------
<S>                                            <C>         <C>         <C>
Expected dividend yield......................     0%          0%          0%
Risk-free interest rate......................    6.4%        6.0%        5.0%
Expected life................................  2-6 years   2-8 years   2-8 years
Volatility...................................    48.0%       65.0%       65.0%
</TABLE>
 
     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 and 100,710 shares in 1998. Compensation
cost of $161,000 and $175,000, respectively, 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.
 
<TABLE>
<CAPTION>
                                                           1997       1998
                                                         --------   --------
<S>                                                      <C>        <C>
Expected dividend yield................................     0%         0%
Expected life..........................................  3 months   3 months
Volatility.............................................    65%        65%
Risk-free interest rate................................     3%      2.5-3.0%
</TABLE>
 
     The weighted average fair value of the purchase rights granted in 1997 and
1998 was $2.46 and $1.74, respectively.
 
     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
 
                                       67
<PAGE>   68
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
over the original vesting period of the Phantom Membership Plan awards,
generally ratably over, or at the end of, 3 or 5 years.
 
     Compensation expense related to the annual award feature of the Phantom
Membership Plan was $764,000 for 1996. 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 $6.8 million, $0.5 million, and $0.4 million for 1996,
1997, and 1998, respectively, the liability for which was included in paid-in
capital in the accompanying consolidated balance sheets.
 
     In March 1996, LCC adopted an Employee Stock 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. An additional 1,501,000 shares of Class A Common Stock were reserved under
the 1996 Employee Stock Option Plan in 1998. Options to purchase approximately
580,000 shares of Class A Common Stock at the offering price of $16 were
granted, at the time of the Offering 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, at the time of the Offering 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 Company to replace the options granted by LCC in connection with the
Employee Stock 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. 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. An
additional 80,000 shares of Class A Common Stock were reserved under the
Director's Plan in 1998. 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 The
Carlyle Group. The option exercise price for these options are and will be 100%
of the fair market value of the 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
                                       68
<PAGE>   69
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
Offering, and an additional option was or will be granted to purchase 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.
 
     On December 11, 1998, the Company re-priced substantially all options
previously granted under the 1996 Employee Stock Option Plan to $5.00 per share
which exceeded the fair market value of the stock on that date. Approximately
887,000 share options were subject to re-pricing.
 
     Changes in stock options outstanding were as follows:
 
<TABLE>
<CAPTION>
                                                1997                              1998
                                   -------------------------------   -------------------------------
                                                      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            2,509           $ 9.89
Granted..........................        418             15.54            1,342            18.31
Exercised........................       (531)             6.08             (431)            6.74
Terminated.......................       (191)            13.08           (1,207)           17.95
                                       -----                             ------
Balance at end of year...........      2,509              9.89            2,213             7.42
                                       =====                             ======
</TABLE>
 
     The following table summarizes information about options at December 31,
1998.
 
<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, 1998   CONTRACTUAL LIFE       PRICE       DECEMBER 31, 1998       PRICE
   ---------------      -----------------   ----------------   -------------   -----------------   -------------
                         (IN THOUSANDS)        (IN YEARS)                       (IN THOUSANDS)
<S>                     <C>                 <C>                <C>             <C>                 <C>
$4.00.................          706              7.73               4.00               566              4.00
$5.00.................          887              8.83               5.00               285              5.00
$8.50-12.65...........          231              8.45              11.69                97             11.66
$14.875-16.00.........          259              8.14              15.41               154             15.67
$18.00-$20.38.........          130              9.00              18.97                 7             19.84
                              -----                                                  -----
                              2,213              8.16               7.42             1,109              6.64
                              =====                                                  =====
</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. 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
subsequent to 1995. Compensation expense accrued in connection with the
distribution of the value of vested Incentive Awards was $541,000, $409,000, and
$4,000 for the years ended December 31, 1996, 1997, and 1998, respectively,
which has been included in obligations under incentive plans, net of current
portion in the accompanying consolidated balance sheets. As of March 29, 1999,
all Incentive Awards granted under the Incentive Compensation Plan were paid in
full.
 
                                       69
<PAGE>   70
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
(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 $289,000 and $763,000 at December 31,
1997 and 1998, 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.
 
     Future minimum rental payments and receivables under non-cancelable
operating leases, excluding executory costs, are as follows:
 
<TABLE>
<CAPTION>
                                                               RENTAL RECEIVABLES
                                              RENTAL PAYABLE    UNDER SUBLEASES
                                              --------------   ------------------
                                                        (IN THOUSANDS)
<S>                                           <C>              <C>
1999........................................     $ 3,651             $1,809
2000........................................       3,724              1,877
2001........................................       3,799              1,650
2002........................................       3,548                249
2003........................................       3,292                 --
Thereafter..................................      12,039                 --
</TABLE>
 
     Rent expense under operating leases was approximately $5.0 million, $5.3
million and $6.9 million for the years ended December 31, 1996, 1997, and 1998,
respectively.
 
