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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-K

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|  
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31,
    2002                                             
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission file number: 0-21213

LCC International, Inc.


(Exact Name of Registrant as Specified in Its
Charter)


|                                                                                     |  |                                         
|------------------------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                                             |  | 54-1807038                              
|(State or Other Jurisdiction
    of Incorporation or Organization)                   |  | (I.R.S. Employer
    Identification No.)
|                                                                                    
|7925 Jones Branch Drive
    McLean, VA
     (Address of Principal Executive Offices) |  | 22102
    (Zip Code)                    

(703) 873-2000

Registrants Telephone Number, Including
Area Code


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 þ          No o

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.     o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes o          No þ

Based upon the closing price of the
registrants common stock as of June 28, 2002, the
aggregate market value of the common stock held by
non-affiliates of the registrant is $10,335,661.*

As of March 1, 2003, the registrant had
outstanding 14,639,865 shares of Class A Common Stock, par
value $.01 per share, (the Class A Common
Stock) and 6,318,874 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 22, 2003 (the Proxy Statement) are
incorporated by reference into Part III,
Items 10  13 of this Form 10-K.



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|  |                                                                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | 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 assumed to be affiliates.



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TABLE OF CONTENTS

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|Item 1.  |  | Business                                                                                  |  |      | 3  | 
|Item 2.  |  | Properties                                                                                |  |      | 18 | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 18 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |      | 18 | 
|PART II 
|Item 5.  |  | Market for Registrants Common Stock and
    Related Stockholder Matters                  |  |      | 19 | 
|Item 6.  |  | Selected Financial Data                                                                   |  |      | 19 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |      | 21 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |      | 31 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                               |  |      | 33 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |      | 60 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                        |  |      | 60 | 
|Item 11. |  | Executive Compensation                                                                    |  |      | 60 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |      | 60 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |      | 60 | 
|Item 14. |  | Controls and Procedures                                                                   |  |      | 60 | 
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                      |  |      | 60 | 

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This Annual Report on Form 10-K
(Form 10-K) contains certain forward-looking
statements within the meaning of Section 21E 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.

PART I



Item 1.     Business


Overview

The Company is one of the worlds largest
independent providers of wireless network and infrastructure
services, including the planning, design and deployment, and
ongoing operations and maintenance of wireless networks, to an
increasingly broad range of companies, including wireless
carriers, satellite service providers, telecommunication
equipment vendors, and tower companies. Since its inception in
1983, the Company has delivered wireless network solutions to
more than 350 customers in over 50 countries. Customers in
the United States include wireless service providers such as
AT&T Wireless Services, Cingular Wireless, Nextel
Communications, Sprint PCS, U.S. Cellular, Verizon Wireless
and XM Satellite Radio. Internationally-based customers
accounted for approximately 57.0% of the Companys revenues
for the year ended December 31, 2002 and include large
international wireless carriers, such as China Unicom,
Dutchtone, Hutchison (including H3G in Italy and
Hutchison UK), O2 (in both the UK and the Netherlands),
Orascom Telecom Algerie, TA Orange, T-Mobile, Vodafone and
Wind. The Company also provides services globally to large
telecommunication equipment vendors such as Ericsson, and Nokia.
In addition, the Company provides high level technical
consulting services for companies such as B.V. Group,
G.E. Capital, MDS America and Vulcan Ventures.

The Company provides integrated end-to-end
solutions for wireless voice and data communications networks
with offerings ranging from high level technical consulting, to
system design and deployment, to ongoing management and
optimization services. As part of its strategy, the Company
leverages initial opportunities to provide high level technical
consulting services to secure later-stage system design and
deployment contracts. Long-term engagements to provide design
and deployment services also enable the Company to secure
ongoing management and operations projects. Providing ongoing
operations and maintenance services also positions the Company
well for additional opportunities as new technologies continue
to be developed and wireless network operators must either
upgrade their existing networks or deploy new networks utilizing
the latest available technologies.

The Companys annual reports on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports,
and the Proxy Statement for its Annual Meeting of Stockholders
are made available, free of charge, on its Web site
http://www.lcc.com, as soon as reasonably practicable
after such reports have been filed with or furnished to the
Securities and Exchange Commission.

Industry Background

Wireless
Telecommunications Networks

Wireless networks are telecommunication systems
built using radio-based systems that allow a telephone set or
data terminal to communicate without a metallic or optical cord
or wire equipment. The life cycle of a wireless network
continually evolves and consists of several phases including
strategic planning, design, deployment, expansion, and
optimization and maintenance. During the strategic planning
phase, operators pursue the licenses necessary to build out a
wireless system and make decisions about the type of technology
and equipment to be used, where it will be located and how it
will be configured. Technical planning and

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preliminary engineering designs are often
required to decide on a deployment strategy and determine
construction costs and the revenue generating ability of the
wireless system.


Following acceptance of a wireless network
design, access to land or building rooftops must be secured for
towers or telecommunication equipment, including radio base
stations, antennas and supporting electronics. Each site must be
qualified in a number of areas, including zoning ordinance
requirements, regulatory compliance and suitability for
construction. Detailed site location designs are prepared and
radio frequency engineers review interference to or from
co-located antennae. Construction and equipment installation
then must be performed and site performance is measured after
completion of construction. Finally, professional technicians
install and commission the new radio equipment, test it,
integrate it with existing networks and tune the components to
optimize performance.

Once a wireless network becomes operational and
the number of subscribers increases, the system must be expanded
to increase system coverage and capacity. In addition, the
wireless system must be continually updated and optimized to
address changes in traffic patterns, and interference from
neighboring or competing networks or other radio sources.
Optimization also involves tuning the network to enable
operators to compete more effectively in areas where there are
multiple system operators.

Finally, as new technologies are continuously
developed, wireless operators must determine whether to upgrade
their existing networks or deploy new networks utilizing the
latest available technologies. Overlaying new technologies, such
as 2.5 generation and third generation protocols, commonly
referred to as 2.5G and 3G, respectively, with an existing
network or deploying a new network requires operators to
reengage in the strategic planning, design, deployment,
expansion, and optimization and maintenance phases of a new
cycle in the life of an existing or new network.

Growth and Evolution of the
Wireless Telecommunication Industry

Worldwide use of wireless telecommunications has
grown rapidly as cellular and other emerging wireless
communications services have become more widely available and
affordable for the mass business and consumer markets. The rapid
growth in wireless telecommunications is driven by the dramatic
increase in wireless telephone usage, as well as strong demand
for wireless Internet and other data services.

Wireless access to the Internet is in an early
stage of development and growing rapidly as web-enabled devices
become more widely accessible and affordable. Demand for
wireless Internet access and other data services is accelerating
the adoption of new technologies such as those embodied in the
third generation standard, known as 3G, to enable wireless
networks to deliver enhanced data capabilities. Examples of
wireless data services include music on demand, m-banking,
locations based entertainment and interactive games.

Current Challenges Confronting
Wireless Service Providers and Telecommunication Equipment
Vendors

Due to an increasingly competitive environment,
wireless service providers, telecommunication equipment vendors
and others are focused on satisfying customer demand for
enhanced services, seamless and comprehensive coverage, better
service quality, more robust content and application offerings,
faster data transmission and lower prices. The proliferation of
wireless carriers and new technologies has created a competitive
environment in which speed to market and subscriber acquisition
and retention are key factors influencing a wireless
carriers success. Network operations and maintenance is
becoming increasingly complex due to an increasing need to
provide services through networks that rely on diverse
technologies, heterogeneous network components and existing
legacy applications. For example, the introduction of wireless
data applications requiring the transmission of large amounts of
data creates additional technological requirements for carriers
establishing or upgrading their networks. These challenges have
led wireless carriers to increasingly prioritize their
resources, focusing on revenue generating activities and
outsourcing when they can do so effectively.

Equipment vendors are also confronting multiple
challenges as they introduce new generations of equipment with
increased features and functionality. Vendors are required to
provide equipment that is both compatible with a carriers
existing network and can be integrated with equipment offered by
other vendors.

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As a result of rapid technological changes, the
Company believes that equipment vendors have, in many cases,
focused on offering competitive product solutions while
outsourcing services such as network design and deployment and
operations and maintenance.




| |                         
| | ------------------------
| | The Need for Outsourcing

Although wireless carriers traditionally have
relied upon their internal engineering workforces to address a
significant portion of their wireless network needs, the current
challenges in the wireless market and the need to reduce
operating costs, have required wireless carriers and equipment
vendors to focus on their core competencies and therefore
outsource an increasing portion of their network services. The
Company believes that wireless carriers that are seeking to
outsource an increasing portion of their wireless network needs
are engaging service providers that:



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | offer speed to market and cost effective network
    implementation;                                                            
|
| |  | have expertise with all major wireless
    technologies;                                                                        
|
| |  | have experience working with all major equipment
    vendors;                                                                   
|
| |  | offer turnkey solutions; and                                                                                                    
|
| |  | have sufficient numbers of highly skilled
    employees capable of handling large-scale domestic and
    international projects.

The LCC Solution

The Company is helping wireless service providers
around the world tackle the issues they face in developing
networks to meet subscriber demand, reduce their costs and add
new services and functionality. In addressing these issues and
the need for wireless service providers, telecommunications
equipment vendors and others to outsource an increasing portion
of their wireless network services, the Company believes that it
distinguishes itself through several competitive advantages:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Speed to Market.The
    Companys expertise and processes enable its customers to
    meet, or in some cases, beat, their project deadlines. Members
    of the Companys technical, design and deployment teams
    often work together with the customer at the initial stage of a
    project in order to plan an effective and efficient solution for
    the customers needs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Expertise and Experience with All Major
    Wireless Technologies.The Company has
    experience in all major wireless access technologies, including
    2G, 2.5G and 3G digital system protocols and their respective
    migration paths; i.e., Global System for Mobile Communications,
    commonly referred to as GSM, Time Division Multiple Access,
    commonly referred to as TDMA, Code Division Multiple Access,
    commonly referred to as CDMA, and Integrated Dispatch Enhanced
    Network, commonly referred to as iDEN; and other wireless
    technologies such as broadbands LMDS, MMDS, UNII/802.11(a)
    and 802.11(b), Europes equivalent to iDEN referred to as
    Tetra and core network technologies such as MAP, IS-41, ATM and
    SS7. The Company is actively engaged in developing new and
    emerging technologies in the wireless telecommunications
    industry through participation in industry panels, industry
    association forums and through independent research. The
    Companys Wireless Institute is an integral part of its
    technical development activities and has become one of the
    premier training schools for the wireless industry.
|
| |  | Ability to Deliver Turnkey Solutions.The Companys ability to provide
    end-to-end, or turnkey, services enables its wireless customers
    to engage a single responsible party who is accountable for
    delivering and managing its wireless network under a single
    contract. The Company coordinates its use of resources for each
    phase of the project from planning to design and deployment to
    optimization and management of the wireless network, enabling it
    to reduce the time and cost of its services. The Company
    provides its customers with a primary point of accountability
    and reduces the inefficiencies associated with coordinating
    multiple subcontractors to enable projects to be transitioned
    from discipline to discipline in an efficient manner.                                                                                                                                                                                                                                                                                                                                                                                           

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Worldwide Depth of Resources.During the past 20 years, the
    Company has designed wireless networks in North America, Europe,
    Asia, Latin America, the Middle East and Africa employing all
    major wireless technologies. As of December 31, 2002, the
    Company had approximately 420 highly qualified and experienced
    engineers and system deployment professionals. The
    Companys system deployment professionals collectively have
    experience deploying networks in the major markets in the United
    States as well as many countries throughout the world. As of
    December 31, 2002, approximately 60% of the Companys
    employees were employed outside the U.S. and represented
    approximately 50 different nationalities.

LCC Services

The Company offers to its wireless customers a
complete range of wireless network services, including:
(1) high level technical consulting services (approximately
3.4% of 2002 revenues); (2) design and deployment services
(approximately 95.0% of 2002 revenues); and (3) ongoing
operations and maintenance services (approximately 1.6% of 2002
revenues).

Consulting Services

Applying its extensive technical and operational
expertise and experience, the Company may be first engaged by a
wireless customer to analyze the engineering and technology
issues related to a proposed network deployment project. From
assisting customers with evaluating their business plans, to
licensing and application support, technology assessments and
defining and refining implementation strategies, the
Companys team of advanced degreed senior wireless
professionals focuses on providing customers with key insights
into all aspects of wireless communications and the impact that
a new technology, device or application might have on the
industry.

Design and Deployment
Services

Program management.Company provides project management services as part of an
overall design and deployment project, to manage site
acquisition, radio frequency engineering, fixed network
engineering and construction management services. Project
managers utilize the Companys proprietary software system,
Web Integrated Network Deployment System (WINDS), to manage all
phases of an engagement. Utilizing WINDS, all information
regarding a project is stored in one location, enabling project
managers to track and retrieve information across all project
phases, including site acquisition and leasing, zoning,
construction, materials management, radio frequency engineering
and installation and optimization. The WINDS system generates a
visual presentation of the network in process, provides
customers with look-in capabilities using remote
connectivity and an Internet browser and forecasts timelines for
each phase of the project. The Company maintains copyright and
trade secret protection for its WINDS system.

Radio frequency and fixed network
engineering.The Company provides both
radio frequency engineering and fixed network engineering
services to design wireless networks for its customers. The
Companys radio frequency engineers design each wireless
network based upon the customers transmission
requirements, which are determined based upon the projected
level of subscriber density, estimated traffic demand and the
scope of the operators license coverage area. The
Companys engineers perform the calculations, measurements
and tests necessary to optimize placement of wireless equipment,
to optimize use of radio frequency and to deliver the highest
possible signal quality for the greatest portion of subscriber
usage within existing constraints. Typical constraints that must
be addressed include cost parameters, terrain and license
limitations, interference from other operators, site
availability limitations and applicable zoning restrictions as
well as other factors.

In addition, because most wireless calls are
ultimately routed through a wireline network, traffic from
wireless networks must be connected with switching centers
within wireline networks. The Companys fixed network
engineers determine the most effective method to connect call
sites to the wireless backbone. The Company also provides
services to cover the entire core network including
interconnect, switching and

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microwave engineering for all access technologies
and into Local Exchange Carrier, Competitive Local Exchange
Carrier and Incumbent Local Exchange Carrier communities.


Competitive
benchmarking.The Company provides
system analysis to its wireless customers for the measurement of
network performance, including benchmarking versus
competitors based upon an extensive set of parameters such as
call quality, drop call rates, signal strength and coverage.

Site acquisition and
development.The Companys local
experts in each market study the feasibility and desirability of
locating base stations in the proposed area according to the
wireless customers requirements, including zoning
ordinance requirements, leasing constraints and building access
issues.

Regulatory
compliance.The Company develops a
regulatory compliance program in the United States designed to
satisfy FCC and Occupational Safety and Health Act requirements
with respect to radio frequency emissions.

Architecture and
engineering.The Company manages
various activities associated with the design, layout and
physical assessment of existing and proposed telecommunications
facilities, including base stations and switching centers. This
includes managing architecture and engineering firms with
respect to site drawings, zoning exhibits, structural analysis
and making recommendations to confirm that the infrastructure
has the structural capacity to accommodate the design of the
wireless network and other materials and services as may be
necessary to secure building permits and jurisdictional
approvals.

Construction and procurement
management.The Company manages
various construction subcontractors to prepare the rooftop or
tower site and secure the proper electrical and
telecommunication connections. The Company also manages the
procurement of materials and equipment for its wireless
customers and the installation of radio frequency equipment,
including base station electronics and antennas.

Operations and Maintenance
Services

The Company provides operations and maintenance
services to wireless carriers with ongoing outsourcing needs.
Depending on customers needs, the scope of such
arrangements varies greatly  the Company may assume
responsibility for all or part of the day-to-day operation and
maintenance of wireless networks. In 2002, the Company was
engaged to provide operations and maintenance services to
wireless service providers such as Lucent and XM Satellite.

See note 19 to the Consolidated Financial
Statements for information about the Companys segments.

Customers and Backlog

The Company provides consulting, design and
deployment, and operations and maintenance services to wireless
carriers, telecommunication equipment vendors, satellite service
providers, and tower companies. The Companys top ten
customers, listed below, accounted for approximately 60.3% of
total revenues for the fiscal year ended December 31, 2002:



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ericsson 
     H3G Italy 
     Nextel Communications 
     Northcoast Communications 
     O2 UK 
     O2 B.V. (Telfort) 
     Sprint PCS 
     T-Mobile 
     U.S. Cellular 
     XM Satellite Radio

The Company had a firm backlog of
$29.3 million as of December 31, 2002, including
renewals and extensions from existing customers, compared with
$24.7 million as of December 31, 2001. The increase in
backlog relates predominantly to the Companys new
contracts in the Europe, Middle East, Africa

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(EMEA) region. Since significant
uncertainty exists regarding the timing of filling backlog
orders, the Company cannot accurately predict the portion of the
backlog that will be filled during 2003. The Company cannot
provide assurances that the contracts included in the backlog as
of December 31, 2002 will actually generate the revenues
anticipated or that actual revenues will be achieved within any
particular period. However, the Company expects that it will not
fill approximately $5.0 million of its backlog during 2003.
The Companys contracts typically include provisions that
permit customers to terminate their contracts under various
circumstances, including for customer convenience.


In addition to the firm backlog described above,
the Company derives significant revenue from master service
agreements and similar arrangements. Such arrangements do not
provide a firm contractual commitment and therefore are excluded
from the Companys calculations of firm backlog. The
Companys implied backlog from these arrangements was
approximately $21.0 million as of December 31, 2002.

Sales and Marketing

The Company sells and markets its consulting,
design and deployment, and operations and maintenance services
through the collaborative efforts of its direct sales force, its
senior management, its marketing group and its Wireless
Institute.