     The Company also incurrs rent expense for ground leases and receives rental
income from its tenants for the use of its RF transmission towers. Certain
ground leases and leases with tenants include renewal options and/or escalation
clauses. Future minimum ground/tower leasing expense/revenue under tower leases
in effect at December 31, 1998 are as follows:
 
<TABLE>
<CAPTION>
                                              RENTAL PAYABLE   RENTAL RECEIVABLES
                                              --------------   ------------------
                                                        (IN THOUSANDS)
<S>                                           <C>              <C>
1999........................................       $664              $1,406
2000........................................        665               1,380
2001........................................        674               1,358
2002........................................        622               1,276
2003........................................        425                 926
Thereafter..................................        972               1,909
</TABLE>
 
(17) CONTINGENCIES
 
     On February 12, 1999, the minority shareholders of the Company's
majority-owned Microcell subsidiary filed a suit against the Company, the
directors appointed by the Company to the Microcell Board and
 
                                       70
<PAGE>   71
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
Microcell itself, seeking rescission of the shareholders' agreement between the
Company and the minority shareholders (which concerns management of Microcell,
funding commitments and other matters), the appointment of a custodian or
receiver and unspecified monetary damages. On February 16, 1999, the plaintiffs
filed a motion to expedite and a motion for appointment of a receiver or
custodian. The suit alleges breach of a fiduciary duty, usurpation of corporate
opportunities, and waste of Microcell's corporate assets, tortious interference
with Microcell's prospective business relations, and violations of the
shareholders' agreement. Microcell and the Company have filed a motion to
dismiss. The Company believes that the case is without merit and intends to
contest this action vigorously.
 
The Company is party to various other 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, 1996, 1997 and 1998 are as follows:
 
<TABLE>
<CAPTION>
                                            1996                           1997                          1998
                               ------------------------------   ---------------------------   --------------------------
                               PRO FORMA                                                                           PER
                                  NET               PER SHARE    NET              PER SHARE     NET               SHARE
                                (LOSS)     SHARES    AMOUNT     INCOME   SHARES    AMOUNT      (LOSS)    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:
Continuing operations........  $(18,693)                        $5,390                        $ (6,958)
Discontinued Operations......    (2,076)                         2,185                         (17,785)
                               --------                         ------                        --------
Total........................  $(20,769)   12,211               $7,575   14,740               $(24,743)  15,509
                               ========                         ======                        ========
Continuing Operations........                        $(1.53)                        $0.37                         $(0.45)
Discontinued Operations......                         (0.17)                         0.15                          (1.15)
                                                     ------                         -----                         ------
Total........................                        $(1.70)                        $0.51                         $(1.60)
                                                     ======                         =====                         ======
EFFECTIVE OF DILUTIVE
  SECURITIES
  Convertible debt...........                  --                                                            --
  Stock option plans.........                  --                         1,215                              --
                                           ------                        ------                          ------
DILUTIVE EPS
  Net income (loss) available
    to common stockholders
    and assumed conversions:
  Continuing Operations......  $(18,693)             $(1.53)    $5,390              $0.34     $ (6,958)           $(0.45)
  Discontinued Operations....    (2,076)              (0.17)     2,185               0.14      (17,785)            (1.15)
                               --------              ------     ------              -----     --------            ------
  Total......................  $(20,769)   12,211    $(1.70)    $7,575   15,955     $0.47     $(24,743)  15,509   $(1.60)
                               ========    ======    ======     ======   ======     =====     ========   ======   ======
</TABLE>
 
                                       71
<PAGE>   72
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     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, 1997 and 1998, 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 and 2.2 million shares of Class A Common Stock
were outstanding during 1996 and 1998, respectively, but were not included in
the computation of diluted earnings per share because the effect of which would
have been anti-dilutive.
 
(19) SEGMENT REPORTING
 
     The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, during the fourth quarter of 1998. SFAS No.
131 established standards for reporting information about the operating segments
in interim and annual financial reports issued to stockholders. It also
established standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and assess performance. The Company's chief
operating decision making group is the Executive Committee which is comprised of
the Chief Operating Officer and the lead executive of each of the Company's
operating segments. The operating segments are managed separately because each
operating segment represents a strategic business unit that offers distinct
services.
 
     The Company's operating segments include Services (Engineering and Design
Services and Program Management Services) and Tower ownership and management.
Engineering and Design Services provides engineering and design services for
cellular phone system operators, personal communication system ("PCS") operators
and other wireless communication systems providers. Program Management Services
provides program and construction management services related to the build-out
of wireless communication systems. Tower ownership and management acquires,
builds, owns and manages telecommunications towers.
 
     The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on stand alone operating segment profit or loss from
operations before income taxes not including nonrecurring gains and losses, and
generally accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices.
Interdivisional transactions are eliminated in consolidation. Revenues are
attributed to geographic areas based on the location of the assignment. Assets
and expenditures for property were not allocated to individual segments in 1996
as the Company did not separately account for and report segment assets until
1997. In addition, segment assets are not allocated between the Engineering and
Design and Program Management segments. All assets related to these two segments
are included as part of the Engineering and Design segment in the tables below.
 
                                       72
<PAGE>   73
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
OPERATING SEGMENTS:
(IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                            TOWER OWNERSHIP
                                                 ENGINEERING    PROGRAM           AND
                                                 AND DESIGN    MANAGEMENT     MANAGEMENT       TOTAL
                                                 -----------   ----------   ---------------   -------
<S>                                              <C>           <C>          <C>               <C>
1996
  Net revenue from external customers..........    $76,759      $16,397         $   --        $93,156
  Intersegment revenues........................         --           --             --             --
                                                   -------      -------         ------        -------
  Total revenues...............................    $76,759      $16,397         $   --        $93,156
                                                   =======      =======         ======        =======
  Depreciation and amortization................    $ 1,712      $   499         $   --        $ 2,211
  Interest income..............................        207           --             --            207
  Interest expense.............................         --           --             --             --
  Income tax expense (benefit).................      6,427       (2,906)            --          3,521
  Net income (loss)............................      8,621       (3,897)            --          4,724
1997
  Net revenue from external customers..........    $81,650      $ 9,639             --        $91,289
  Intersegment revenues........................         81          316             --            397
                                                   -------      -------         ------        -------
  Total revenues...............................    $81,731      $ 9,955         $   --        $91,686
                                                   =======      =======         ======        =======
  Depreciation and amortization................    $ 1,617      $   317         $   88        $ 2,022
  Interest income..............................        147           --             --            147
  Interest expense.............................        (14)          --            122            108
  Income tax expense (benefit).................      4,597          124           (256)         4,465
  Net income (loss)............................     16,016          430           (893)        15,553
  Segment assets...............................     26,854           --          3,735         30,589
  Expenditures for property....................        562          154          3,048          3,764
1998
  Net revenue from external customers..........    $67,889      $18,439         $  860        $87,188
  Intersegment revenues........................        629          551             --          1,180
                                                   -------      -------         ------        -------
  Total revenues...............................    $68,518      $18,990         $  860        $88,368
                                                   =======      =======         ======        =======
  Depreciation and amortization................    $   916      $   269         $  451        $ 1,636
  Interest income..............................        338           --             --            338
  Interest expense.............................         --           --          1,016          1,016
  Income tax expense (benefit).................      2,386        1,975         (1,692)         2,669
  Net income (loss)............................      3,638        3,012         (2,581)         4,069
  Segment assets...............................     26,899           --         18,250         45,149
  Expenditures for property....................        603          154         14,860         15,617
</TABLE>
 
                                       73
<PAGE>   74
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                             1996       1997       1998
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
REVENUES
  Revenues for reportable segments.......................  $93,156    $91,686    $88,368
  Eliminations...........................................       --       (397)    (1,180)
                                                           -------    -------    -------
  Total consolidated revenues............................  $93,156    $91,289    $87,188
                                                           =======    =======    =======
ASSETS
  Total assets for reportable segments...................             $30,589    $45,149
  Unallocated corporate assets...........................              64,831     39,055
                                                                      -------    -------
  Total consolidated assets..............................             $95,420    $84,204
                                                                      =======    =======
</TABLE>
 
     OTHER SIGNIFICANT ITEMS
 
<TABLE>
<CAPTION>
                                                              UNALLOCATED
                                                    SEGMENT    CORPORATE                    CONSOLIDATED
                                                     TOTAL    EXPENDITURES   ELIMINATIONS      TOTAL
                                                    -------   ------------   ------------   ------------
<S>                                                 <C>       <C>            <C>            <C>
1996
  Depreciation and amortization...................  $ 2,211     $    119       $    --        $ 2,330
  Interest Income.................................      207          718            --            925
  Interest expense................................       --        3,050            --          3,050
  Income taxes....................................    3,521      (12,266)           --         (8,745)
1997
  Depreciation and amortization...................  $ 2,022     $  1,388       $    --        $ 3,410
  Interest Income.................................      147          711          (122)           736
  Interest expense................................      108        3,303          (122)         3,289
  Income taxes....................................    4,465       (2,895)          (22)         1,548
  Expenditures for property.......................    3,764        2,920            --          6,684
1998
  Depreciation and amortization...................  $ 1,636     $    773       $    --        $ 2,409
  Interest Income.................................      338        1,576        (1,016)           898
  Interest expense................................    1,016        2,295        (1,016)         2,295
  Income taxes....................................    2,669       (7,089)         (141)        (4,561)
  Expenditures for property.......................   15,617        1,118            --         16,735
</TABLE>
 