Direct Sales

The Company has established direct sales forces
in three regions of the world: the first region is North America
and Latin America; the second region is Europe, the Middle East
and Africa; and the third region is Asia-Pacific. The
Companys professional sales force works in conjunction
with its senior executives to develop new client relationships.
Sales personnel and the Companys senior management
proactively establish contact with targeted prospects to
identify potential sales opportunities and work to establish
awareness and preference for the Companys services.
Because customers purchase decisions often involve an
extended decision making process requiring involvement of their
technical personnel, the Companys sales personnel work
collaboratively with the Companys technical consulting and
deployment personnel to develop new sales leads and secure new
contracts. Finally, the Companys Wireless Institute,
providing extensive training in the latest technologies,
including emerging mobile data technologies such as 2.5G and 3G,
also positions the Company well to generate additional sales
opportunities.

Marketing

The Companys marketing staff supports its
business strategy through articles, publications, analyst
meetings and conferences. The marketing group conducts market
and competitive analysis, defines industry-specific business
requirements and identifies potential sales opportunities. The
Companys marketing group helps position service offerings,
creates awareness/ brand recognition and manages joint marketing
efforts with strategic alliance partners.

As of December 31, 2002, the Company
employed 32 full-time sales and marketing staff.

Competition

The market for technical consulting, design and
deployment and operations and maintenance is highly competitive
and fragmented and includes numerous service providers. In
particular, the Company believes that the competition in Europe
is particularly fragmented with numerous small, regional
independent service providers. The Companys competitors
fall into six broad categories:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | internal staffs of wireless network operators;                                                                                                                                                                     
|
| |  | telecommunication equipment vendors, which
    frequently provide design and deployment services as part of an
    equipment sale;                                                                                 
|
| |  | independent service companies such as Wireless
    Facilities, Inc. which provides a full range of wireless network
    services, and a large number of other companies that provide
    limited wireless services;

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| |   |                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | construction and project management companies,
    such as Bechtel Group Inc. and General Dynamics for the
    deployment of wireless networks;                                                                                                                  
|
| |  | tower ownership and management companies, such as
    Crown Castle International and American Tower Corporation, which
    provide tower deployment service capabilities; and                                                                                    
|
| |  | information technology and consulting companies
    such as Bearing Point, Inc. (formerly known as KPMG Consulting,
    Inc.), Logica and others, which have developed capabilities to
    deliver network consulting services to wireless service
    providers.

Although the services provided by many of these
competitors are comparable to the services provided by the
Company, there are areas where certain competitors may have an
advantage over the Company. For example, telecommunications
equipment vendors presumably know the relative strengths and
weaknesses of their products better than the service providers
who have no product offerings; construction companies have more
hands-on capabilities with respect to the construction aspects
of a deployment project; and equipment vendors, construction
companies and tower ownership and management companies have
greater financial resources that allow them to offer financing
and deferred payment arrangements. In addition, many of the
Companys competitors have significantly greater marketing
resources, larger workforces and greater name recognition than
the Company.

The Company believes that the principal
competitive factors in its market include: expertise in new and
evolving technologies, industry experience, ability to deliver
end-to-end services, ability to deliver results within budget
and on time, reputation and competitive pricing. In particular,
the Company believes that the breadth of its service offerings,
the efficiencies of its processes, its ability to integrate new
technologies and equipment from multiple vendors, its ability to
provide training for its customers through its Wireless
Institute and the high quality of its professional staff provide
it with a competitive advantage.

The Company believes its ability to compete also
depends on a number of additional factors, which are outside of
its control, including:



| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | the willingness of competitors to finance
    customers projects on favorable terms;                            
|
| |  | the ability and willingness of customers to rely
    on their internal staffs to perform services themselves; and
|
| |  | the customers desire to bundle equipment
    and services.                                                      

Employees and Culture

Recognizing the critical importance of employee
retention for its business, the Company works closely with its
employees to develop and enhance the technical, professional and
management skills required to be successful in the Company.
Senior management of the Company believes it is critically
important to create and maintain an open culture that encourages
learning, responsibility and collaboration. C. Thomas
Faulders, III, the Companys chief executive officer,
hosts monthly teleconference meetings with all employees to
foster an open working environment. The Company recognizes that
preserving its culture requires its employees to have a stake in
the success of its business. For that reason, the Company has
granted stock options to a significant majority of its
employees, including its clerical and administrative support
staff.

The Company invests in all of its professionals
to expand their professional education. In particular, the
Company allocates substantial resources to its Wireless
Institute, which provides training for its engineers covering
the latest technologies developed and employed throughout the
world. In addition, the Companys engineers receive
continuous on-the-job exposure to the latest wireless
technologies.

As of December 31, 2002, the Company had
approximately 550 full-time employees worldwide. The Company
believes that relations with its employees are good. None of the
Companys employees are represented by a labor union, and
the Company has not experienced any work stoppages. The Company

9



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believes that its future growth and success will
depend upon its ability to attract and retain skilled and
motivated personnel.


International Operations

The further development of the Companys
international operations requires the Company to research and
comply with local laws and regulations, including employment,
corporate and tax laws. For example, if the Company enters into
a longer term contract overseas, it is often required to
establish a local presence in country, either as a branch or
subsidiary and, if hiring locally, to comply with all local
employment recruiting, hiring and benefit requirements. When not
hiring locally, the Company faces the task of obtaining visas
and work permits for its assigned employees and must comply with
local tax requirements for its expatriate employees.

Risk Factors

The Company tends to derive a significant
portion of revenue in any given year from a limited number of
projects, and the Companys inability to replace projects
that are nearing or at completion with new contract awards would
cause a significant decrease in revenues and negatively impact
the Companys results.

The Company has derived, and believes that it
will continue to derive, a significant portion of its revenues
in any given year from a limited number of large projects. For
the year ended December 31, 2002, the Company derived
approximately 60.3% of its total revenues from its ten largest
customers. As these projects wind down to completion, the
Company faces the task of replacing such revenue with a new
project for the customer or with projects from new customers.
The Companys inability to replace such revenues would
cause a significant decrease in the Companys revenue and
negatively affect its operating results. For example, the
Companys initial deployment of a terrestrial network of
repeater sites for XM Satellite was substantially completed
during the fourth quarter of 2001, wound down in 2002 and the
Company was unable to generate such significant revenues from
other projects in 2002.

Many of the Companys customers face
difficulties in obtaining financing to fund the expansion of
their businesses, including deployments and upgrades, which
results in reduced demand for the Companys
services.

Due to downturns in the financial markets in
general since 2000, and specifically within the
telecommunications financial markets, many of the Companys
customers or potential customers are having trouble obtaining
financing. The current volatility of the financial markets and
slowdown in the U.S. economy in particular and economies
world wide has also intensified the uncertainty experienced by
the Companys customers, who are increasingly finding it
difficult to predict demand for their products and services. As
a result, many of the Companys customers have slowed and
postponed deployment of new networks and development of new
products, which reduces the demand for the Companys
services.

The Company may experience significant
fluctuations in its quarterly results in 2003 as a result of
uncertainties relating to its ability to generate additional
revenues, manage its expenditures and other factors, certain of
which are outside of the Companys control.

The Companys quarterly and annual operating
results have varied considerably in the past and are likely to
vary considerably in 2003 and the future due to a number of
additional factors, many of which are outside of the
Companys control. The factors outside the Companys
control include, among others:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | the timing of receipt of new licenses, use of
    existing spectrum for new services, or financing by potential
    customers;
|
| |  | the length of the Companys sales cycles;                                                                                     
|
| |  | changes in pricing policy by the Companys
    competitors;                                                                   
|
| |  | the timing and size of contracts;                                                                                             
|
| |  | customer budget changes;                                                                                                      

10



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| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the commencement of services by a customer and
    the pace at which a customer desires to build its network;                                                           
|
| |  | services and equipment furnished by other
    providers;                                                                                                                
|
| |  | the availability of capital for wireless carriers
    to fund build-outs;                                                                                               
|
| |  | the growth rate of wireless subscribers, which
    has a direct impact on the rate at which new cell sites are
    developed and built;                                 
|
| |  | the Companys ability to generate
    significant additional revenues to replace revenues associated
    with projects that are nearing, or at project completion;      
|
| |  | the timing of the adoption and deployment of new
    technologies such as 3G and broadband, and availability of
    equipment to adopt and deploy such technologies; and
|
| |  | telecommunications market conditions and economic
    conditions generally.                                                                                             

The factors within the Companys control
include, among others:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | the amount of the Company sales and marketing
    expenses and general and administrative expenses incurred by the
    Company;
|
| |  | the timing and expansion into new international
    markets, through acquisitions or otherwise; and                            
|
| |  | changes in the prices of services offered by the
    Company.                                                                  

Due to the factors above, quarterly revenues,
expenses and results of operations could vary significantly in
2003 and beyond. As a result, the Companys results may not
meet the expectations of securities analysts and investors,
which could cause the price of the Companys common stock
to decline significantly.

Because an increasing percentage of the
Companys revenue is contracted on a fixed price basis,
changes in estimated project costs could cause fluctuations in
the Companys quarterly results and adversely affect its
operating results.

An increasing percentage of the Companys
revenue is derived from fixed price contracts and its reliance
on fixed price contracts may continue to grow. The portion of
the Companys revenue from fixed price contracts was 44.5%
in 2001 and 61.1% in 2002. Fixed price contracts are typically
paid on a milestone basis. As a result of the current business
climate, particularly in Europe, fixed price contracts recently
have included fewer milestones than in previous years, which in
turn requires the Company to finance an increased amount of
unbilled receivables.

In addition, the Company recognizes revenue on
fixed price contracts using the percentage-of-completion method
of accounting, which requires considerable judgment since this
technique relies upon estimates or budgets. With the
percentage-of-completion method, in each period the Company
recognizes expenses as they are incurred and recognizes revenue
based on the ratio of the current costs incurred for the project
to the then estimated total costs of the project. Accordingly,
the revenue that the Company recognizes in a given quarter
depends on, among other things, costs it has incurred for
individual projects and its then current estimate of the total
remaining costs to complete individual projects. If in any
period the Company significantly increases its estimate of the
total costs to complete a project, it may recognize very little
or no additional revenue with respect to that project. If the
total contract cost estimates indicate that there is a loss,
such loss is recognized in the period such determination is
made. To the extent that the Companys cost estimates
fluctuate over time or differ from actual costs, the
Companys operating results may be materially affected. As
a result of these challenges associated with fixed price
contracts, the Companys gross profit in future periods may
be significantly reduced or eliminated.

If the Company is unable to collect
receivables from development stage customers and other
telecommunication companies, its operating results may be
materially harmed.

The Company frequently performs services for
development stage customers that carry a higher degree of
financial risk for the Company. The Companys customers,
established and development stage, are also

11



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vulnerable to, and have been, and may continue to
be, impacted by the tightening of available credit and general
economic slowdown. As a result of these conditions, the
Companys customers may be unable to pay, or may delay
payment, for services performed by the Company. If the Company
is not able to collect such amounts, it may be required to
write-off significant accounts receivable and recognize bad debt
expense. The Company recorded a provision for doubtful accounts
of $5.0 million in fiscal 2002 compared to its recording of
a provision of doubtful accounts of $2.4 million in fiscal
2001. This increase in doubtful accounts reflects increased
losses from customers declaring bankruptcy or having other
financial difficulties during 2002. For example, the Company
recorded a $1.9 million reserve against its receivables
from a customer due to the customers inability in
procuring additional financing.


If the Company is not able to reduce expenses
timely to correspond with any decrease in revenues, its costs as
a percentage of revenue may increase and its net earnings could
decline disproportionately to any decrease in
revenues.

The Company may not be able to reduce its
expenses in order to timely correspond with any decrease in its
revenues, including decreases resulting from delays,
cancellation or completion of existing projects. The
Companys failure to timely effect a redeployment of
personnel associated with such projects and reduce its costs
would decrease gross profits and increase the Companys
operating expenses. Efforts to reduce costs may include a
restructuring of the Companys business, reduction in
headcount, office closings and the reduction or elimination of
other administrative functions. Costs of compliance with
domestic and international regulations associated with such
headcount reductions, particularly in Europe, the Middle East
and Africa, where the Company anticipates considerable growth,
could be significant. The Companys efforts to reduce
expenses could give rise to significant accounting charges and
the payment of certain separation or severance benefits. Efforts
to reduce expenses and the corresponding compliance burdens
would place considerable strain on the Companys
management, legal and administrative functions. The
Companys inability to reduce costs as fast as a decrease
in revenues would cause its costs as a percentage of revenue to
increase and its net earnings to decline disproportionately to
any decrease in revenues. The Company experienced difficulties
reducing general and administrative expenses in the same
proportion as the Companys revenue decreased in 2002.

Further delays in the adoption and deployment
of new technologies such as 3G would negatively affect the
Companys opportunity to generate revenues in 2003 and
beyond.

Wireless carriers have been re-evaluating their
network deployment plans in response to downturns in the capital
markets, changing perceptions regarding industry growth and the
level of customer acceptance of new technologies. Wireless
carriers have delayed or failed to make the significant capital
commitments necessary to begin deployment of their wireless
networks. The costs to acquire 3G licenses that have been issued
in Europe to date have been substantial and coupled with the
continued delay in issuing additional spectrum in the US,
wireless carriers currently may not have the capital or spectrum
required to begin deployment of their networks based on 3G
technology. In 2002, deployment of 3G networks continued to be
delayed in certain regions in Europe, particularly the United
Kingdom and Germany. Since the Company expects that a
substantial portion of its growth is dependent upon services
related to new technologies, further delays in the adoption and
deployment of new technologies such as 3G would negatively
affect the Companys opportunity to generate revenues in
2003 and in the future.

The Companys increasing dependence on
international operations may give rise to increased management
challenges and could harm results of operations.

Approximately 57.0% of the Companys
revenues for the year ended December 31, 2002 were
generated outside of the United States, primarily in Europe, the
Middle East and Africa. The Company currently expects
international revenues to increase as a percentage of total
revenues in 2003 and the future, driven by international
acquisitions, projects undertaken in multiple countries, and
anticipated growth in work in Europe. In 2001, the Company
completed its acquisition of Transmast Italia, a Milan based
deployment firm. In January 2002, the Company completed the
acquisition of Smith Woolley Telecom, a U.K. based deployment
firm. In July 2002, the Company acquired 51.0% of the equity
interest of Detron LCC, a

12



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##### 



deployment firm based in the Netherlands. The
multi-jurisdictional nature of the Companys revenues
exposes the Company to additional risks. Such risks include:




| |   |                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the effects of war with Iraq or terrorism;                                                                                                                                                                                                                                                       
|
| |  | the general economic and political conditions in
    each country;                                                                                                                                                                                                                               
|
| |  | the effect of applicable foreign tax structures,
    including tax rates that may be higher than tax rates in the
    United States;                                                                                                                                                             
|
| |  | tariff and trade regulations;                                                                                                                                                                                                                                                                    
|
| |  | difficulties in obtaining local business licenses;                                                                                                                                                                                                                                               
|
| |  | management of a geographically diverse
    organization; and                                                                                                                                                                                                                                     
|
| |  | difficulties and increased expenses in complying
    with a variety of foreign laws and regulations, including labor,
    employment and immigration laws where failure to comply could
    expose the Company to substantial fines and penalties and a
    reduction in its available workforce.

The level and timing of the demand for the
Companys services and products could also be affected by
changes in the applicable industry regulatory environments in
foreign countries, including delays in deregulation or
privatization affecting the pace at which licenses are awarded
to wireless network system operators.

Expansion of the Companys international
operations may require significant expenditure of operating,
financial and management resources and result in increased
administrative and compliance costs that could harm its results
of operations. In addition, by expanding the Companys
international operations, the Companys operations and
earnings may be significantly affected by political instability
and other political developments throughout the world, such as
war and other international conflicts, civil unrest and local
security concerns. Both the likelihood of such occurrences and
their overall effect upon the Company vary greatly from country
to country and are not predictable.

Providing services outside the United States
carries the additional risk of currency fluctuations and foreign
exchange controls imposed by certain countries since many of the
Companys non-U.S. projects are undertaken in local
currency. Although the Company generally incurs project expenses
in the same currency in which payments are received under the
contract, the Company does not currently engage in additional
currency hedging activities to limit the risk of exchange rate
fluctuations. Therefore, fluctuations in the currency exchange
rate could have a negative impact on the profitability of the
Companys operations particularly if (1) the Company
cannot incur project expenses in the same currency in which
payments are received under the contract, and (2) there is
a negative impact when converting back to U.S. dollars. See
Item 7A, Quantitative and Qualitative Disclosures
about Market Risk.

The
Companys operating results may suffer because of intense
competition in the wireless services industry in the United
States and internationally.

The Company faces intense competition in the
United States and internationally in the market for wireless
network design and system deployment services. Wireless
operators themselves and system equipment vendors have and
continue to develop capabilities competitive with those provided
by the Company.

Many competitors, including equipment vendors,
and system integrators, have substantially greater financial and
other resources than the Company. The ability of such
competitors to leverage their greater resources to more
effectively deliver a full turnkey solution, e.g. by providing
equipment as part of their solution or quickly deploying a large
number of personnel for a project, poses a competitive threat to
the Companys business. Although the equipment vendors or
system integrators may subcontract a portion of the services to
the Company in some cases, the Company often experiences lower
margins for such services as a subcontractor.

Competition can increase pressure on the
Companys pricing. For example, in a deployment project the
Company typically provides program management services as well
as site development and construction

13



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##### 



services. The Company may be pressured to reduce
its pricing with respect to either its program management
services or its site development and construction services in an
attempt to compete with (1) the operator, who may be
inclined to provide program management services itself, or
(2) the Companys own subcontractors, who may be able
to provide the services directly to the customer for the same or
lower price. In addition, there is a risk that the
Companys subcontractors may build relationships with the
Companys customers over time and compete with the Company
for the customers business. With respect to the
competition from its own subcontractors, the Company attempts to
mitigate the risk by including restrictions on the
subcontractors ability to contract directly with the
Companys customer.