     Information concerning principal geographic areas was as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                 1996                  1997                  1998
                                          -------------------   -------------------   -------------------
                                                       NET                   NET                   NET
                                          REVENUES   PROPERTY   REVENUES   PROPERTY   REVENUES   PROPERTY
                                          --------   --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>
North America
  United States.........................  $74,327     $4,031    $61,682     $7,524    $47,065    $21,721
  Canada and Mexico.....................    1,805         --      2,740         --      3,492         --
                                          -------     ------    -------     ------    -------    -------
Total North America.....................   76,132      4,031     64,422      7,524     50,557     21,721
                                          -------     ------    -------     ------    -------    -------
</TABLE>
 
                                       74
<PAGE>   75
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
<TABLE>
<CAPTION>
                                                 1996                  1997                  1998
                                          -------------------   -------------------   -------------------
                                                       NET                   NET                   NET
                                          REVENUES   PROPERTY   REVENUES   PROPERTY   REVENUES   PROPERTY
                                          --------   --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>
Europe
  United Kingdom........................    2,482         --      3,964         --        825          3
  Belgium...............................       --         --      1,230         --      3,384         --
  Netherland............................      816         --      1,443         --      7,113         --
  Other.................................    2,708          3      1,603          2      2,487          1
                                          -------     ------    -------     ------    -------    -------
Total Europe............................    6,006          3      8,240          2     13,809          4
                                          -------     ------    -------     ------    -------    -------
Latin America
  Brazil................................    1,206         --      5,513        165     14,516        407
  Argentina.............................       --         --        258         --        836         --
  Other Latin America...................    1,247         --        358         --        326         --
                                          -------     ------    -------     ------    -------    -------
Total Latin America.....................    2,453         --      6,129        165     15,678        407
                                          -------     ------    -------     ------    -------    -------
Asia-Pacific
  Malaysia..............................    5,203         --      5,331         --      4,036         --
  Korea.................................    2,022         --      1,569         --        650         --
  Phillipines...........................       --         --      1,610         --        885         --
  Other.................................      892         --      3,543         --      1,422         --
                                          -------     ------    -------     ------    -------    -------
Total Asia-Pacific......................    8,117         --     12,053         --      6,993         --
                                          -------     ------    -------     ------    -------    -------
All other...............................      448         --        445         --        151         --
                                          -------     ------    -------     ------    -------    -------
Total...................................  $93,156     $4,034    $91,289     $7,691    $87,188    $22,132
                                          =======     ======    =======     ======    =======    =======
</TABLE>
 
(20) QUARTERLY DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                           1997
                                                         -----------------------------------------
                                                           1ST        2ND        3RD        4TH
                                                         QUARTER    QUARTER    QUARTER    QUARTER
                                                         --------   --------   --------   --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                      <C>        <C>        <C>        <C>
Revenues...............................................  $20,224    $23,812    $24,587    $22,666
Operating income (loss)................................      796      2,716      7,612     (2,908)
Income (loss) from continuing operations
  before income taxes..................................      455      2,113      7,086     (2,716)
Income (loss) from continuing operations...............      354      1,641      5,505     (2,110)
Income (loss) from discontinued operations.............       36       (512)        78      2,583
Net income.............................................      390      1,129      5,583        473
Pro forma income (loss) per share:
Continuing operations:
  Basic................................................  $  0.02    $  0.11    $  0.37    $ (0.14)
                                                         =======    =======    =======    =======
  Diluted..............................................  $  0.02    $  0.11    $  0.32    $ (0.14)
                                                         =======    =======    =======    =======
Discontinued operations:
  Basic................................................  $  0.00    $ (0.04)   $  0.01    $  0.17
                                                         =======    =======    =======    =======
  Diluted..............................................  $  0.00    $ (0.03)   $  0.00    $  0.17
                                                         =======    =======    =======    =======
Net income per share:
</TABLE>
 
                                       75
<PAGE>   76
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
<TABLE>
<CAPTION>
                                                                           1997
                                                         -----------------------------------------
                                                           1ST        2ND        3RD        4TH
                                                         QUARTER    QUARTER    QUARTER    QUARTER
                                                         --------   --------   --------   --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                      <C>        <C>        <C>        <C>
  Basic................................................  $  0.03    $  0.08    $  0.38    $  0.03
                                                         =======    =======    =======    =======
  Diluted..............................................  $  0.02    $  0.07    $  0.32    $  0.03
                                                         =======    =======    =======    =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                           1998
                                                         -----------------------------------------
                                                           1ST        2ND        3RD        4TH
                                                         QUARTER    QUARTER    QUARTER    QUARTER
                                                         --------   -------    --------   --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                      <C>        <C>        <C>        <C>
Revenues...............................................  $22,633    $21,790    $22,236    $20,529
Operating income (loss)................................    1,707       (981)    (5,311)    (4,919)
Income (loss) from continuing operations
  before income taxes..................................    1,211     (1,378)    (5,838)    (5,514)
Income (loss) from continuing operations...............      731       (832)    (3,526)    (3,331)
Income (loss) from discontinued operations.............     (432)    (1,364)    (3,553)   (12,436)
Net income (loss)......................................      299     (2,196)    (7,079)   (15,767)
Income (loss) per share................................
Continuing operations:
  Basic................................................  $  0.05    $ (0.05)   $ (0.23)   $ (0.21)
                                                         =======    =======    =======    =======
  Diluted..............................................  $  0.05    $ (0.05)   $ (0.23)   $ (0.21)
                                                         =======    =======    =======    =======
Discontinued operations:
  Basic................................................  $ (0.03)   $ (0.09)   $ (0.23)   $ (0.80)
                                                         =======    =======    =======    =======
  Diluted..............................................  $ (0.03)   $ (0.09)   $ (0.23)   $ (0.80)
                                                         =======    =======    =======    =======
Net income (loss) per share:
  Basic................................................  $  0.02    $ (0.14)   $ (0.45)   $ (1.01)
                                                         =======    =======    =======    =======
  Diluted..............................................  $  0.02    $ (0.14)   $ (0.45)   $ (1.01)
                                                         =======    =======    =======    =======
</TABLE>
 
See note 8 with respect to the special charge recorded by the Company in
December 1996, 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 and note 9 with respect to the restructuring
charge recorded by the company in October 1998. All periods presented have been
restated to reflect the hardware and software businesses as discontinued
operations (see note 4).
 
(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>
                                                             1997                        1998
                                                   -------------------------   -------------------------
                                                   CARRYING   ESTIMATED FAIR   CARRYING   ESTIMATED FAIR
                                                    AMOUNT        VALUE         AMOUNT        VALUE
                                                   --------   --------------   --------   --------------
                                                                      (IN THOUSANDS)
<S>                                                <C>        <C>              <C>        <C>
Liabilities:
  Convertible subordinated debt..................  $50,000       $41,196       $50,000       $10,654
Shareholders' Equity:
  Notes receivable from shareholder..............    2,800         2,800         2,100         2,100
Off balance sheet--letters of credit.............       --            --         3,700         3,700
</TABLE>
 
                                       76
<PAGE>   77
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
     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, 1997 and
1998 because of the relatively short duration of these instruments.
 
     Convertible subordinated debt -- the fair value at December 31, 1997 and
1998 is based on the fair market value of the Class A Common Stock assuming
conversion into 2,841,099 shares.
 
     Notes receivable from shareholder -- the carrying value of the note
receivable approximated the fair value as the receivable is treated as a deemed
dividend.
 
     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, 1997 or 1998.
 
(22) SUBSEQUENT EVENTS
 
     From January 1, 1999 to March 29, 1999 the Company borrowed a total of $3.4
million under its Credit Facility with Chase.
 
     In January 1999, the Company entered into a $5.0 million convertible
promissory note with Telcom Ventures. Under the terms of the note, the entire
principal balance and accrued interest thereon at a rate of 9.0 percent is due
on April 30, 2000 or upon the occurrence of certain events such as the sale of
all or substantially all of the assets of the Company. At anytime from August 1,
1999 either Telcom Ventures or the Company may convert the then outstanding
principal and accrued, but unpaid interest into shares of the Company's Class A
Common Stock based on a conversion price of $6.22 per share, subject to
adjustment for stock split, stock dividend, recapitalization or similar events.
 
     During the two month period ended February 28, 1999, the Company recognized
total foreign currency transaction losses of approximately $2.1 million related
to its 1998 Latin American operations. The majority of the losses were from the
Company's Brazilian operations as a result of the devaluation of the Real in
1999.
 
     Telcom Ventures has assured the Company that it intends to provide the
Company with funding to cover any cash shortfalls the Company may have during
1999 in an amount not to exceed $12.5 million less the sum of amounts drawn
under the Credit Facility in excess of $10 million plus amounts received through
additional financings or the sale of the Products Businesses. These assurances
are subject to the satisfaction of certain conditions, including the parties
reaching agreement on applicable financing documents, and will apply only as
long as Telcom Ventures directly or indirectly owns at least 40% of the
Company's outstanding common stock, other than any stock issued to MCI upon
conversion of the MCI notes.
 