Lastly, as a result of intense competition, the
Company has increasingly encountered and may be required to
agree to less favorable contract terms, including provisions
such as liquidated damages, performance guarantees and deferred
payment terms.

Managing the
size of the Companys workforce to anticipate increases or
decreases in market demand for the Companys services is
challenging. Difficulties associated with such management could
result in increased costs to the Company and may harm its
competitive position and financial results.

If the Company maintains or increases staffing
levels in anticipation of one or more projects and those
projects are delayed, reduced, terminated or otherwise do not
materialize, the Company may underutilize these personnel, which
would increase its cost of revenues, harming results of
operations. Due to current economic conditions and the
corresponding effect on the Companys customers or
potential customers, managing the appropriate size of the
Companys workforce and projected demand for its services
is extremely difficult. If the Company maintains a workforce
sufficient to support a resurgence in demand, then its expenses
will be high relative to revenues. If the Company reduces the
size of its workforce in response to any industry slowdown or
decrease in the demand for services, then the Company may not
maintain a sufficient number of skilled personnel to be able to
effectively respond to any resurgence. As a result of these
insufficient staffing levels, the Companys competitive
position in the industry could be negatively impacted and the
Company could incur increased recruiting costs to replace its
workforce. To the extent that the Company is unable to
successfully anticipate increases or decreases in market demand
for its services and manage the size of its workforce
accordingly or mitigate through the use of contract labor, the
Companys financial results will be harmed.

Competitors that
offer wireless customers financing pose a threat to the
Companys ability to compete for business, particularly in
international markets.

Wireless network operators, particularly new
operators and new licensees, depend increasingly on wireless
telecommunication equipment vendors to supply and to finance the
deployment of entire wireless networks. Frequently, those
vendors only make financing available for services or products
if they are contracted to provide the services themselves. For
services the vendors do not provide directly, financing is
provided only if they have the right to select the providers of
those services and products, including radio frequency
engineering and network deployment services. The Company faces
similar competition in the United States and internationally
from tower ownership and management companies that provide tower
deployment service capabilities as part of their overall leasing
package or as part of a build-to-suit financing package. The
Company does not typically provide these types of financing to
its wireless customers. To the extent that future wireless
companies continue to seek such financing, it would harm the
Companys ability to compete for such business.

The
Companys inability to anticipate or adapt to changes in
technology may harm its competitive position, reputation and
opportunities for revenue growth.

The Company operates in a highly competitive
environment that is subject to rapid technological changes and
the emergence of new technologies. Future revenues for the
Company depend significantly upon the adoption and deployment by
wireless customers of new technologies. The Companys
success will depend on its ability to timely enhance its current
service offerings to keep pace with new technologies and the
changing needs of its customers. If the Company is not
successful in responding to technological changes, industry or

14



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marketplace developments, its competitive
position, reputation and opportunities for revenue growth may be
harmed.


The Company may
not be able to hire or retain a sufficient number of qualified
engineers and other employees to meet its contract commitments
or maintain the quality of its services.

As a service business the Companys success
depends significantly on its ability to attract, train and
retain engineering, system deployment, managerial, marketing and
sales personnel who have excellent technical skills,
particularly as technology changes, as well as the interpersonal
skills crucial to fostering client satisfaction. Competition
within the wireless industry for employees with the required
range of skills fluctuates, depending on customer needs, and can
be intense, particularly for radio frequency engineers. At times
the Company has had difficulty recruiting and retaining
qualified technical personnel to properly and quickly staff
large customer projects. In addition to recruitment
difficulties, the Company must fully and properly train its
employees according to the customers technology
requirements and deploy and fully integrate each employee into
the customers project. Increased competition in the
wireless industry is increasing the level of specific technical
experience and training required to fulfill customer-staffing
requirements. This process is costly and resource constraints
may impede the Companys ability to quickly and effectively
train and deploy all of the personnel required to staff a large
project.

The
Companys contracts typically have provisions that permit
customers to terminate their contracts under various
circumstances. If a large project is terminated, the Company may
not be able to replace the revenues from such project and its
revenues and operating results may decline.

The Companys contracts typically have
provisions that permit customers to terminate their contracts
under various circumstances, including termination for
convenience. Certain contracts, particularly with international
customers, a sector that the Company expects to grow, provide
for the deferral of payment for services until the completion of
a project, rather than periodic milestone payments. Termination
of such contracts by the customers may result in further loss of
revenues and cause the Company to incur legal and other expenses
associated with its efforts to collect some or all of the
amounts it may be entitled to under such contracts. The Company
also believes that intense competition and the current trend in
industry contracting toward shorter term contracts that provide
increased grounds for customer termination may result in
increased frequency of customer termination or renegotiation. If
large projects, or a number of projects that in the aggregate
account for a material amount of revenues, are suspended for any
significant length of time or terminated, the Company may
encounter difficulty replacing such revenues and its revenues
and operating results would decline.

Because the
Company has experienced, and expects to continue to experience,
long sales cycles, the Company expects to incur significant
costs to generate new business and its customer base may not
experience growth commensurate with such costs.

Purchases of the Companys 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. The Company may expend
substantial funds and effort to negotiate agreements for these
services, but may ultimately be unable to consummate agreements
for services and expand its customer base. In addition, the
Company has increasingly been required to change both its
personnel and the techniques it employs to respond to customer
organizational changes and expanded geographic reach. Customer
buying habits currently seem to favor a regionalized sales
force, which can increase cost, and may prove to be ineffective.
As a result of its lengthy sales cycles and these potential
increased costs, the Company expects to continue to incur
relatively high costs to generate new business.

15



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##### 



The Company may
not be able to successfully achieve the expected benefits of its
acquisitions.

The Company has made three acquisitions of
deployment service companies since December 2001 and may make
additional acquisitions in the future. The three companies
acquired are small, regional operations that are highly
dependent on the relationships the principals have with the
companys customers.

The Companys acquisition strategy was an
attempt to leverage the acquired companys relationships
with its customers in the local market in order to either
(1) build a turnkey services offering to the customer in
the respective market, or (2) expand the customer
relationship to additional markets. The Company may not be able
to successfully increase its services to the customer in the
same market, leverage the relationship to expand outside the
market, or ultimately build customer loyalty at the Company
level.

Future
acquisitions of new companies or technologies may result in
disruption to the Companys business and expose the Company
to risks associated with acquisitions.

The Company may make future acquisitions or
investments in other companies or technologies. Any future
acquisitions or investments may require additional debt or
equity financing, or the issuance of shares, which could be
dilutive to the Companys existing shareholders. In
addition, the Companys operating results may suffer as a
result of any acquisition-related costs or impairment of
goodwill and other intangible assets acquired in connection with
an acquisition (See Note 9 to Consolidated Financial
Statements). In addition, acquisitions could expose the Company
to a number of other risks and challenges, including:



| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | diversion of managements attention and
    resources;                                                
|
| |  | potential loss of key employees and customers of
    the acquired companies;                          
|
| |  | difficult and costly integration of operations;                                                       
|
| |  | lack of experience operating in the geographic
    market or industry sector of the acquired business;
|
| |  | an increase in the Companys expenses and
    working capital requirements; and                       
|
| |  | exposure to unanticipated contingent liabilities
    of acquired companies.                           

Any of these and other factors could disrupt the
Companys business and harm its ability to achieve the
anticipated benefits of an acquisition.

RF
Investors voting control may result in the taking of
certain unilateral actions.

RF Investors owns all of the outstanding
shares of the Companys Class B Common Stock, which
carries 10 to 1 voting rights and represents 81.2% of the
combined voting power of both classes of common stock. These
shares may be sold without participation of any other Company
shareholder in the sale; however, when such Class B shares
are sold, the shares automatically convert to Class A
Common Stock and lose the 10 to 1 voting rights. Accordingly, RF
Investors, its parent company Telcom Ventures and its equity
holders are able, without approval of any other Company
shareholder, to control the Companys 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 (30.2% of the total outstanding shares
of Class A Common Stock on March 1, 2003 or 35.3% when
combined with the Class A Common Stock held by its parent
company, Telcom Ventures) to influence 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 control Telcom Ventures,
are directors of the Company. Dr. Singh was also a director
of XM Satellite, which accounted for approximately 5.1% of the
Companys total revenues for 2002. Telcom Ventures is
principally engaged in making investments in wireless system
operators and emerging wireless and Internet technologies. If
the Company desires to pursue a transaction requiring
stockholder approval that may conflict with the interests of
Telecom Ventures, RF Investors may elect to vote its shares to
block such transaction.

16



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##### 



Significant
sales of common stock in the future may depress the trading
price of the Companys common stock.

If the Companys stockholders sell
significant amounts of their common stock, including shares
issuable upon conversion of Class B common stock, or upon
exercise of outstanding options, or if the market perceives that
such sales may occur, the market price of the Companys
common stock may decline. Ownership of a significant portion of
the Companys common stock is concentrated in the hands of
a few shareholders, i.e., RF Investors (owning
approximately 30.2% of the Companys outstanding common
shares or 35.3% when combined with the Class A Common Stock
held by its parent company, Telcom Ventures), WorldCom, Inc.
(owning approximately 13.6% of the Companys outstanding
common shares) and the Carlyle Investors (which
consist of five separate legal entities, four of which have the
same general partner) owning in the aggregate approximately
10.1% of the Companys outstanding shares. The shares held
by these shareholders are deemed to be restricted
securities under applicable securities laws but may be
eligible for sale in compliance with Rule 144 under the
Securities Act. Rule 144 generally provides that a person
holding restricted securities that have been outstanding for a
period of one year after the later of the issuance by the
Company or sale by an affiliate of the Company, may sell in
brokerage transactions an amount equal to the greater of 1% of
the Companys outstanding common stock and the
Companys average weekly trading volume for the prior four
weeks, every three months. A person who is a
non-affiliate, and has not been an affiliate within
90 days, who has held restricted securities for over two
years is not subject to the aforesaid volume limitations as long
as the other conditions of the rule are met. The Carlyle
Investors are not subject to such restrictions. Sales of a
significant number of shares (whether by these shareholders or
by shareholders that also accumulate a significant number of
shares), in a single public transaction or over a period of
time, could have a depressive effect on the trading price of the
Companys common stock and may make it more difficult for
the Company to sell its equity securities in the future at a
time and price deemed to be appropriate.

The
Companys 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 and Internet
technologies. Directors of Telcom Ventures and its subsidiaries
who are also the Companys directors have certain fiduciary
obligations to each organization. Telcom Ventures and directors
of Telcom Ventures and its subsidiaries who are also the
Companys directors may be subject to conflicts of interest
in transactions concerning the Company. For example, the Company
may have an interest in pursuing acquisitions, divestitures,
financings or other transactions that, in the Companys
judgment, could be beneficial to the Company, even though such
transactions might conflict with the interests of Telcom
Ventures. If such conflicts do occur, directors of Telcom
Ventures and its subsidiaries who are also the Companys
directors may exercise their influence in the best interests of
Telcom Ventures instead of the best interests of the Company.

The Company has 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 the
Company. The 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 the Company in its traditional lines of business
and (ii) Telcom Ventures is limited in its ability to
invest in entities whose primary business is to compete with the
Company in its traditional lines of business, in each case until
the earlier of (i) the date on which those owners no longer
possess 51% or more of the outstanding voting power of the
Company or (ii) the occurrence of certain termination
events specified in the intercompany agreement. No termination
events have occurred to date.

Each of the Carlyle Investors (but not its
affiliates) is limited in its ability to invest in entities
whose primary business is to compete with the Company in its
traditional line of business (excluding the program management
and tower businesses) until the earlier of (i) the date on
which the Carlyle Investor no longer owns, directly or
indirectly, an interest in the Company or (ii) the
occurrence of certain termination events specified in the
intercompany agreement.

17



---



##### 



The Company is free to pursue investment
opportunities on its own, but it is 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,
the Company 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.

Item 2.     Properties

The Company currently leases approximately
155,000 square feet of office space at its headquarters in
McLean, Virginia, under a ten-year lease expiring in 2007. The
Company occupies approximately 32,000 square feet of the
McLean facility and currently subleases approximately 24,000
square feet to subtenants. Approximately 99,000 square feet was
vacant as of December 31, 2002 and the Company is actively
pursuing additional subleasing opportunities.

The Company leases approximately 8,600 square
feet of office space at its EMEA regional headquarters in
London, England under a 13 year lease expiring in September
2014. The Company occupies approximately 4,500 square feet of
the London facility and is actively pursuing subleasing
opportunities.

In addition, the Company leases office space in
connection with its local operations in North and South America
(Mission Viejo, California and Sao Paolo, Brazil), the United
Kingdom (Cambridge, Bath, Newark, Enfield), Italy (Rome, Milan),
the Netherlands (s Hertogenbosch). The Company also leases
space in connection with its regional marketing efforts in Spain
and Australia.

All of the Companys facilities are used for
current operations of all segments.

Item 3.     Legal
Proceedings

The Company is party to various non-material
legal proceedings and claims incidental to its business.

Item 4.     Submission
of Matters to a Vote of Security Holders

None.

18



---



##### 



PART II

Item 5.     Market
for Registrants Common Stock and Related Stockholder
Matters

Since completion of the Companys initial
public offering in September 1996, its Class A Common Stock
has been quoted on the NASDAQ National Market under the trading
symbol LCCI. As of March 1, 2003, there were
115 stockholders of record of the Class A Common Stock and
two stockholders of record of the Class B Common Stock. As
of March 1, 2003, the Company estimates there were in
excess of 4,000 beneficial holders of Class A Common Stock.
The following table summarizes the high and low sales prices of
the Class A Common Stock by fiscal quarter for 2001 and
2002 as reported on the NASDAQ National Market:

|               |  |      |         |  |  |   |       | 
|-------------- |  | ---- | ------- |  |  | - | ----- | 
|               |  |     
|Quarter Ended: |  | 2001
|               |  |     
|               |  |      |         | 
|March 31       |  | $    | 4.94 to |  |  | $ | 14.00 | 
|June 30        |  | $    | 2.69 to |  |  | $ | 7.55  | 
|September 30   |  | $    | 4.00 to |  |  | $ | 6.90  | 
|December 31    |  | $    | 4.80 to |  |  | $ | 8.40  | 

|               |  |      |         |  |  |   |      | 
|-------------- |  | ---- | ------- |  |  | - | ---- | 
|               |  |     
|Quarter Ended: |  | 2002
|               |  |     
|               |  |      |         | 
|March 31       |  | $    | 4.03 to |  |  | $ | 7.59 | 
|June 30        |  | $    | 1.22 to |  |  | $ | 5.35 | 
|September 30   |  | $    | 1.22 to |  |  | $ | 2.55 | 
|December 31    |  | $    | 1.20 to |  |  | $ | 2.40 | 

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. 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.

Equity Compensation Plan Information

|                                                               |                                                                    |                      |           |                      |  |                              |      |       |  |  |           |           | 
|-------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------- | --------- | -------------------- |  | ---------------------------- | ---- | ----- |  |  | --------- | --------- | 
|                                                               |                                                                    |                      |           |                      |  | Number of securities        
|                                                               |                                                                    | Number of securities |           |                      |  | remaining available for     
|                                                               |                                                                    | to be issued upon    |           | Weighted-average     |  | future issuance under equity
|                                                               |                                                                    | exercise of          |           | exercise price of    |  | compensation plans          
|                                                               |                                                                    | outstanding options, |           | outstanding options, |  | (excluding securities       
|                                                               |                                                                    | warrants and rights  |           | warrants and rights  |  | reflected in column (a))    
|Plan category                                                  |                                                                    | (a)                  |           | (b)                  |  | (c)                         
|                                                               |                                                                    |                      |           |                      |  |                             
|Equity compensation plans approved by
    securities holders   |                                                                    |                      |           |                      |  |                              |      |       |  |  |           |          
|                                                               | Employee Stock Option Plan                                         |                      |           | 3,953,193            |  |                              | $    | 6.72  |  |  |           | 2,851,042 | 
|                                                               | Directors Stock Option Plan (Class A and
    Class B Common Stock) |                      |           | 422,600              |  |                              |      | 11.41 |  |  |           | 77,400    | 
|                                                               | Employee Stock Purchase Plan                                       |                      |           |                     |  |                              |      |      |  |  |           | 472,292   | 
|Equity compensation plans not approved by
    security holders |                                                                    |                      |          |                      |  |                              |     |       |  |  |          |          
|                                                               |                                                                    |                      |           |                      |  |                              |      |       |  |  |           |          
|Total                                                          |                                                                    |                      | 4,375,793 |                      |  | $                            | 7.18 |       |  |  | 3,400,734 |          
|                                                               |                                                                    |                      |           |                      |  |                              |      |       |  |  |           |          

Item 6.  Selected Financial
Data

Set forth below are selected consolidated
financial data as of and for each of the years in the five-year
period ended December 31, 2002, which have been derived
from the Companys audited consolidated financial
statements. 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

19



---



##### 



consolidated financial statements and related
notes thereto included, or incorporated by reference, elsewhere
in this Form 10-K.