                                       77
<PAGE>   78
                    LCC INTERNATIONAL, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
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.
 
                                       78
<PAGE>   79
 
                                    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,
1996, 1997, and 1998.
 
             Consolidated Balance Sheets as of December 31, 1997 and 1998.
 
             Consolidated Statements of Shareholders' Equity (Deficit) -- Years
             Ended December 31, 1996, 1997 and 1998.
 
             Consolidated Statements of Cash Flows -- Years Ended December 31,
1996, 1997 and 1998.
 
             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**
             4.6    --   Amendment to LCC International, Inc. 1996 Directors Stock
                         Option Plan, dated April 22, 1997.
             4.7    --   Amendment to LCC International, Inc. 1996 Directors Stock
                         Option Plan, dated April 16, 1998.
             4.8    --   Amendment to LCC International, Inc. 1996 Employee Stock
                         Option Plan, dated April 16, 1998.
            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.*
</TABLE>
 
                                       79
<PAGE>   80
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            10.9    --   Subordinated Note due 2000 by LCC, L.L.C. payable to MCI
                         Telecommunications Corporation dated June 28, 1994.*
           +10.10   --   [Intentionally omitted]
          ++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 12, 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>
 
                                       80
<PAGE>   81
 
<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, Geoffrey S. Carroll, Steven J.
                         Gilbert, J. Michael Bonin, Kathryn M. Condello, Peter A.
                         Deliso, Richard Hozik, Frank F. Navarrete, Donald R. Rose,
                         Gerard L. Vincent, Louis R. Olsen, Stuart P. Lawson and
                         Michael S. McNelly.*
            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   --   [Intentionally omitted]
            10.45   --   [Intentionally omitted]
            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.*
            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.*
</TABLE>
 
                                       81
<PAGE>   82
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            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   --   [Intentionally omitted]
            10.55   --   [Intentionally omitted]
            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   --   [Intentionally omitted]
            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   --   [Intentionally omitted]
            10.62   --   [Intentionally omitted]
            10.63   --   Third Amended and Restated Credit Agreement dated as of
                         December 30, 1998, among LCC International, Inc., LCC Europe
                         AS, LCC Design Services, L.L.C., LCC Development Company,
                         L.L.C., Microcell Management, Inc., Koll Telecommunications
                         Services, L.L.C., the Lenders signatory thereto and The
                         Chase Manhattan Bank.
            10.64   --   Cash Collateral Account Agreement dated as of December 30,
                         1998 by Rajendra Singh in favor of The Chase Manhattan Bank.
            10.65   --   Unconditional Guaranty dated as of December 30, 1998 by
                         Rajendra Singh in favor of The Chase Manhattan Bank.
            10.66   --   Side letter from LCC International, Inc. to Microcell
                         Management, Inc., dated March 12, 1999.
            10.67   --   Convertible Subordinated Promissory Note dated January 28,
                         1999, in the principal amount of $5,000,000 issued to Telcom
                         Ventures, L.L.C. by LCC International, Inc.
            10.68   --   Subordination and Intercreditor Agreement dated as of
                         January 28, 1999 among The Chase Manhattan Bank, Telcom
                         Ventures, L.L.C. and LCC International, Inc.
            10.69   --   Agreement Regarding Resignation of Employment and Other
                         Matters dated as of October 5, 1998, by Geoffrey S. Carroll
                         and LCC International, Inc.
            10.70   --   Form of Revolving Credit Note dated September 30, 1996, in
                         the principal amount of $20,000,000 issued to The Chase
                         Manhattan Bank by LCC International, Inc.****
            10.71   --   Form of Swingline Note dated December 15, 1997, in the
                         principal amount of 2,500,000 issued to The Chase Manhattan
                         Bank by LCC Europe AS.****
</TABLE>
 
                                       82
<PAGE>   83
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            10.72   --   Revolving Credit Facility and Security Agreement, dated as
                         of December 31, 1996, by LCC International, Inc. and
                         Microcell Management, Inc.
            10.73   --   Revolving Credit Note dated December 31, 1996, in the
                         principal amount of $35,000,000 issued to LCC International,
                         Inc. by Microcell Management, Inc.
            10.74   --   Shareholders' Agreement of Microcell Management, Inc., dated
                         as of December 31, 1996 among LCC International, Inc.,
                         Albert F. Grimes, Donald G. McClure, Jr., R. Michael Gill,
                         Roy R. Markert, III, Joseph D. Croft, III, Pamela H.
                         O'Neill, and Gary L. Grimes.
            10.75   --   Letter, dated November 7, 1996, from LCC International, Inc.
                         to MCI Telecommunications Corporation.
            11      --   Calculation of Pro Forma Net Income (Loss) Per Share.
            21      --   Subsidiaries of the Company.
            23.1    --   Consent of KPMG 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.
 