|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |        |        |  
|-------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------- | ------- | ------- | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | - | ------- | ------ | ------ | -
|                                                                     |                                                             |                                      
|                                                                     |                                                             | Years Ended December 31,             
|                                                                     |                                                             |                                      
|                                                                     |                                                             | 1998(1)                               |         | 1999(1) |        | 2000 |        | 2001   |        | 2002
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |     
|                                                                     |                                                             |                                      
|                                                                     |                                                             | (in thousands, except per share data)
|Revenues:                                                            |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Service                                                     |                                       | $       | 86,328  |        |      | $      | 73,289 |        |      | $      | 149,385 |         |   | $      | 130,609 |         |   | $       | 67,069 |       
|                                                                     | Tower ownership and management                              |                                       |         | 860     |        |      |        | 2,504  |        |      |        | 1,008   |         |   |        |        |         |   |         |       |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     |                                                             | Total revenues                        |         |         | 87,188 |      |        |        | 75,793 |      |        |         | 150,393 |   |        |         | 130,609 |   |         |        | 67,069 |  
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Cost of revenues:                                                    |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Service                                                     |                                       |         | 66,238  |        |      |        | 53,080 |        |      |        | 109,952 |         |   |        | 103,535 |         |   |         | 58,429 |       
|                                                                     | Tower ownership and management                              |                                       |         | 521     |        |      |        | 1,176  |        |      |        | 333     |         |   |        |        |         |   |         |       |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     |                                                             | Total cost of revenues                |         |         | 66,759 |      |        |        | 54,256 |      |        |         | 110,285 |   |        |         | 103,535 |   |         |        | 58,429 |  
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Gross profit                                                         |                                                             |                                       | 20,429  |         |        |      | 21,537 |        |        |      | 40,108 |         |         |   | 27,074 |         |         |   | 8,640   |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Operating expenses:                                                  |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Sales and marketing                                         |                                       |         | 3,843   |        |      |        | 5,464  |        |      |        | 7,833   |         |   |        | 7,068   |         |   |         | 8,095  |       
|                                                                     | General and administrative                                  |                                       |         | 22,063  |        |      |        | 18,128 |        |      |        | 19,673  |         |   |        | 15,978  |         |   |         | 20,311 |       
|                                                                     | Restructuring charge                                        |                                       |         | 1,256   |        |      |        |       |        |      |        | (108    | )       |   |        |        |         |   |         | 13,522 |       
|                                                                     | Non-cash compensation                                       |                                       |         | 362     |        |      |        | (12    | )      |      |        |        |         |   |        |        |         |   |         |       |       
|                                                                     | Gain on sale of tower portfolio and
    administration, net |                                       |         |        |        |      |        |       |        |      |        | (26,437 | )       |   |        | (2,998  | )       |   |         | (2,000 | )     
|                                                                     | Depreciation and amortization                               |                                       |         | 2,409   |        |      |        | 3,628  |        |      |        | 2,899   |         |   |        | 3,012   |         |   |         | 2,884  |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     |                                                             | Total operating expenses              |         |         | 29,933 |      |        |        | 27,208 |      |        |         | 3,860   |   |        |         | 23,060  |   |         |        | 42,812 |  
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Operating income (loss)                                              |                                                             |                                       | (9,504  | )       |        |      | (5,671 | )      |        |      | 36,248 |         |         |   | 4,014  |         |         |   | (34,172 | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Other income (expense)                                               |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Interest income (expense), net                              |                                       |         | (1,397  | )      |      |        | (1,827 | )      |      |        | 1,688   |         |   |        | 1,886   |         |   |         | 818    |       
|                                                                     | Other                                                       |                                       |         | (618    | )      |      |        | (1,391 | )      |      |        | (787    | )       |   |        | 22,113  |         |   |         | (3,767 | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     |                                                             | Total other income (expense)          |         |         | (2,015 | )    |        |        | (3,218 | )    |        |         | 901     |   |        |         | 23,999  |   |         |        | (2,949 | )
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Income (loss) from continuing operations before
    income taxes     |                                                             |                                       | (11,519 | )       |        |      | (8,889 | )      |        |      | 37,149 |         |         |   | 28,013 |         |         |   | (37,121 | )     
|Provision (benefit) for income taxes                                 |                                                             |                                       | (4,561  | )       |        |      | (2,677 | )      |        |      | 16,531 |         |         |   | 11,041 |         |         |   | (8,451  | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Income (loss) from continuing operations                             |                                                             |                                       | (6,958  | )       |        |      | (6,212 | )      |        |      | 20,618 |         |         |   | 16,972 |         |         |   | (28,670 | )     
|Loss from discontinued operations net of tax
    benefit             |                                                             |                                       | (17,785 | )       |        |      |       |        |        |      |       |         |         |   |       |         |         |   |        |       
|Gain on disposal of discontinued operations net
    of tax provision |                                                             |                                       |        |         |        |      | 803    |        |        |      |       |         |         |   |       |         |         |   |        |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Net income (loss)                                                    |                                                             | $                                     | (24,743 | )       |        | $    | (5,409 | )      |        | $    | 20,618 |         |         | $ | 16,972 |         |         | $ | (28,670 | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Income (loss) per share:                                             |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Continuing operations:                                               |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Basic                                                       |                                       | $       | (0.45   | )      |      | $      | (0.36  | )      |      | $      | 1.01    |         |   | $      | 0.83    |         |   | $       | (1.37  | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Diluted                                                     |                                       | $       | (0.45   | )      |      | $      | (0.36  | )      |      | $      | 0.93    |         |   | $      | 0.81    |         |   | $       | (1.37  | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Discontinued operations:                                             |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Basic                                                       |                                       | $       | (1.15   | )      |      | $      | 0.05   |        |      |        |        |         |   |        |        |         |   |         |       |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Diluted                                                     |                                       | $       | (1.15   | )      |      | $      | 0.05   |        |      |        |        |         |   |        |        |         |   |         |       |       
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Net income (loss) per share:                                         |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Basic                                                       |                                       | $       | (1.60   | )      |      | $      | (0.31  | )      |      | $      | 1.01    |         |   | $      | 0.83    |         |   | $       | (1.37  | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Diluted                                                     |                                       | $       | (1.60   | )      |      | $      | (0.31  | )      |      | $      | 0.93    |         |   | $      | 0.81    |         |   | $       | (1.37  | )     
|                                                                     |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|Consolidated Balance Sheet Data (at year-end):                       |                                                             |                                       |         |         |        |      |        |        |        |      |        |         |         |   |        |         |         |   |         |       
|                                                                     | Working capital                                             |                                       | $       | 14,471  |        |      | $      | (8,039 | )      |      | $      | 59,460  |         |   | $      | 72,134  |         |   | $       | 49,959 |       
|                                                                     | Intangibles, net                                            |                                       |         | 572     |        |      |        | 430    |        |      |        | 57      |         |   |        | 637     |         |   |         | 11,273 |       
|                                                                     | Total assets                                                |                                       |         | 84,204  |        |      |        | 82,868 |        |      |        | 110,045 |         |   |        | 112,231 |         |   |         | 96,723 |       
|                                                                     | Long-term liabilities                                       |                                       |         | 50,115  |        |      |        | 1,006  |        |      |        | 5,944   |         |   |        | 849     |         |   |         | 6,618  |       
|                                                                     | Shareholders equity                                        |                                       |         | 229     |        |      |        | 42,426 |        |      |        | 68,416  |         |   |        | 85,804  |         |   |         | 61,088 |       




|    |                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 1999, the Companys Board of
    Directors adopted a plan to dispose of the operations comprising
    its hardware and software products segments, which were sold to
    Ericsson Radio Systems AB in October 1999. Prior year balances
    have been restated to reflect these segments as discontinued
    operations.

20



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 provides integrated end-to-end
solutions for wireless voice and data communication networks
with service offerings to include high level technical
consulting, system design and deployment and ongoing operations
and maintenance services. Since its inception in 1983, the
Company has delivered wireless network solutions to more than
350 customers in over 50 countries. Internationally based
customers accounted for approximately 57.0% of the
Companys revenues for the year ended December 31,
2002. See note 19 of the Consolidated Financial Statements
for additional information about revenues derived from
internationally based customers.

In the last several years, the Company has made
several strategic decisions that have enabled it to focus on its
core competency in providing end-to-end wireless services. In
October 1999, the Company disposed of its hardware and software
products businesses and, in March 2000, the Company sold its
telecommunication tower business. In addition, during the last
two years, the Company has entered into a number of strategic
acquisitions and investments to enhance its wireless
capabilities with a particular focus on certain international
markets.

The Company operates in a highly competitive
environment subject to rapid technological change and emergence
of new technologies. Historically, the key drivers of changes in
the Companys wireless services business have been
(1) the issuance of new or additional licenses to wireless
operators; (2) the introduction of new services or
technologies; (3) increases in the number of subscribers
served by wireless operators; (4) the increasing complexity
of wireless systems in operation, and changes in wireless
infrastructure spending and deployment.

The Companys primary sources of revenues
are from engineering design and system deployment services.
Prior to the sale of its tower business in March 2000, tower
lease revenues provided an additional source of revenues (see
note 4 to the Consolidated Financial Statements). Revenues
from services are derived from fixed price and time and
materials contracts. The Company recognizes revenues from
fixed-price service contracts using the percentage-of-completion
method. Fixed price revenues as a percentage of total revenues
were 63.4%, 44.5%, and 61.1% in 2000, 2001, and 2002,
respectively. With fixed price contracts, the Company recognizes
revenue based on the ratio of individual contract costs incurred
to date on a project compared with total estimated costs.
Anticipated contract losses are recognized, as they become known
and estimable. The Company recognizes revenues on time and
materials contracts as the services are performed. Lease
revenues from the tower business in 2000 and preceding periods
are recognized over the term of the related lease.

Cost of revenues includes direct compensation and
benefits, living and travel expenses, payments to third-party
subcontractors and consultants, equipment rentals, expendable
computer software and equipment, and allocated, or directly
attributed, facility and overhead costs identifiable to projects.

General and administrative expenses consist of
compensation, benefits, office and occupancy, and other costs
required for the finance, human resources, information systems,
and executive office functions. Sales and marketing expenses
consist of salaries, benefits, sales commissions, travel and
other related expenses required to implement the Companys
marketing, sales and customer support plans.

Trends That Have Affected or May Affect
Results of Operations and Financial Condition

The Company has continued to see tightened
capital markets, which among other things have contributed to a
slowdown in wireless telecommunications infrastructure spending.
The Companys success depends upon continued growth in the
design and deployment and optimization of wireless networks.
Many wireless carriers are reliant upon the capital markets to
obtain funds to finance building and improving their wireless
networks. Most vulnerable are the customers that are new
licensees and operator/ carriers who have limited sources of
funds from operations or have business plans that are dependent
on funding from the capital

21



---



##### 



markets. The slowdown in wireless
telecommunications infrastructure spending caused some of the
Companys customers or potential customers to slow,
postpone or reduce the scope of the deployment of new wireless
networks or expansion of existing networks, which has reduced
the demand for the Companys services. This industry
slowdown is occurring at the same time the Company is searching
for projects to replace the revenue received from
XM Satellite, the Companys largest client in 2001.
The XM Satellite contract was substantially completed in
the first quarter of 2002, and no additional significant revenue
is anticipated from this customer in 2003.


The completion of the XM Satellite contract
coupled with the industry slowdown caused revenue to decline
dramatically in 2002. Additionally, the need to replace revenue
derived from the XM Satellite contract and the difficult
marketplace has caused gross profit as a percentage of total
revenues to decline. Cost reduction measures taken by the
Company are not sufficient to return the Company to
profitability without additional growth in revenue. The Company
has recently seen renewed customer activity to upgrade or
enhance existing systems. Despite this renewed activity, it is
difficult to predict the impact, if any, and the related timing
of any such impact, upon the Companys future revenue
growth opportunities.

Europe is a promising area for revenue growth for
the Company. This optimism is caused by the need of the European
carriers to meet network-building obligations associated with
their 3G licenses, which represent a significant investment on
their part. With the recent availability of 3G equipment in
Europe, the Company expects that demand for the types of
services provided by the Company will increase. Revenue from
3G networks constituted 4.7% and 20.0% of the
Companys revenues for the years ended December 31,
2001 and 2002, respectively, and it is expected to continue to
be an area of business growth in the future. In anticipation of
this growth, and in order to complement its European Radio
Frequency Engineering capacity with local deployment capability
necessary to provide end-to-end services in key European
markets, the Company has recently acquired additional deployment
capability in Europe. In December 2001, the Company acquired
Transmast Italia, a wireless infrastructure, deployment, civil
engineering and project management firm located in Milan, Italy.
In January 2002, the Company acquired the assets of Smith
Woolley Telecom, a telecommunications consultancy company that
specializes in the provision of search, acquisition, design,
build, and management and maintenance services to the wireless
industry in the United Kingdom. In July 2002, the Company
acquired 51% of Detron LCC Network Services B.V., a newly formed
company specializing in the provision of deployment, management
and maintenance services to the wireless industry in the
Netherlands. The Company also anticipates that its reliance upon
fixed price contracts will continue to grow in connection with
these recent acquisitions. These newly acquired international
operations provide more support for network deployment and
construction management, where use of fixed price contracts is
more typical. These contracts typically contain payment terms
that are less favorable, and consequently require greater
working capital than has historically been required by the
Company, which is reflected as an increase in days sales
outstanding. Additionally, the work may provide lower gross
profit margins than engineering design services.

22



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##### 



Results of Operations

The following table sets forth certain items as a
percentage of revenues from the Companys audited
consolidated statements of operations for the years ended
December 31, 2000, 2001, and 2002. The table, and the
discussion that follows, provide information which management
believes is relevant to an assessment and understanding of the
Companys consolidated results of operations and financial
condition. The discussion should be read in conjunction with the
consolidated financial statements and accompanying notes thereto
included elsewhere herein.

|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |       |       |  
|------------------------------------------------- | -------------------------------------------- | ---------------------------- | ---- | ----- | ----- | ---- | ---- | ----- | ----- |  | ----- | ----- | ----- | -
|                                                  |                                              |                             
|                                                  |                                              | Years Ended December 31,    
|                                                  |                                              |                             
|                                                  |                                              | 2000                         |      | 2001  |       | 2002
|                                                  |                                              |                              |      |       |       |     
|Revenues:                                         |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  | Service                                      |                              |      | 99.3  | %     |      |      | 100.0 | %     |  |       | 100.0 | %    
|                                                  | Tower ownership and management               |                              |      | 0.7   |       |      |      |      |       |  |       |      |      
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  |                                              | Total revenues               |      |       | 100.0 |      |      |       | 100.0 |  |       |       | 100.0 |  
|Cost of revenues:                                 |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  | Service                                      |                              |      | 73.1  |       |      |      | 79.3  |       |  |       | 87.1  |      
|                                                  | Tower ownership and management               |                              |      | 0.2   |       |      |      |      |       |  |       |      |      
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  |                                              | Total cost of revenues       |      |       | 73.3  |      |      |       | 79.3  |  |       |       | 87.1  |  
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|Gross profit:                                     |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  | Service                                      |                              |      | 26.2  |       |      |      | 20.7  |       |  |       | 12.9  |      
|                                                  | Tower ownership and management               |                              |      | 0.5   |       |      |      |      |       |  |       |      |      
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|Gross profit                                      |                                              |                              | 26.7 |       |       |      | 20.7 |       |       |  | 12.9  |      
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|Operating expenses:                               |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  | Sales and marketing                          |                              |      | 5.2   |       |      |      | 5.4   |       |  |       | 12.1  |      
|                                                  | General and administrative                   |                              |      | 13.1  |       |      |      | 12.2  |       |  |       | 30.3  |      
|                                                  | Restructuring charge                         |                              |      | (0.1  | )     |      |      |      |       |  |       | 20.2  |      
|                                                  | Tower portfolio sale and administration, net |                              |      | (17.5 | )     |      |      | (2.3  | )     |  |       | (3.0  | )    
|                                                  | Depreciation and amortization                |                              |      | 1.9   |       |      |      | 2.3   |       |  |       | 4.3   |      
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  |                                              | Total operating expenses     |      |       | 2.6   |      |      |       | 17.6  |  |       |       | 63.9  |  
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|Operating income (loss)                           |                                              |                              | 24.1 |       |       |      | 3.1  |       |       |  | (51.0 | )    
|Other income (expense):                           |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  | Interest income                              |                              |      | 1.3   |       |      |      | 1.5   |       |  |       | 1.3   |      
|                                                  | Interest expense                             |                              |      | (0.2  | )     |      |      |      |       |  |       |      |      
|                                                  | Other                                        |                              |      | (0.5  | )     |      |      | 16.9  |       |  |       | (5.6  | )    
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|                                                  |                                              | Total other income (expense) |      |       | 0.6   |      |      |       | 18.4  |  |       |       | (4.3  | )
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|Income (loss) from operations before income taxes |                                              |                              | 24.7 |       |       |      | 21.5 |       |       |  | (55.3 | )    
|Provision (benefit) for income taxes              |                                              |                              | 11.0 |       |       |      | 8.5  |       |       |  | (12.6 | )    
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      
|Net income (loss)                                 |                                              |                              | 13.7 | %     |       |      | 13.0 | %     |       |  | (42.7 | )%   
|                                                  |                                              |                              |      |       |       |      |      |       |       |  |       |      

23



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##### 



Year Ended December 31, 2002 Compared to
Year Ended December 31, 2001

Revenues

Revenues for the twelve months ended
December 31, 2002 were $67.1 million compared to
$130.6 million for the prior year, a reduction of
$63.5 million or 48.6%. This reduction was primarily
composed of a decrease in revenues in the Americas region of
$72.6 million, offset by an increase in the Europe, Middle
East and Africa (EMEA) region of $11.4 million.
Of the decrease in revenues in the Americas of
$72.6 million, approximately $53.9 million reflected
the substantial completion of the XM contract together with a
general slow down in wireless infrastructure spending and
deployment. The increase in revenues in EMEA of
$11.4 million was primarily attributable to the acquisition
of Transmast Italia in December 2001, Smith Woolley Telecom in
January 2002 and Detron in July 2002.

Cost of
Revenues

Cost of revenues for the twelve months ended
December 31, 2002 was $58.4 million compared to
$103.5 million for the prior year, a reduction of
$45.1 million. This reduction was primarily composed of a
decrease in cost of revenues for Americas of $50.5 million
and an increase in cost of revenues for EMEA of
$6.8 million, reflecting the reasons described above for
reduction in revenue. As a percentage of total revenues, cost of
revenues for the twelve months ended December 31, 2002 was
87.1%, compared to 79.3% for the prior year. After adjusting for
the completion of the XM contract, cost of revenues for the
twelve months ended December 31, 2002 was 86.1%, compared
to 85.3% for the prior year.

Gross
Profit

Gross profit for the twelve months ended
December 31, 2002 was $8.6 million compared to
$27.1 million for the prior year, a reduction of
$18.5 million. As a percentage of total revenues, gross
profit for the twelve months ended December 31, 2002 was
12.9%, compared to 20.7% for the prior year. After adjusting for
the completion of the XM contract, gross profit for the twelve
months ended December 31, 2002 was 13.9%, compared to 14.7%
for the prior year.

Sales and
Marketing

Sales and marketing expenses for the twelve
months ended December 31, 2002 were $8.1 million,
compared to $7.1 million for the prior year. The increase
of $1.0 million was mostly attributable to the acquisitions
in EMEA described above together with increased sales and
marketing expenses in the Asia Pacific region. As a percentage
of revenues, sales and marketing expenses for the twelve months
ended December 31, 2002 were 12.1%, compared to 5.4% for
the prior year, reflecting the relatively fixed nature of the
expenses.

General and
Administrative

General and administrative expenses for the
twelve months ended December 31, 2002 were
$20.3 million, compared to $16.0 million for the prior
year, an increase of $4.3 million. Included in these
figures are provisions for bad debts net of benefits from
recoveries of $2.7 million (net expense) in 2002 and
$5.4 million (net benefit) in 2001 respectively.

Excluding the effects of recovering bad debts
written off in prior periods, general and administrative
expenses for the twelve months ended December 31, 2002 were
$17.6 million, compared to $21.4 million for the prior
year. Of the reduction of $3.8 million, $2.2 million
was attributable to real property expenses charged against the
restructuring provision and the balance of $1.6 million was
attributable to the Companys continuing efforts to manage
the general and administrative expenses in relation to the
volume of business.

As a percentage of revenues, general and
administrative expenses excluding the effect of recovering bad
debts written off in prior periods for the twelve months ended
December 31, 2002 were 26.2%, compared to 16.3% for the
prior year. The increase in percentage of revenues for the
twelve months ended December 31, 2002 was attributable to
the overall reduction in volume, described above under
Revenues.

24



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##### 



Restructuring
Charge

Restructuring charge for the twelve months ended
December 31, 2002 was $13.5 million. There was no
comparable charge in the prior year. The charge was recorded
pursuant to a restructuring plan adopted by the Company, which
included a reduction of approximately 140 employees. Of the
total charge of $13.5 million, approximately
$1.0 million related to employee severance and associated
costs, and approximately $12.5 million related to excess
office space. See note 7 to the Consolidated Financial
Statements.

Gain on Sale
of Tower Portfolio and Administration, Net

During February 2000, the Company entered into an
agreement for the sale of telecommunication towers that it
owned. As part of the sale agreement, the Company agreed to
lease unoccupied space on the towers, effectively guaranteeing a
minimum rent level of a fixed amount on the towers sold. The
gain from the tower portfolio sale deferred an amount
corresponding to the rent commitment, until the space was leased
to another tenant or otherwise satisfied. For the twelve months
ended December 31, 2002, the Company recognized
$2.0 million of this previously deferred gain, compared to
$3.0 million for the prior year. As of December 31,
2002, the Company has recognized the entire deferred gain.

Depreciation
and Amortization

Depreciation and amortization for the twelve
months ended December 31, 2002 was $2.9 million,
compared to $3.0 million for the prior year. Reductions in
infrastructure depreciation of about $0.9 million have been
offset by increases in amortization of intangible assets of
about the same amount.

Interest
Income

Interest income for the twelve months ended
December 31, 2002 was $0.8 million, compared to
$1.9 million for the prior year. The reduction of
$1.1 million was attributable to the lower average balance
of cash deposits combined with further decreases in available
yields on short-term investments.

Other Income
and Expense

Other income and expense for the twelve months
ended December 31, 2002 was a net expense of
$3.8 million, compared to a net income of
$22.1 million for the prior year. The net expense of
$3.8 million for 2002 was composed of an impairment charge
of $5.1 million and other income of $1.3 million. The
impairment charge related to the entire investment the Company
made in two separate companies, Plan + Design Netcare AG
($4.6 million) and Mobilocity, Inc. ($0.5 million).
Both firms entered into statutory or voluntary liquidation plans
during 2002 and, in both cases, no proceeds are anticipated to
be returned to the shareholders. Of the other income of
$1.3 million in 2002, approximately $1.1 million was
attributable to the recovery of excess provisions no longer
required for operations in Egypt. The net income of
$22.1 million for 2001 was largely related to the gains
from the sale of the Companys investments and assets held
in Nextwave ($21.4 million) and Tecnosistemi
($1.0 million).

Provision
(Benefit) for Income Taxes

The provision for income taxes was recorded for
the twelve months ended December 31, 2002 using an
effective income tax rate of 22.8% compared to 39.4% for the
comparative period in 2001. The lower rate reflects an
adjustment to deferred tax assets, domestic losses and increased
foreign taxes.

Net Income
(Loss)

Net loss for the twelve months ended
December 31, 2002 was $28.7 million, compared to net
income of $17.0 million for the prior year. Net income in
2001 was increased by gains related to the sale of the
Companys assets included in other income and expense of
$22.4 million. The net loss for 2002 did not reflect any
such unusual gains, and included a restructuring charge of
$13.5 million as well as a charge for impaired assets of
$5.1 million.

25



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##### 



Year Ended December 31, 2001 Compared to
Year Ended December 31, 2000

Revenues

Revenues for the twelve months ended
December 31, 2001 were $130.6 million compared to
$150.4 million for the prior year, a decrease of
$19.8 million or 13.2%. A slowdown in a large fixed-price
contract performed in the Middle East contributed to
$11.1 million of the decreased revenues. Revenue declines
in the United States of $6.5 million, largely related to
decreased customer spending on broadband and other wireless
infrastructure spending also contributed to the decline. A major
driver for the decline in revenues was the slowdown in wireless
telecommunications infrastructure spending due to the tightening
of the capital markets during the year.

Cost of
Revenues

Cost of revenues for the twelve months ended
December 31, 2001 was $103.5 million compared to
$110.3 million for the prior year, a decrease of
$6.8 million. As a percentage of total revenues, cost of
revenues was 79.3% and 73.3% for 2001 and 2000, respectively.
Cost of revenues in 2001 was a higher percentage of revenue than
in the previous year due to an increase in costs to complete a
large fixed-price contract in the Middle East of
$3.3 million, an additional provision for expatriate
employees reimbursed taxes of $1.3 million, costs
associated with lower utilization of professional staff of
$1.0 million, and a $1.5 million benefit recorded in
2000 relative to certain employment related taxes recorded in
prior years.

Gross
Profit

Gross profit for the twelve months ended
December 31, 2001 was $27.1 million compared to
$40.1 million for the prior year, a decrease of
$13.0 million or 32.4%. As a percentage of total revenues,
gross profit was 20.7% and 26.7% for 2001 and 2000,
respectively. The decline in gross profit margin in 2001 is
primarily attributable to additional items of cost, discussed in
Cost of Revenues above, and contract margin declines caused by
increased competition driven by a slowdown in customer wireless
telecommunications infrastructure spending.

Sales and
Marketing

Sales and marketing expenses were
$7.1 million for the twelve months ended December 31,
2001 compared to $7.8 million for the prior year, a
decrease of $0.7 million. As a percentage of total
revenues, sales and marketing was 5.4% and 5.2% for 2001 and
2000, respectively. The decrease is primarily attributed both to
reductions in agent commissions relative to the revenue decline
of a large fixed-price contract performed in the Middle East as
well as reductions from cost saving measures.

General and
Administrative

General and administrative expenses were
$16.0 million for the twelve months ended December 31,
2001 compared to $19.7 million for the prior year. General
and administrative expenditures in 2001 include a net benefit of
$7.4 million due to the recovery of receivable balances
written-off in prior years from two bankrupt customers, offset
by bad debt provisions for 2001 of $2.1 million. The
provision for bad debt expense in 2001 is caused by a general
tightening of the capital markets to customers in the wireless
telecommunications market and increased incidence of bankruptcy
filings among the Companys customers. Other increases in
the general and administrative expenses in 2001 were related to
employee severance and related costs of $0.7 million,
insurance costs of $0.3 million, and other administrative
costs associated with infrastructure to support anticipated
international growth and expansion.

Gain on Sale
of Tower Portfolio and Administration, Net

During February 2000, the Company entered into an
agreement for the sale of telecommunications towers that it
owned. As part of the sale agreement, the Company agreed to
lease unoccupied space on the towers, effectively guaranteeing a
minimum rent level of $5.2 million on the towers sold. The
gain from the

26



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##### 



tower portfolio sale deferred an amount
corresponding to this rent commitment, until the space was
leased to another tenant. In 2001, the Company recognized
$3.2 million of this previously deferred revenue, which was
offset by a $0.2 million in related operating expenses.


Depreciation
and Amortization

Depreciation and amortization expense was
$3.0 million for the twelve months ended December 31,
2001 compared to $2.9 million for the prior year.

Interest
Income

Interest income was $1.9 million for the
twelve months ended December 31, 2001 compared to
$2.0 million for the prior year. Interest income in 2001
declined slightly over 2000 reflecting a decline in yields
available for short-term investments.

Other Income
(Expense)

Other income was $22.1 million for the
twelve months ended December 31, 2001 compared to an
expense of $0.8 million for the prior year. Other income in
2001 is largely attributable to the sale of all of the
Companys NextWave Class B common stock and
substantially all of its current debt claims against NextWave
resulting in a gain of $21.4 million. The Company also sold
its investment in Tecnosistemi, an Italian telecommunications
services company in which the Company invested in September
1999, resulting in a gain of $1.0 million in 2001. Other
expense in the prior year was primarily due to losses from using
the equity method of accounting for one of the Companys
investments.

Provision for
Income Taxes

The provision for income taxes was recorded for
the twelve months ended December 31, 2001 using an
effective income tax rate of 39.4% compared to 44.5% for the
comparable period in 2000. The higher tax rate in 2000 reflects
permanent differences relative to the tower portfolio sale.

Net
Income

Net income was $17.0 million for the twelve
months ended December 31, 2001 compared to
$20.6 million in the prior year. Net income in both 2001
and 2000 was increased by gains related to the sale of the
Companys telecommunications towers of $26.4 million
and $3.0 million in 2000 and 2001, respectively. Net income
for 2001 also contained an unusual gain related to the sale of
the Companys assets included in other income of
$22.4 million.

Liquidity and Capital Resources

Cash combined with short-term investments at
December 31, 2002 provided total liquid assets of
$38.0 million compared to $53.1 million at
December 31, 2001, a decrease of $15.1 million. This
decrease in liquidity was primarily attributable to the
acquisitions made during the year of $9.0 million, the
purchase of property and equipment of $2.9 million and cash
used to fund operating losses of $2.8 million.

Cash used in operating activities was
$2.8 million for the twelve months ended December 31,
2002, compared to $7.7 million for the prior year.
Excluding $8.8 million of gains and related taxes from
sales of investments and assets, cash used in operating
activities in the prior year was $1.1 million. The cash
used in operating activities in 2002 was largely attributable to
the inability of the Company to reduce fixed expenses in
relation to declining revenues.

Cash used in investing activities was
$11.9 million for the twelve months ended December 31,
2002. Of the $11.9 million used in 2002, $9.0 million
related to the acquisitions made during the year and
$2.9 million related to the purchase of property and
equipment. For the prior year, cash provided by investing
activities of $37.1 million was largely composed of
$22.6 million in proceeds from the sale of investments and
assets and

27



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##### 



$19.6 million in net proceeds from the sale
of short-term investments. This was offset by the use of cash to
make investments in affiliates of $1.8 million and purchase
property and equipment of $3.4 million.


Cash from financing activities was
$0.5 million and provided $1.0 million for the twelve
months ended December 31, 2002 and prior year,
respectively. In 2002, the Company increased restricted cash by
$1.3 million, which related to the deposit of cash to
support the issue of certain advance and performance guarantees,
offset by the receipt of $0.7 million resulting from the
repayment of a loan by a shareholder. The Companys cash
position negated the need for any significant financing activity
during the twelve months ended December 31, 2002.

Working capital was $50.0 million at
December 31, 2002 compared to $72.1 million at
December 31, 2001, a decrease of $22.1 million. The
decrease in working capital in 2002 was due to the use of cash
to fund acquisitions and operating losses, and the reduction of
receivables following the decrease in revenues during the year.
The Company has no material cash commitments other than
obligations under its operating leases. Future capital
requirements will depend upon many factors, including the timing
of payments under contracts and increases in personnel in
advance of new contracts.

The Companys operating lease obligations at
December 31, 2002 are as follows (in thousands):

|                            |  |                        |        |           |  |           |       |           |  |         |       |  |  |   |       |  |  |   |       | 
|--------------------------- |  | ---------------------- | ------ | --------- |  | --------- | ----- | --------- |  | ------- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                            |  |                       
|                            |  | Principal Payments Due
|                            |  |                       
|                            |  |                        |        | Less than |  |           |       | More than
|                            |  | Total                  |        | 1 year    |  | 1-3 years |       | 3-5 years |  | 5 years
|                            |  |                        |        |           |  |           |       |           |  |        
|Operating lease obligations |  | $                      | 24,720 |           |  | $         | 4,792 |           |  | $       | 9,237 |  |  | $ | 7,080 |  |  | $ | 3,611 | 

The Company had no debt and did not maintain a
line of credit as of December 31, 2002, since it had cash
and short-term investments that it considered sufficient to meet
liquidity requirements. The Company may consider the limited use
of debt facilities in the EMEA region to support the anticipated
growth in working capital for specific projects or entities. The
Company has not engaged in any off-balance sheet financing as of
December 31, 2002. The Company believes it has sufficient
assets and relationships with financial institutions to obtain
appropriate debt facilities should the business need arise.

For the short-term, the Company believes it has
adequate cash and short-term investments to satisfy cash
requirements for at least the next twelve months. The Company
also believes it will generate sufficient cash from operations
to meet its long-term liquidity needs.

Critical Accounting Policies

The Companys critical accounting policies
are as follows:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | Revenue recognition;                                                
|
| |  | Allowance for doubtful accounts and accrual of
    expatriate taxes;
|
| |  | Accounting for income taxes;                                        
|
| |  | Impairment of investments in affiliates; and                        
|
| |  | Restructuring charge.                                               

Revenue
recognition policy

The Companys principal source of revenues
consists of design and system deployment services. The Company
provides design 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 offers its deployment services on a
fixed price, time-certain basis. The portion of the
Companys revenue from fixed-price contracts was 61.1% in
2002. The Company recognizes revenue on fixed-price contracts
using the percentage-of-completion method. With the
percentage-of-completion method, expenses on each project are
recognized as incurred, and revenues are recognized based on the
ratio of the current costs incurred for the project to the then
estimated total costs of the project. Accordingly, revenue
recognized in a given period

28



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##### 



depends on, among other things, the costs
incurred on each individual project and its then current
estimate of the total remaining costs to complete individual
projects. Considerable judgment on the part of the
Companys management may be required in determining
estimates to complete a project including the scope of the work
to be completed, and reliance on the customer or other vendors
to fulfill some task(s). If in any period the Company
significantly increases its estimate of the total costs to
complete a project, it may recognize very little or no
additional revenue with respect to that project. If total
contract cost estimates increase, gross profit for any single
project may be significantly reduced or eliminated. If the total
contract cost estimates indicate that there is a loss, the loss
is recognized in the period the determination is made.


Allowance for
doubtful accounts and accrual of expatriate taxes

The preparation of financial statements requires
the Companys management to make estimates and assumptions
that affect the reported amount of assets, liabilities,
contingent assets and liabilities and the reported amounts of
revenues and expenses during the reported period. Specifically,
the Companys management must make estimates of the
probability of collection of its accounts receivable. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in its customer payment terms when evaluating
the adequacy of the valuation allowance for doubtful accounts.
For the year ended December 31, 2002, the Company derived
60.3% of its total revenues from its ten largest customers,
indicating significant customer concentration risk with the
Companys receivables. These ten largest customers
constituted 66.4% of the Companys net receivable balance
as of December 31, 2002. In addition, fixed-price contracts
with unfavorable milestone payments can cause unbilled
receivables to grow prior to achieving the applicable milestone
that permits billing. At December 31, 2002, the Company had
approximately $12.4 million of unbilled receivables,
compared to approximately $10.2 million at
December 31, 2001. Lastly, the Company frequently performs
services for development-stage customers, which carry a higher
degree of risk, particularly as to the collection of accounts
receivable. These customers may be particularly vulnerable to
current tightening of available credit and general economic
slowdown.

The Company estimates liabilities associated with
taxes relative to employees sent to assignments in foreign
countries. These expatriate employees are reimbursed for any
additional personal income tax burden that was derived as a
result of the assignment. Calculation of these obligations takes
considerable knowledge of payroll, social, and other taxes in
multiple countries, and the employees personal tax
situation. In addition, it requires interpretation of tax laws,
an assessment of potential audit risk from tax authorities, and
often the resolution of the tax liabilities may not occur for
several years. The Company has $2.7 million accrued for
expatriate tax obligations as of December 31, 2002.