      + 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) Reports on Form 8-K.
 
     On September 30, 1998, the Company filed a Current Report on Form 8-K which
reported that, on September 18, 1998, the Company entered into an Asset Exchange
Agreement with Allen Telecom Inc., Allen Telecom Investments, Inc. and LCC
Europe GmbH for the acquisition by the Company of the Comsearch Division of
Allen Telecom Inc. and the sale to Allen Telecom Inc. of the products division
of the Company. The September 30, 1998 Current Report also explained that
consummation of the transactions under the Asset Exchange Agreement were subject
to the satisfaction of certain conditions.
 
     On October 7, 1998, the Company filed a Current Report on Form 8-K which
reported that, on October 5, 1998, the Company announced the resignation of Dr.
Geoffrey Scott Carroll as President and Chief Executive Officer of the Company
and the appointment of Dr. Rajendra Singh, Chairperson of the Company's Board of
Directors, as interim chief executive.
 
                                       83
<PAGE>   84
 
     On October 20, 1998 the Company filed a Current Report on Form 8-K which
reported that, on October 19, 1998, the Company and Allen Telecom Inc. announced
the termination of the Asset Exchange Agreement, dated September 18, 1998, among
the Company, Allen Telecom Inc., Allen Telecom Investments, Inc. and LCC Europe
GmbH.
 
   (c) Exhibits to this Form 10-K are attached or incorporated by reference as
stated above.
 
   (d) None.
 
                                       84
<PAGE>   85
 
                               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.
 
                                       85
<PAGE>   86
 
     "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.
 
     "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.
 
     "ITU " -- International Telecommunications Union
 
     "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).
 
     "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.
 
                                       86
<PAGE>   87
 
     "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.
 
     "3G " -- A single next generation standard for the Americas, Europe, Japan,
Korea and China which the ITU and other standard bodies are attempting to
develop. This next generation of service will enable carriers to deploy key
capabilities that current so-called "2G" wireless technologies such as TDMA,
CDMA and GSM are unable to support, provide open standards and architecture and
lower cost, higher capacity and improved performance. Anticipated 3G
capabilities include wireline quality voice service, collaborative working
between multimedia and high speed data, user customization allowing the
subscriber better control over features such as voicemail routing, announcements
and call screening, mobility-enabled services such as vehicular navigation and
emergency services, wireless local loop capabilities, seamless global roaming,
zone identification and billing and satellite interworking. The ITU has received
numerous proposals from several countries and standards groups recommending
specifications for the new standard and has formed an operators' standards forum
for the purpose of forging a consensus with respect to the new standard among
operators, vendors and standards groups.
 
"UNIX " -- A multiuser, multitasking operating system.
 
                                       87
<PAGE>   88
 
     "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.
 
                                       88
<PAGE>   89
 
                                   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 30th day of
March, 1999.
                                          LCC INTERNATIONAL, INC.
 
                                          By:     /s/ RAJENDRA SINGH
                                          --------------------------------------
                                                      Rajendra Singh
                                                    Interim President
                                               and Chief Executive Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
 
<TABLE>
<CAPTION>
                    SIGNATURES                                   TITLE                     DATE
                    ----------                                   -----                     ----
<C>                                                   <S>                            <C>
 
                /s/ RAJENDRA SINGH                    Interim President and Chief    March 30, 1999
---------------------------------------------------     Executive Officer and
                  Rajendra Singh                        Chairperson of the Board
                                                        of Directors
 
                 /s/ RICHARD HOZIK                    Senior Vice President,         March 30, 1999
---------------------------------------------------     Treasurer and Chief
                   Richard Hozik                        Financial Officer
                                                        (Principal Financial
                                                        Officer)
 
              /s/ GEOFFREY S. CARROLL                 Director                       March 30, 1999
---------------------------------------------------
                Geoffrey S. Carroll
 
                                                      Director                       March   , 1999
---------------------------------------------------
                    Mark D. Ein
 
                /s/ ARNO A. PENZIAS                   Director                       March 30, 1999
---------------------------------------------------
                  Arno A. Penzias
 
                  /s/ NEERA SINGH                     Director                       March 30, 1999
---------------------------------------------------
                    Neera Singh
</TABLE>
 
                                       89
<PAGE>   90
 
                                                                     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, 1996
  Allowance for doubtful accounts.....        $ 1,919              $13,731              $--            $1,881          $13,769
Year ended December 31, 1997
  Allowance for doubtful accounts.....         13,769                3,206               --             5,046           11,929
Year ended December 31, 1998
  Allowance for doubtful accounts.....         11,929                2,047               --             3,523           10,453
</TABLE>
 
---------------
 
(1) Deduction for write-off of receivables to allowance account.
 