Accounting
for income taxes

As part of the process of preparing the
Companys consolidated financial statements an estimate for
income taxes is required for each of the jurisdictions in which
the Company operates. This process requires estimating the
Companys actual current tax exposure together with
assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax accounting
purposes. These differences result in deferred tax assets and
liabilities, which are included in the consolidated balance
sheet. The Company must then assess the likelihood that its
deferred tax assets will be recovered from future taxable income
and to the extent the Company believes that recovery is not
likely, it must establish a valuation allowance The valuation
allowance is based on the Companys estimates of taxable
income by jurisdiction in which it operates and the period over
which its deferred tax assets will be recoverable. In the event
the actual results differ from these estimates the Company may
need to increase or decrease its valuation allowance, which
could materially have an impact on its financial position and
results of operations.

Considerable management judgment may be required
in determining the Companys provision for income taxes,
its deferred tax assets and liabilities and any valuation
allowance recorded against its net deferred tax assets. The
Company has recorded a valuation allowance of $6.2 million
as of December 31, 2002, due to uncertainties related to
its ability to utilize some of its deferred tax assets before
they expire. These deferred tax assets primarily consist of
foreign net operating losses carried forward, foreign tax
credits and non-

29



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##### 



cash compensation accruals relating to stock
options issued under a phantom membership plan in effect prior
to the Companys initial public offering. The net deferred
tax assets, as of December 31, 2002 were $5.4 million.


Impairment of
investments in affiliates

The Company maintained investments in affiliates
of $5.1 million as of December 31, 2001 and none at
December 31, 2002. These investments were made in 2000
relative to two separate companies, Plan + Design
Netcare AG ($4.6 million) and Mobilocity, Inc.
($0.5 million). Both investments were accounted for at
cost. Mobilocity has implemented a voluntary liquidation plan.
Plan + Design Netcare AG and its operating
subsidiary have filed for insolvency protection. Based upon the
voluntary liquidation plans and insolvency filings, the Company
has determined these investments are probably not recoverable
and recorded an impairment charge of $5.1 million in the
second quarter of 2002.

Restructuring
charge

The Company recorded a restructuring charge
during the second quarter of 2002 and an additional charge
during the fourth quarter of 2002. Included in this
restructuring charge of $13.5 million was a charge for
excess facilities aggregating approximately $12.5 million.
This facility charge significantly relates to leased office
space, which the Company no longer occupies. The facility charge
takes the existing lease obligation less anticipated rental
receipts to be received from existing and potential subleases.
This requires significant judgments about the length of time
space will remain vacant, anticipated cost escalators and
operating costs associated with the leases, market rate the
space will be subleased at, and broker fees or other costs
necessary to market the space. These judgments were based upon
independent market analysis and assessment from experienced real
estate brokers. The restructuring charge calculation assumes
$10.1 million will be derived in sublease income, for which
the Company does not currently have a subtenant.

Related Party Transactions

The Company provided services to Telcom Ventures
and various other companies that are majority owned, or
controlled by, Telcom Ventures or its members. The
Companys relationship with Telcom Ventures may result in
potential conflicts of interest (see Risk
Factors  The Companys relationship with Telcom
Ventures may result in potential conflicts of
interest.). Revenues from Telcom Ventures are not
material, providing 1.3%, 0.1%, and none of 2000, 2001 and 2002
revenues, respectively.

During 2001 and 2002, the Company continued to
make certain payments on behalf of Telcom Ventures that
consisted primarily of fringe and payroll-related costs of
$252,000 and $155,000, respectively and the Company received
reimbursements of $98,000 and $464,000, respectively. During
2002, the Company also provided an allowance of $100,000 for
amounts in disagreement, for which the Company continues to
pursue collection. At December 31, 2001 and 2002,
outstanding amounts associated with these payments totaling
$418,000 and $9,000, respectively, are included in due from
related parties and affiliates within the accompanying
consolidated balance sheets.

During 2000, 2001 and 2002, the Company provided
services to XM Satellite. Telcom Ventures has a minority
investment in XM Satellite, and Dr. Rajendra Singh, a
director of Telcom Ventures, is a member of the board of
directors of the Company. Dr. Singh was also a former
director of the XM Satellite board of directors. Revenues earned
during 2000, 2001 and 2002 for services provided to XM Satellite
were $58.4 million, $57.3 million and
$3.4 million, respectively. Receivables from XM Satellite
were $17.0 million and none at December 31, 2001 and
2002, respectively. See note 5 to the Companys
consolidated financial statements for a further discussion of
related party transactions.

In July 2002, the Company acquired
51 percent of the outstanding shares of Detron LCC Network
Services B.V. (Detron), a newly formed corporation
in the Netherlands. LCC acquired the shares from Westminster
Capital B.V. (Westminster). Detron has certain
ongoing transactions with Westminster. Under a five-year lease
agreement for office space, Detron recorded approximately
$27,000 of rent expense

30



---



##### 



from the date of acquisition. During the third
and fourth quarters of 2002, Detron seconded various idle
employees to Detron Telematics, Westminsters wholly-owned
subsidiary and recorded revenue of approximately
$0.2 million.


Recent Accounting Pronouncements

In July 2002, FASB SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, was issued. The statement provides specific
guidance for the recognition, measurement and reporting of costs
associated with exiting an activity or disposing of a long-lived
asset, including restructuring charges that the Company
currently accounts for under EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). The provisions are effective
after December 31, 2002. The Companys adoption of
SFAS No. 146 may have an effect on the timing of
future restructuring charges taken, if and when they occur.

In December 2002, FASB SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of FASB Statement No. 123, was
issued. This statement provides for alternative methods of
transition for a company that voluntarily changes to the fair
value based method of accounting for stock-based employee
compensation. The statement also amends the required disclosures
relating to employee stock-based compensation effective
December 31, 2002. At this time, the Company does not plan
to adopt the fair value based method of accounting for its
stock-based employee compensation.

In November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45
requires a guarantor to recognize a liability, at the inception
of the guarantee, for the fair value of obligations it has
undertaken in issuing the guarantee and also to include more
detailed disclosures in respect to those guarantees. FIN 45 is
effective on a prospective basis for guarantees issued or
modified starting January 1, 2003 and requires the
additional disclosures for the interim and annual financial
statements for periods ending after December 15, 2002. The
Company does not anticipate issuing any guarantees which would
be required to be recognized as a liability under FIN 45 and,
therefore, the Company does not expect the adoption of this
interpretation to have a material impact on the Companys
financial condition and results of operations.



|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A: | Quantitative and Qualitative Disclosures
    about Market Risk

The Company is exposed to the impact of foreign
currency fluctuations. The Companys exposure to exchange
rates relates primarily to its foreign subsidiaries.
Subsidiaries with material foreign currency exposure are in
Great Britain, the Netherlands, Italy and Brazil. For its
foreign subsidiaries, exchange rates can have an impact on the
U.S. dollar value of their reported earnings and the
intercompany transactions with the subsidiaries.

Approximately 57.0% of the Companys
revenues were generated outside the United States for the twelve
months ended December 31, 2002, the majority of which were
in Europe. In connection with the Companys recent
acquisitions and the increased availability of 3G equipment in
Europe, the Company anticipates continued growth of its
international operations, particularly in Europe, the Middle
East and Africa, in 2003 and beyond. As a result, fluctuations
in the value of foreign currencies against the U.S. dollar
may have a significant impact on the reported results of the
Company. Revenues and expenses denominated in foreign currencies
are translated monthly into United States dollars at the
weighted average exchange rate. Consequently, as the value of
the dollar strengthens or weakens relative to other currencies
in the Companys major markets the resulting translated
revenues, expenses and operating profits become lower or higher,
respectively.

Fluctuations in currency exchange rates also can
have an impact on the U.S. dollar amount of
shareholders equity of the Company. The assets and
liabilities of the Companys non-U.S. subsidiaries are
translated into United States dollars at the exchange rate in
effect at December 31, 2002. The resulting translation
adjustments are recorded in shareholders equity as
accumulated other comprehensive loss. The dollar was stronger
relative to many of the foreign currencies at December 31,
2002 compared to December 31, 2001. Consequently, the
accumulated other comprehensive loss component of
shareholders

31



---



##### 



equity increased $1.5 million during the
twelve months ended December 31, 2002. As of
December 31, 2002, the total amount of long-term
intercompany receivable/ payables in non-U.S. subsidiaries
subject to this equity adjustment, using the exchange rate as of
the same date, was approximately $13.5 million.


The Company is exposed to the impact of foreign
currency fluctuations due to the operations of and short-term
intercompany transactions with its consolidated foreign
subsidiaries. While these intercompany balances are eliminated
in consolidation, exchange rate changes do affect consolidated
earnings. A hypothetical 10% adverse change would result in a
$1.0 million reduction to operating losses generated
outside the United States. This was estimated using a 10%
deterioration factor to the average monthly exchange rates
applied to net income or loss for each of the subsidiaries in
the respective period. Foreign exchange gains and losses
recognized on any transactions are included in the Consolidated
Statements of Operations.

Although currency fluctuations can have an impact
on the Companys reported results and shareholders
equity, such fluctuations generally do not affect the
Companys cash flow or result in actual economic gains or
losses. The Company currently does not hedge any of these risks
in its foreign subsidiaries because: (i) the Companys
Brazilian subsidiary derives revenues and incurs expenses within
a single country, and consequently, does not incur currency
risks in connection with the conduct of its normal operations,
(ii) the British pound sterling, U.S. dollar, and Euro
are relatively stable against each other, (iii) other
foreign operations are minimal, and (iv) the Company does
not believe that hedging transactions are justified by the
current exposure and cost at this time.

32



---



##### 





|        |                                                
|------- | -----------------------------------------------
|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, 2001 and 2002, and
the related consolidated statements of operations,
shareholders equity, and cash flows for each of the years
in the three-year period ended December 31, 2002. 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
auditing standards generally accepted in the United States of
America. 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, 2001 and 2002, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2002, in
conformity with accounting principles generally accepted in the
United States of America. 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

McLean, Virginia

March 15, 2003


33



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

Years ended December 31, 2000, 2001,
2002


(In thousands, except per share
data)


|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |        |  
|-------------------------------------------------- | -------------------------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------ | -
|                                                   |                                                                      | 2000 |         | 2001    |   | 2002
|                                                   |                                                                      |      |         |         |   |     
|Revenues (note 5):                                 |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|                                                   | Service                                                              |      | $       | 149,385 |   |      | $       | 130,609 |   |   | $       | 67,069 |  
|                                                   | Tower ownership and management                                       |      |         | 1,008   |   |      |         |        |   |   |         |       |  
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Total revenues                                     |                                                                      |      | 150,393 |         |   |      | 130,609 |         |   |   | 67,069  |       
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Cost of revenues:                                  |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|                                                   | Service                                                              |      |         | 109,952 |   |      |         | 103,535 |   |   |         | 58,429 |  
|                                                   | Tower ownership and management                                       |      |         | 333     |   |      |         |        |   |   |         |       |  
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Total cost of revenues                             |                                                                      |      | 110,285 |         |   |      | 103,535 |         |   |   | 58,429  |       
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Gross profit                                       |                                                                      |      | 40,108  |         |   |      | 27,074  |         |   |   | 8,640   |       
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Operating expenses:                                |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|                                                   | Sales and marketing                                                  |      |         | 7,833   |   |      |         | 7,068   |   |   |         | 8,095  |  
|                                                   | General and administrative                                           |      |         | 19,673  |   |      |         | 15,978  |   |   |         | 20,311 |  
|                                                   | Restructuring charge (note 7)                                        |      |         | (108    | ) |      |         |        |   |   |         | 13,522 |  
|                                                   | Gain on sale of tower portfolio and
    administration, net (note 3) |      |         | (26,437 | ) |      |         | (2,998  | ) |   |         | (2,000 | )
|                                                   | Depreciation and amortization                                        |      |         | 2,899   |   |      |         | 3,012   |   |   |         | 2,884  |  
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Total operating expenses                           |                                                                      |      | 3,860   |         |   |      | 23,060  |         |   |   | 42,812  |       
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Operating income (loss)                            |                                                                      |      | 36,248  |         |   |      | 4,014   |         |   |   | (34,172 | )     
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Other income (expense):                            |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|                                                   | Interest income                                                      |      |         | 1,951   |   |      |         | 1,899   |   |   |         | 840    |  
|                                                   | Interest expense                                                     |      |         | (263    | ) |      |         | (13     | ) |   |         | (22    | )
|                                                   | Other                                                                |      |         | (787    | ) |      |         | 22,113  |   |   |         | (3,767 | )
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Total other income (expense)                       |                                                                      |      | 901     |         |   |      | 23,999  |         |   |   | (2,949  | )     
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Income (loss) from operations before income taxes  |                                                                      |      | 37,149  |         |   |      | 28,013  |         |   |   | (37,121 | )     
|Provision (benefit) for income taxes
    (note 13) |                                                                      |      | 16,531  |         |   |      | 11,041  |         |   |   | (8,451  | )     
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Net income (loss)                                  |                                                                      | $    | 20,618  |         |   | $    | 16,972  |         |   | $ | (28,670 | )     
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|Net income (loss) per share:                       |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|                                                   | Basic                                                                |      | $       | 1.01    |   |      | $       | 0.83    |   |   | $       | (1.37  | )
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       
|                                                   | Diluted                                                              |      | $       | 0.93    |   |      | $       | 0.81    |   |   | $       | (1.37  | )
|                                                   |                                                                      |      |         |         |   |      |         |         |   |   |         |       

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

34



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share
data)

|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |         |        |        | 
|----------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------ | ------ | ------ | ------ | ------- | ------ | ------ | 
|                                                                                    |                                                                                                                              |                                                                                                                                     
|                                                                                    |                                                                                                                              | December 31,                                                                                                                        
|                                                                                    |                                                                                                                              |                                                                                                                                     
|                                                                                    |                                                                                                                              | 2001                                                                                                                                 |                            | 2002  
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |       
|ASSETS:                                                                            
|Current assets:                                                                     |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    | Cash and cash equivalents (note 4)                                                                                           |                                                                                                                                      | $                          | 52,658 |        |        | $      | 37,507  |       
|                                                                                    | Restricted cash                                                                                                              |                                                                                                                                      |                            |       |        |        |        | 1,308   |       
|                                                                                    | Short-term investments                                                                                                       |                                                                                                                                      |                            | 484    |        |        |        | 514     |       
|                                                                                    | Receivables, net of allowance for doubtful
    accounts of $2,048 and $3,122 at December 31, 2001 and
    2002, respectively |                                                                                                                                      |                            |        |        |        |        |         |       
|                                                                                    |                                                                                                                              | Trade accounts receivable                                                                                                            |                            |        | 26,294 |        |        |         | 13,165 |       
|                                                                                    |                                                                                                                              | Unbilled receivables                                                                                                                 |                            |        | 10,240 |        |        |         | 12,369 |       
|                                                                                    |                                                                                                                              | Due from related parties and affiliates
    (note 5)                                                                                 |                            |        | 1,073  |        |        |         | 61     |       
|                                                                                    | Deferred income taxes, net (note 13)                                                                                         |                                                                                                                                      |                            | 2,724  |        |        |        | 3,932   |       
|                                                                                    | Prepaid expenses and other current assets                                                                                    |                                                                                                                                      |                            | 1,607  |        |        |        | 1,835   |       
|                                                                                    | Prepaid tax receivable and prepaid taxes                                                                                     |                                                                                                                                      |                            | 2,632  |        |        |        | 8,285   |       
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              |                                                                                                                                      | Total current assets       |        |        | 97,712 |        |         |        | 78,976 | 
|Property and equipment, net (note 6)                                                |                                                                                                                              |                                                                                                                                      | 5,730                      |        |        |        | 5,010  |        
|Investments in affiliates (note 10)                                                 |                                                                                                                              |                                                                                                                                      | 5,162                      |        |        |        |       |        
|Deferred income taxes, net (note 13)                                                |                                                                                                                              |                                                                                                                                      | 2,038                      |        |        |        | 504    |        
|Goodwill and other intangibles                                                      |                                                                                                                              |                                                                                                                                      | 637                        |        |        |        | 11,273 |        
|Other assets                                                                        |                                                                                                                              |                                                                                                                                      | 952                        |        |        |        | 960    |        
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              | $                                                                                                                                    | 112,231                    |        |        | $      | 96,723 |        
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                          
|Current liabilities:                                                                |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    | Accounts payable                                                                                                             |                                                                                                                                      | $                          | 3,840  |        |        | $      | 7,316   |       
|                                                                                    | Accrued expenses                                                                                                             |                                                                                                                                      |                            | 8,287  |        |        |        | 10,543  |       
|                                                                                    | Accrued employee compensation and benefits                                                                                   |                                                                                                                                      |                            | 10,323 |        |        |        | 6,272   |       
|                                                                                    | Deferred revenue                                                                                                             |                                                                                                                                      |                            | 640    |        |        |        | 41      |       
|                                                                                    | Income taxes payable (note 13)                                                                                               |                                                                                                                                      |                            | 292    |        |        |        | 882     |       
|                                                                                    | Accrued restructuring current                                                                                                |                                                                                                                                      |                            |       |        |        |        | 3,937   |       
|                                                                                    | Other current liabilities                                                                                                    |                                                                                                                                      |                            | 2,196  |        |        |        | 26      |       
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              |                                                                                                                                      | Total current liabilities  |        |        | 25,578 |        |         |        | 29,017 | 
|Accrued restructuring                                                               |                                                                                                                              |                                                                                                                                      |                           |        |        |        | 5,786  |        
|Other liabilities                                                                   |                                                                                                                              |                                                                                                                                      | 849                        |        |        |        | 832    |        
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              |                                                                                                                                      | Total liabilities          |        |        | 26,427 |        |         |        | 35,635 | 
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|Commitments and contingencies (notes 1, 4,
    11, 14, 15, and 16)                  |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    | Shareholders equity:                                                                                                        |                                                                                                                                      |                            |        |        |        |        |         |       
|                                                                                    | Preferred stock:                                                                                                             |                                                                                                                                      |                            |        |        |        |        |         |       
|                                                                                    |                                                                                                                              | 10,000 shares authorized; -0- shares issued and
    outstanding                                                                      |                            |        |       |        |        |         |       |       
|                                                                                    | Class A common stock; $.01 par value:                                                                                        |                                                                                                                                      |                            |        |        |        |        |         |       
|                                                                                    |                                                                                                                              | 70,000 shares authorized; 12,271 shares and
    14,632 shares issued and outstanding at December 31, 2001
    and 2002, respectively |                            |        | 123    |        |        |         | 146    |       
|                                                                                    | Class B common stock; $.01 par value:                                                                                        |                                                                                                                                      |                            |        |        |        |        |         |       
|                                                                                    |                                                                                                                              | 20,000 shares authorized; 8,407 shares and 6,319
    shares issued and outstanding at December 31, 2001 and
    2002, respectively   |                            |        | 84     |        |        |         | 63     |       
|                                                                                    | Paid-in capital                                                                                                              |                                                                                                                                      |                            | 92,428 |        |        |        | 94,132  |       
|                                                                                    | Accumulated deficit                                                                                                          |                                                                                                                                      |                            | (1,409 | )      |        |        | (30,079 | )     
|                                                                                    | Notes receivable from shareholders (note 5)                                                                                  |                                                                                                                                      |                            | (2,325 | )      |        |        | (1,625  | )     
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              |                                                                                                                                      | Subtotal                   |        |        | 88,901 |        |         |        | 62,637 | 
|Accumulated other comprehensive loss 
    foreign currency translation adjustments |                                                                                                                              |                                                                                                                                      | (3,097                     | )      |        |        | (1,549 | )      
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              |                                                                                                                                      | Total shareholders equity |        |        | 85,804 |        |         |        | 61,088 | 
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        
|                                                                                    |                                                                                                                              | $                                                                                                                                    | 112,231                    |        |        | $      | 96,723 |        
|                                                                                    |                                                                                                                              |                                                                                                                                      |                            |        |        |        |        |        