                                       90
<PAGE>   91
 
                                 EXHIBIT INDEX
 
<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**
             4.6    --   Amendment to LCC International, Inc. 1996 Directors Stock
                         Option Plan, dated April 22, 1997.
             4.7    --   Amendment to LCC International, Inc. 1996 Directors Stock
                         Option Plan, dated April 16, 1998.
             4.8    --   Amendment to LCC International, Inc. 1996 Employee Stock
                         Option Plan, dated April 16, 1998.
            10.1    --   [Intentionally omitted]
            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   --   [Intentionally omitted]
          ++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 12, 1996 between NextWave
                         Telecom, Inc. and LCC, L.L.C.*
            10.17   --   [Intentionally omitted]
</TABLE>
 
                                       91
<PAGE>   92
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            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.*
            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, Geoffrey S. Carroll, Steven J.
                         Gilbert, J. Michael Bonin, Kathryn M. Condello, Peter A.
                         Deliso, Richard Hozik, Frank F. Navarrete, Donald R. Rose,
                         Gerard L. Vincent, Louis R. Olsen, Stuart P. Lawson and
                         Michael S. McNelly.*
            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.*
</TABLE>
 
                                       92
<PAGE>   93
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            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   --   [Intentionally omitted]
            10.45   --   [Intentionally omitted]
            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.*
            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   --   [Intentionally omitted]
            10.55   --   [Intentionally omitted]
            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.*
</TABLE>
 
                                       93
<PAGE>   94
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            10.57   --   Asset Purchase Agreement, dated as of December 30, 1996,
                         between European Technology Partner AS and LCC International
                         AS***
            10.58   --   [Intentionally omitted]
            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   --   [Intentionally omitted]
            10.62   --   [Intentionally omitted]
            10.63   --   Third Amended and Restated Credit Agreement dated as of
                         December 30, 1998, among LCC International, Inc., LCC Europe
                         AS, LCC Design Services, L.L.C., LCC Development Company,
                         L.L.C., Microcell Management, Inc., Koll Telecommunications
                         Services, L.L.C., the Lenders signatory thereto and The
                         Chase Manhattan Bank.
            10.64   --   Cash Collateral Account Agreement dated as of December 30,
                         1998 by Rajendra Singh in favor of The Chase Manhattan Bank.
            10.65   --   Unconditional Guaranty dated as of December 30, 1998 by
                         Rajendra Singh in favor of The Chase Manhattan Bank.
            10.66   --   Side letter from LCC International, Inc. to Microcell
                         Management, Inc., dated March 12, 1999.
            10.67   --   Convertible Subordinated Promissory Note dated January 28,
                         1999, in the principal amount of $5,000,000 issued to Telcom
                         Ventures, L.L.C. by LCC International, Inc.
            10.68   --   Subordination and Intercreditor Agreement dated as of
                         January 28, 1999 among The Chase Manhattan Bank, Telcom
                         Ventures, L.L.C. and LCC International, Inc.
            10.69   --   Agreement Regarding Resignation of Employment and Other
                         Matters dated as of October 5, 1998, by Geoffrey S. Carroll
                         and LCC International, Inc.
            10.70   --   Form of Revolving Credit Note dated September 30, 1996, in
                         the principal amount of $20,000,000 issued to The Chase
                         Manhattan Bank by LCC International, Inc.****
            10.71   --   Form of Swingline Note dated December 15, 1997, in the
                         principal amount of 2,500,000 issued to The Chase Manhattan
                         Bank by LCC Europe AS.****
            10.72   --   Revolving Credit Facility and Security Agreement, dated as
                         of December 31, 1996, by LCC International, Inc. and
                         Microcell Management, Inc.
</TABLE>
 
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<PAGE>   95
 
<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                             EXHIBIT DESCRIPTION
          -------                            -------------------
          <C>       <S>  <C>
            10.73   --   Revolving Credit Note dated December 31, 1996, in the
                         principal amount of $35,000,000 issued to LCC International,
                         Inc. by Microcell Management, Inc.
            10.74   --   Shareholders' Agreement of Microcell Management, Inc., dated
                         as of December 31, 1996, among LCC International, Inc.,
                         Albert F. Grimes, Donald G. McClure, Jr., R. Michael Gill,
                         Roy R. Markert, III, Joseph D. Croft, III, Pamela H. O'Neil,
                         and Gary L. Grimes.
            10.75   --   Letter, dated November 7, 1996, from LCC International, Inc.
                         to MCI Telecommunications Corporation.
            11      --   Calculation of Pro Forma Net Income (Loss) Per Share.
            21      --   Subsidiaries of the Company.
            23.1    --   Consent of KPMG 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.
 
     + 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.
 
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