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

35



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

Years ended December 31, 2000, 2001 and
2002


(In thousands)


|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------- |  | --------- | - | ------------ |  | ------- | --- | ------------- |  | ----------- | --- | ------------ |  | ------------- | ------ | ----------- |  | ----- | ------- | - |  | - | ------- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  | Notes         |        | Accumulated |  |      
|                                                                          |  |           |   |              |  |         |     |               |  |             |     | Receivable   |  | Other         |        |            
|                                                                          |  |           |   | Common Stock |  |         |     | Comprehensive |  |             |     | from         |  | Comprehensive |        |            
|                                                                          |  | Preferred |   |              |  | Paid-in |     | Income        |  | Accumulated |     | Shareholders |  | Income        |        |            
|                                                                          |  | Stock     |   | Class A      |  | Class B |     | Capital       |  | (Loss)      |     | Deficit      |  | (note 5)      |        | (Loss)      |  | Total
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |      
|Balances at December 31, 1999                                             |  |           |  |              |  | $       | 116 |               |  | $           | 85  |              |  | $             | 85,846 |             |  |       |         |   |  | $ | (38,999 | ) |  | $ | (3,025 | ) |  | $ | (1,597 | ) |  | $ | 42,426  |  
|Payment from shareholder                                                  |  |           |  |              |  |         |    |               |  |             |    |              |  |               | 100    |             |  |       |         |   |  |   |        |   |  |   | 700    |   |  |   |       |   |  |   | 800     |  
|Exercise/ issuance of stock options                                       |  |           |  |              |  |         | 4   |               |  |             |    |              |  |               | 4,868  |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 4,872   |  
|Issuance of common stock                                                  |  |           |  |              |  |         |    |               |  |             |    |              |  |               | 593    |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 593     |  
|Net income                                                                |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  | $     | 20,618  |   |  |   | 20,618  |   |  |   |       |   |  |   |       |   |  |   | 20,618  |  
|Other comprehensive loss  foreign
    currency translation adjustments   |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  |       | (893    | ) |  |   |        |   |  |   |       |   |  |   | (893   | ) |  |   | (893    | )
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive income                                                      |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  | $     | 19,725  |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   |        |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balances at December 31, 2000                                             |  |           |  |              |  |         | 120 |               |  |             | 85  |              |  |               | 91,407 |             |  |       |         |   |  |   | (18,381 | ) |  |   | (2,325 | ) |  |   | (2,490 | ) |  |   | 68,416  |  
|Exercise/ issuance of stock options                                       |  |           |  |              |  |         | 2   |               |  |             | (1  | )            |  |               | 536    |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 537     |  
|Issuance of common stock                                                  |  |           |  |              |  |         | 1   |               |  |             |    |              |  |               | 485    |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 486     |  
|Net income                                                                |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  | $     | 16,972  |   |  |   | 16,972  |   |  |   |       |   |  |   |       |   |  |   | 16,972  |  
|Other comprehensive loss  foreign
    currency translation adjustments   |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  |       | (607    | ) |  |   |        |   |  |   |       |   |  |   | (607   | ) |  |   | (607    | )
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive income                                                      |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  | $     | 16,365  |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   |        |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balances at December 31, 2001                                             |  |           |  |              |  |         | 123 |               |  |             | 84  |              |  |               | 92,428 |             |  |       |         |   |  |   | (1,409  | ) |  |   | (2,325 | ) |  |   | (3,097 | ) |  |   | 85,804  |  
|Exercise/ issuance of stock options                                       |  |           |  |              |  |         |    |               |  |             |    |              |  |               | 183    |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 183     |  
|Issuance of common stock                                                  |  |           |  |              |  |         | 23  |               |  |             | (21 | )            |  |               | 1,521  |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 1,523   |  
|Payment from shareholder                                                  |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  |       |         |   |  |   |        |   |  |   | 700    |   |  |   |       |   |  |   | 700     |  
|Net loss                                                                  |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  | $     | (28,670 | ) |  |   | (28,670 | ) |  |   |       |   |  |   |       |   |  |   | (28,670 | )
|Other comprehensive income  foreign
    currency translation adjustments |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  |       | 1,548   |   |  |   |        |   |  |   |       |   |  |   | 1,548  |   |  |   | 1,548   |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive loss                                                        |  |           |  |              |  |         |    |               |  |             |    |              |  |               |       |             |  | $     | (27,122 | ) |  |   |        |   |  |   |       |   |  |   |       |   |  |   |        |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balances at December 31, 2002                                             |  |           |  |              |  | $       | 146 |               |  | $           | 63  |              |  | $             | 94,132 |             |  |       |         |   |  | $ | (30,079 | ) |  | $ | (1,625 | ) |  | $ | (1,549 | ) |  | $ | 61,088  |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |        |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  

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

36



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

Years ended December 31, 2000, 2001, and
2002


(In thousands)


|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |        |        |  
|---------------------------------------------------------------------------------------- | ------------------------------------------------------- | --------------------------------------- | ------- | ------- | ------- | ---- | ------ | ------- | ------ | - | ------- | ------ | ------ | -
|                                                                                         |                                                         | 2000                                    |         | 2001    |         | 2002
|                                                                                         |                                                         |                                         |         |         |         |     
|Cash flows from operating
    activities:                                                |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|                                                                                        
|Net income (loss)                                                                        |                                                         | $                                       | 20,618  |         |         | $    | 16,972 |         |        | $ | (28,670 | )     
|Adjustments to reconcile net income (loss) to net
    cash used in operating activities: |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|                                                                                         | Depreciation and amortization                           |                                         |         | 2,899   |         |      |        | 3,012   |        |   |         | 2,884  |       
|                                                                                         | Provision (recovery) for doubtful accounts              |                                         |         | (306    | )       |      |        | 2,123   |        |   |         | 4,317  |       
|                                                                                         | Realized gain on sale of investments and assets         |                                         |         |        |         |      |        | (22,395 | )      |   |         |       |       
|                                                                                         | Loss from investments in joint ventures, net            |                                         |         | 796     |         |      |        |        |        |   |         |       |       
|                                                                                         | Impairment of assets                                    |                                         |         |        |         |      |        |        |        |   |         | 5,140  |       
|                                                                                         | Restructuring charge                                    |                                         |         |        |         |      |        |        |        |   |         | 13,522 |       
|                                                                                         | Gain on sale of tower portfolio                         |                                         |         | (26,437 | )       |      |        | (2,998  | )      |   |         | (2,000 | )     
|                                                                                         | Changes in operating assets and liabilities:            |                                         |         |         |         |      |        |         |        |   |         |        |       
|                                                                                         |                                                         | Trade, unbilled, and other receivables  |         |         | (28,275 | )    |        |         | 9,358  |   |         |        | 10,963 |  
|                                                                                         |                                                         | Accounts payable and accrued expenses   |         |         | 2,593   |      |        |         | (8,835 | ) |         |        | 902    |  
|                                                                                         |                                                         | Other current assets and liabilities    |         |         | 7,165   |      |        |         | (5,227 | ) |         |        | (8,560 | )
|                                                                                         |                                                         | Other noncurrent assets and liabilities |         |         | 4,828   |      |        |         | 324    |   |         |        | (1,328 | )
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Net cash used in operating activities                                                    |                                                         |                                         | (16,119 | )       |         |      | (7,666 | )       |        |   | (2,830  | )     
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Cash flows from investing
    activities:                                                |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|                                                                                         | Proceeds from sales of short-term investments           |                                         |         | 31,282  |         |      |        | 42,069  |        |   |         |       |       
|                                                                                         | Purchases of short-term investments                     |                                         |         | (51,260 | )       |      |        | (22,489 | )      |   |         | (30    | )     
|                                                                                         | Purchases of property and equipment                     |                                         |         | (3,870  | )       |      |        | (3,377  | )      |   |         | (2,854 | )     
|                                                                                         | Proceeds from sale of property and equipment            |                                         |         | 209     |         |      |        | 29      |        |   |         | 34     |       
|                                                                                         | Investments in affiliates                               |                                         |         | (3,386  | )       |      |        | (1,755  | )      |   |         |       |       
|                                                                                         | Proceeds from sale of investments and assets            |                                         |         |        |         |      |        | 22,624  |        |   |         |       |       
|                                                                                         | Business acquisitions                                   |                                         |         |        |         |      |        |        |        |   |         | (9,021 | )     
|                                                                                         | Purchase of minority interest                           |                                         |         | (7,174  | )       |      |        |        |        |   |         |       |       
|                                                                                         | Proceeds from tower portfolio sale, net of
    expenses |                                         |         | 72,176  |         |      |        |        |        |   |         |       |       
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Net cash provided by (used in) investing
    activities                                  |                                                         |                                         | 37,977  |         |         |      | 37,101 |         |        |   | (11,871 | )     
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Cash flows from financing
    activities:                                                |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|                                                                                         | Proceeds from issuance of common stock, net             |                                         |         | 593     |         |      |        | 518     |        |   |         | 49     |       
|                                                                                         | Proceeds from exercise of options                       |                                         |         | 1,604   |         |      |        | 434     |        |   |         | 109    |       
|                                                                                         | Increase in restricted cash                             |                                         |         |        |         |      |        |        |        |   |         | (1,308 | )     
|                                                                                         | Proceeds from line of credit/note                       |                                         |         | 9,700   |         |      |        |        |        |   |         |       |       
|                                                                                         | Payments on line of credit/note                         |                                         |         | (14,235 | )       |      |        |        |        |   |         |       |       
|                                                                                         | Repayment of loan to shareholder                        |                                         |         | 800     |         |      |        |        |        |   |         | 700    |       
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Net cash provided by (used in) financing
    activities                                  |                                                         |                                         | (1,538  | )       |         |      | 952    |         |        |   | (450    | )     
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Net increase (decrease) in cash and cash
    equivalents                                 |                                                         |                                         | 20,320  |         |         |      | 30,387 |         |        |   | (15,151 | )     
|Cash and cash equivalents at beginning of period                                         |                                                         |                                         | 1,951   |         |         |      | 22,271 |         |        |   | 52,658  |       
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Cash and cash equivalents at end of period                                               |                                                         | $                                       | 22,271  |         |         | $    | 52,658 |         |        | $ | 37,507  |       
|                                                                                         |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|Supplemental disclosures of cash flow information:                                       |                                                         |                                         |         |         |         |      |        |         |        |   |         |       
|                                                                                         | Cash paid during the year for:                          |                                         |         |         |         |      |        |         |        |   |         |        |       
|                                                                                         |                                                         | Interest                                |         | $       | 263     |      |        | $       | 13     |   |         | $      | 22     |  
|                                                                                         |                                                         | Income taxes                            |         |         | 2,781   |      |        |         | 14,103 |   |         |        | 1,545  |  

Supplemental disclosures of non-cash investing
and financing activities:

In January 2002, the Company purchased all of the
assets of Smith Woolley Telecom for a purchase price of
approximately $8.6 million. The purchase price consisted of
$7.1 million in cash included above as part of business
acquisitions and the issuance of 215,000 shares of the
Companys Class A Common Stock, par value $0.01 per
share. The value of the Class A Common Stock was
approximately $1.5 million. As a result, common stock and
additional paid in capital increased, offset by an increase to
goodwill and other intangibles.

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

37



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Years ended December 31, 2000, 2001 and
2002


(1)     Description
of Operations

The Company provides integrated end-to-end
solutions for wireless voice and data communication networks
with service offerings to include high level technical
consulting, system design and deployment and ongoing operations
and maintenance services. The Company operates in a highly
competitive environment subject to rapid technological change
and emergence of new technologies. Historically, the key drivers
of changes in the Companys wireless services business have
been (1) the issuance of new or additional licenses to
wireless operators; (2) the introduction of new services or
technologies; (3) increases in the number of subscribers
served by wireless operators; (4) the increasing complexity
of wireless systems in operation and (5) changes in
wireless infrastructure spending and deployment. Although the
Company believes that its services are transferable to emerging
technologies, rapid changes in technology and deployment could
have an adverse financial impact on the Company.

(2)     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 and include overnight repurchase agreements, short-term
notes, and short-term money market funds.

Short-Term
Investments

Short-term investments consist primarily of
federally sponsored short-term notes with maturity dates of more
than three months from the date of acquisition. The portfolio
held by the Company has been classified based on
managements intentions as to future investment activity.
The Company carries these investments at cost plus accrued
interest receivable, 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 a provision for doubtful accounts
related to potential credit losses. The Company had the
following significant concentrations of trade receivables from
customers located outside the United States at December 31,
2001 and 2002:

|                   |  |                |       |      |  |   |       | 
|------------------ |  | -------------- | ----- | ---- |  | - | ----- | 
|                   |  | 2001           |       | 2002
|                   |  |                |       |     
|                   |  |               
|                   |  | (In thousands)
|Latin America      |  | $              | 436   |      |  | $ | 142   | 
|North America      |  |                | 20    |      |  |   | 32    | 
|Europe             |  |                | 3,529 |      |  |   | 9,724 | 
|Middle East/Africa |  |                | 1,690 |      |  |   | 1,308 | 
|Asia-Pacific       |  |                | 1,777 |      |  |   | 1,175 | 

The Companys existing and potential
customer base is diverse and includes start-up companies and
foreign enterprises. The Company derived approximately 82.9% and
60.3% of its revenues from its ten largest customers for the
years ended December 31, 2001 and 2002, respectively. These
ten largest customers

38



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

constituted 66.4% of the Companys net
receivable balance as of December 31, 2002. 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.

In 2002, revenues from one customer were
approximately $7.8 million or 11.7% of the Companys
total revenues and revenues from another customer were
$7.0 million or 10.5% of total revenues. In 2001, revenues
from one customer were approximately $57.3 million or 43.9%
of the Companys total revenues and revenues from another
customer were $10.3 million or 7.9% of the Companys
total revenues. In 2000, revenues from one customer were
approximately $58.4 million or 38.8% of the Companys
total revenues and revenues from another customer were
approximately $19.0 million or 12.6% of the Companys
total revenues.

Fair Value of
Financial Instruments

The carrying amounts of financial instruments,
including cash and cash equivalents, accounts receivable, and
accounts payable, approximated fair value as of
December 31, 2001 and 2002 because of the relatively short
duration of these instruments. The carrying value of the notes
receivable from shareholders approximated the fair value as the
instruments included a market rate of interest.

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 per the table below.

|                               |  |                                                              
|------------------------------ |  | -------------------------------------------------------------
|Computer equipment             |  | 3 years                                                      
|Software                       |  | 3 years                                                      
|Furniture and office equipment |  | 3 to 7 years                                                 
|Leasehold improvements         |  | Shorter of the term of the lease or estimated
    useful life
|Vehicles                       |  | 5 years                                                      

Impairment 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. The measurement of
the impairment losses to be recognized is based upon the
difference between the fair value and the carrying amount of the
assets.

Goodwill and
Other Intangible Assets

Goodwill represents the excess of costs over fair
value of assets of businesses acquired. The Company adopted the
provisions of SFAS No. 142, Goodwill and Other
Intangible Assets, as of January 1, 2002. Goodwill and
intangible assets acquired in a purchase business combination
and determined to have an indefinite useful life are not
amortized, but instead tested for impairment at least annually
in accordance with the provisions of SFAS No. 142. SFAS
No. 142 also requires that intangible assets with estimable
useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 144, Accounting
for Impairment or Disposal of Long-Lived Assets.

39



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Investments
in Affiliates

The Company uses the equity method to account for
those investments in which it has an ownership interest equal to
or greater than twenty percent or exercises significant
influence. For equity method investments, the Company records
its proportionate share of the investees net income or
loss. Generally, the Company uses the cost method of accounting
for its investments in which the Company has an ownership
interest of less than twenty percent or does not exercise
significant influence. Investments carried at cost are written
down if circumstances indicate that the carrying amount of the
investment may not be recoverable.

Revenue
Recognition

The Companys principal sources of revenues
are design services and system deployment services, and, prior
to the sale of its tower business, tower lease revenues (see
note 3). The Company recognizes revenues from long-term
fixed-price contracts using the percentage-of-completion method.
With the percentage-of-completion method, the Company recognizes
revenue based on the ratio of individual contract costs incurred
to date on a project compared with total estimated contract
costs. Anticipated contract losses are recognized as soon as
they become known and estimable. The Company also recognizes
revenues on time and materials contracts as the services are
performed. Lease revenues from the tower business 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

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 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. The foreign
taxes paid or accrued by the Company may represent a potential
credit for the Company against its U.S. Federal income
taxes.

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. Foreign currency
transaction gains and losses are recognized currently in the
consolidated statements of operations.

Use of
Estimates

The preparation of the consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amount
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. Estimates are used in accounting for, among other
things, long-term contracts, allowance for doubtful

40



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

accounts, accrual of expatriate taxes, accrual of
income taxes, recoverability of investments in affiliates and
the accrual of restructuring charges. Actual results could
differ from those estimates.

Stock-Based
Compensation

The Company accounts for equity-based
compensation arrangements in accordance with the provisions of
Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, and related interpretations, and complies
with the disclosure provisions of FASB SFAS No. 123,
Accounting for Stock-Based Compensation. All
equity-based awards to non-employees are accounted for at their
fair value in accordance with SFAS No. 123. Under APB
No. 25, compensation expense is based upon the difference,
if any, on the date of grant, between the fair value of the
Companys stock and the exercise price.

Had compensation cost for the Companys
stock-based compensation plans and employee stock purchase plan
been determined on the fair value at the grant dates for awards
under those plans, consistent with Financial Accounting
Standards Board Statement No. 123 (SFAS
No. 123), the Companys net income (loss) and
net income (loss) per share would have been reduced to the pro
forma amounts indicated below.

|                        |              |                                       |   |        |      |      |   |        |      |  |   |         |       |  
|----------------------- | ------------ | ------------------------------------- | - | ------ | ---- | ---- | - | ------ | ---- |  | - | ------- | ----- | -
|                        |              | 2000                                  |   | 2001   |      | 2002
|                        |              |                                       |   |        |      |     
|                        |              |                                      
|                        |              | (In thousands, except per share data)
|Net income (loss)       |              |                                       |   |        |      |      |   |        |      |  |   |        
|                        | As reported  |                                       | $ | 20,618 |      |      | $ | 16,972 |      |  | $ | (28,670 | )    
|                        | Pro forma    |                                       |   | 17,257 |      |      |   | 14,316 |      |  |   | (31,232 | )    
|Net income (loss) share |              |                                       |   |        |      |      |   |        |      |  |   |        
|                        | As reported: |                                       |   |        |      |      |   |        |      |  |   |         |      
|                        |              | Basic                                 |   | $      | 1.01 |      |   | $      | 0.83 |  |   | $       | (1.37 | )
|                        |              | Diluted                               |   | $      | 0.93 |      |   | $      | 0.81 |  |   | $       | (1.37 | )
|                        | Pro forma:   |                                       |   |        |      |      |   |        |      |  |   |         |      
|                        |              | Basic                                 |   | $      | 0.85 |      |   | $      | 0.70 |  |   | $       | (1.49 | )
|                        |              | Diluted                               |   | $      | 0.78 |      |   | $      | 0.68 |  |   | $       | (1.49 | )

Other
Comprehensive Income (Loss)

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 2000, 2001 and 2002. Changes in components of
other comprehensive income (loss) are reported net of income
tax, as follows (in thousands):

|                                         |  |        |        |          |  |        |      |        |  |          |      |        |  |        |        |          |  |        |      |   |  |   |      |   |  |   |       |  |  |   |     |  |  |   |       | 
|---------------------------------------- |  | ------ | ------ | -------- |  | ------ | ---- | ------ |  | -------- | ---- | ------ |  | ------ | ------ | -------- |  | ------ | ---- | - |  | - | ---- | - |  | - | ----- |  |  | - | --- |  |  | - | ----- | 
|                                         |  |        |        |          |  |       
|                                         |  | 2000   |        | 2001     |  | 2002  
|                                         |  |        |        |          |  |       
|                                         |  |        |        | Tax      |  |        |      |        |  | Tax      |      |        |  |        |        | Tax      |  |       
|                                         |  | Pretax |        | Expense  |  | Net    |      | Pretax |  | Expense  |      | Net    |  | Pretax |        | Expense  |  | Net   
|                                         |  | Amount |        | (Credit) |  | Amount |      | Amount |  | (Credit) |      | Amount |  | Amount |        | (Credit) |  | Amount
|                                         |  |        |        |          |  |        |      |        |  |          |      |        |  |        |        |          |  |       
|Foreign currency translation Adjustments |  | $      | (1,609 | )        |  | $      | (716 | )      |  | $        | (893 | )      |  | $      | (1,002 | )        |  | $      | (395 | ) |  | $ | (607 | ) |  | $ | 2,003 |  |  | $ | 455 |  |  | $ | 1,548 | 
|                                         |  |        |        |          |  |        |      |        |  |          |      |        |  |        |        |          |  |        |      |   |  |   |      |   |  |   |       |  |  |   |     |  |  |   |       | 

Reclassifications

Certain reclassifications of prior year amounts
have been made to conform to the current year presentation.

41



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                     
| | ------------------------------------
| | Recent Accounting
    Pronouncements

In July 2002, FASB SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, was issued. The statement provides specific
guidance for the recognition, measurement and reporting of costs
associated with exiting an activity or disposing of a long-lived
asset, including restructuring charges that the Company
currently accounts for under EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). The provisions are effective
after December 31, 2002. The adoption of SFAS
No. 146 may have an effect on the timing of future
restructuring charges taken, if and when they occur.

In December 2002, FASB SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of FASB Statement No. 123,was
issued. This statement provides for alternative methods of
transition for a company that voluntarily changes to the fair
value based method of accounting for stock-based employee
compensation. At this time, the Company does not plan to adopt
the fair value based method of accounting for its stock-based
employee compensation.

In November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45
requires a guarantor to recognize a liability, at the inception
of the guarantee, for the fair value of obligations it has
undertaken in issuing the guarantee and also to include more
detailed disclosures in respect to those guarantees. FIN 45 is
effective on a prospective basis for guarantees issued or
modified starting January 1, 2003 and requires the
additional disclosures for the interim and annual financial
statements for periods ending after December 15, 2003. The
Company does not anticipate issuing any guarantees which
would be required to be recognized as a liability under FIN 45
and therefore, the Company does not expect the adoption of this
interpretation to have a material impact on the Companys
financial condition and results of operations.



|    |                                            
|--- | -------------------------------------------
|(3) | Tower Portfolio Sale and
    Administration

During 2000, Microcell Management, Inc.
(Microcell), a subsidiary of the Company, completed
the closing of the sale of its telecommunication tower portfolio
to Pinnacle Towers Inc. (Pinnacle) pursuant to an
Asset Purchase Agreement between Pinnacle and Microcell. During
2000, Microcell conveyed 177 tower sites to Pinnacle for net
cash proceeds of $72.2 million. On February 15, 2000,
Microcell and the Company entered into a Settlement and Release
Agreement with the minority shareholders of Microcell. Pursuant
to the Settlement and Release Agreement, concurrent with the
Pinnacle tower sale, the aggregate 16.25% minority shareholder
interests were redeemed and other costs paid and/or reimbursed
for $7.2 million. The payment was capitalized as part of
the cost of acquiring the Microcell assets and was expensed as
sites were conveyed to Pinnacle. As part of the agreement, all
pending claims of the minority shareholders were settled and
dismissed with prejudice.

As part of the tower sale transaction, Microcell
and Pinnacle entered into a Master Antenna Site Lease pursuant
to which Microcell agreed to lease, until December 31,
2002, the unoccupied space on each telecommunication tower sold
to Pinnacle. As of December 31, 2000, the Company had
recognized a gain of $26.4 million on the sale of the tower
portfolio and deferred $5.2 million of the gain. The
deferred gain related to the maximum lease obligation under the
Master Antenna Site Lease and was included in other long-term
liabilities. During 2001, the Company recognized
$3.2 million of the deferred gain, which was offset by
$0.2 million in related operating expenses. As of
December 31, 2001, the Company had deferred
$2.0 million of the gain that related to the maximum lease
obligations under the Master Antenna Site Lease and included it
in other current liabilities. Microcell and Pinnacle also
entered into a Tower Services Agreement to provide Pinnacle with
audit, maintenance, and program management services. The Tower
Services Agreement, which expired in August 2001, provided for
minimum annual payments to Microcell of $10.0 million for
the contemplated services.

42



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

On January 25, 2002, the Company entered
into a settlement agreement with Pinnacle. Pursuant to the
agreement, the Company received $2.0 million in cash to
satisfy Pinnacles obligations under the Tower Services
Agreement. This gain was recognized in the second quarter of
2002, when all uncertainties related to any potential claims
against the payment received were resolved. In addition, the
Company paid Pinnacle $2.0 million to satisfy all remaining
obligations under the Master Antenna Site Lease. This payment
reduced the $2.0 million deferred gain the Company included
in other current liabilities on the December 31, 2001
consolidated balance sheet.



|    |                          
|--- | -------------------------
|(4) | Cash and Cash Equivalents

At December 31, 2001 and 2002, cash and cash
equivalents consisted of the following (in thousands):

|                 |  |      |        |      |  |   |        | 
|---------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                 |  | 2001 |        | 2002
|                 |  |      |        |     
|Cash in banks    |  | $    | 3,106  |      |  | $ | 10,073 | 
|Cash equivalents |  |      | 49,552 |      |  |   | 27,434 | 
|                 |  |      |        |      |  |   |        | 
|                 |  | $    | 52,658 |      |  | $ | 37,507 | 
|                 |  |      |        |      |  |   |        | 



|    |                           
|--- | --------------------------
|(5) | Related Party Transactions

RF Investors, a subsidiary of Telcom Ventures,
owns the Class B Common Stock shares outstanding, which
have ten-to-one voting rights over the Class A Common Stock
shares and therefore represent approximately 81% voting control.

During 2000, 2001, and 2002, the Company provided
services to Telcom Ventures and various other companies majority
owned, or controlled by, Telcom Ventures or its members.
Revenues earned during 2000, 2001 and 2002 for services provided
to these customers were approximately $1.9 million,
$0.1 million, and none, respectively. Receivables from
these related parties were $19,000 and none at December 31,
2001 and 2002, 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 $89,000 and $33,000 at
December 31, 2001 and 2002, respectively.

During 2001 and 2002, the Company continued to
make certain payments on behalf of Telcom Ventures that
consisted primarily of fringe and payroll-related costs of
$252,000 and $155,000, respectively and the Company received
reimbursements of $98,000 and $464,000 respectively. During
2002, the Company also provided an allowance of $100,000 for
amounts in disagreement, for which the Company continues to
pursue collection. At December 31, 2001 and 2002,
outstanding amounts associated with these payments, totaling
$418,000 and $9,000 respectively, are included in due from
related parties and affiliates within the accompanying
consolidated balance sheets.

In September 1996, the Company lent
$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. The original note was payable over five years with
equal annual principal payments over the term. Interest accrued
at the rate of LIBOR, plus 1.75%. The Company received the final
payment of principal and accrued interest of approximately
$0.7 million during the first quarter of 2002 in
satisfaction of the note.

During 2000, 2001, and 2002, the Company provided
services to XM Satellite. Telcom Ventures has a minority
investment in XM Satellite, and Dr. Rajendra Singh, a
director of Telcom Ventures, is a member of the board of
directors of the Company. Dr. Singh is also a former member
of the XM Satellite board of directors. Revenues earned during
2000, 2001, and 2002 for services provided to XM Satellite were

43



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$58.4 million, $57.3 million, and
$3.4 million, respectively. Receivables from XM Satellite
were $17.0 million and none at December 31, 2001 and
2002, respectively.

In December 1999, the Company issued
approximately 108,000 shares of Class A Common Stock in
exchange for a $1.6 million note receivable from the
Companys President and Chief Executive Officer. The note
is payable on the earlier of December 2004 or the date he is no
longer the Companys President and Chief Executive Officer.
Upon the event of a change in control of ownership of the
Company, the note will be forgiven. Interest accrues at the
federal mid-term rate on the date of the note and is payable
quarterly. The note is reflected as a reduction of
shareholders equity in the accompanying statement of
shareholders equity.

In November 2001, the Company entered into a
$0.6 million promissory note with Plan + Design
Netcare AG (see note 10). Under the terms of the note, the
entire principal amount, plus accrued interest was due to the
Company on January 31, 2002. The interest rate was 5.0%
calculated on a basis of a 365-day year. In the event of
default, interest would accrue on the unpaid balance of the note
at the interest rate, plus 5.0%. The note was paid in full in
February 2002.

In July 2002, the Company acquired
51 percent of the outstanding shares of Detron LCC Network
Services B.V. (Detron), a newly formed corporation
in the Netherlands. LCC acquired the shares from Westminster
Capital B.V. (Westminster). Detron has certain
ongoing transactions with Westminster. Under a five-year lease
agreement for office space, Detron recorded approximately
$27,000 of rent expense from the date of acquisition. During the
third and fourth quarters of 2002, Detron seconded various idle
employees to Detron Telematics, Westminsters wholly-owned
subsidiary and recorded revenue of approximately
$0.2 million.

(6)     Property and
Equipment

At December 31, 2001 and 2002, property and
equipment consisted of the following:

|                                               |  |                |         |      |  |   |         |  
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                               |  | 2001           |         | 2002
|                                               |  |                |         |     
|                                               |  |               
|                                               |  | (In thousands)
|Computer equipment                             |  | $              | 14,078  |      |  | $ | 14,221  |  
|Software                                       |  |                | 2,017   |      |  |   | 2,920   |  
|Furniture and office equipment                 |  |                | 7,281   |      |  |   | 9,416   |  
|Leasehold improvements                         |  |                | 3,587   |      |  |   | 1,547   |  
|Vehicles                                       |  |                | 224     |      |  |   | 216     |  
|                                               |  |                |         |      |  |   |         |  
|                                               |  |                | 27,187  |      |  |   | 28,320  |  
|Less accumulated depreciation and amortization |  |                | (21,457 | )    |  |   | (23,310 | )
|                                               |  |                |         |      |  |   |         |  
|                                               |  | $              | 5,730   |      |  | $ | 5,010   |  
|                                               |  |                |         |      |  |   |         |  

(7)     Restructuring
Charge

During the second quarter of 2002, the Company
adopted a restructuring plan and recorded a restructuring charge
of $10.0 million. During the fourth quarter of 2002, the
Company recorded an additional $3.5 million relating to the
costs of excess office space. The restructuring plan was in
response to the low utilization of professional employees caused
by the completion of several large fixed-price contracts and the
difficulty in obtaining new contracts as a result of the
slowdown in wireless telecommunications infrastructure spending.
The cost of the severance and associated expenses was
approximately $1.0 million and resulted in a work force
reduction of approximately 140 people. In addition, the Company
had excess facility costs relative to the space occupied by the
employees affected by the reduction in force, space previously
occupied by divested operations, and reduced business use of
office space resulting from a continued trend for clients to
provide professional staff office space while performing their
services. The charge for the excess office space

44



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

was approximately $12.5 million, which
included $1.5 million in written-off leasehold improvements
and other assets related to the excess space. The facility
charge takes the existing lease obligation, less the anticipated
rental receipts to be received from existing and potential
subleases. This charge required significant judgments about the
length of time that space will remain vacant, anticipated cost
escalators and operating costs associated with the leases,
market rate of the subleased space, and broker fees or other
costs necessary to market the space. A reconciliation of the
restructuring activities is as follows:

|                                              |                                                         |                |       |            |   |       |        |        |   |   |        |        |  
|--------------------------------------------- | ------------------------------------------------------- | -------------- | ----- | ---------- | - | ----- | ------ | ------ | - | - | ------ | ------ | -
|                                              |                                                         | Severance      |       | Facilities |   | Total
|                                              |                                                         |                |       |            |   |      
|                                              |                                                         |               
|                                              |                                                         | (in thousands)
|Restructuring charge                          |                                                         | $              | 1,030 |            |   | $     | 12,492 |        |   | $ | 13,522 |       
|Reclassification of deferred rent             |                                                         |                |      |            |   |       | 639    |        |   |   | 639    |       
|                                              |                                                         |                |       |            |   |       |        |        |   |   |        |       
|                                              |                                                         |                | 1,030 |            |   |       | 13,131 |        |   |   | 14,161 |       
|Charges against the provision:                |                                                         |                |       |            |   |       |        |        |   |   |        |       
|                                              | Excess office space                                     |                |       |           |   |       |        | (2,152 | ) |   |        | (2,152 | )
|                                              | Severance and associated costs paid                     |                |       | (878       | ) |       |        |       |   |   |        | (878   | )
|                                              | Leasehold improvements and other assets
    written-off |                |       |           |   |       |        | (1,461 | ) |   |        | (1,461 | )
|                                              | Other                                                   |                |       |           |   |       |        | 53     |   |   |        | 53     |  
|                                              |                                                         |                |       |            |   |       |        |        |   |   |        |       
|                                              |                                                         |                | (878  | )          |   |       | (3,560 | )      |   |   | (4,438 | )     
|                                              |                                                         |                |       |            |   |       |        |        |   |   |        |       
|Restructuring payable as of December 31, 2002 |                                                         | $              | 152   |            |   | $     | 9,571  |        |   | $ | 9,723  |       
|                                              |                                                         |                |       |            |   |       |        |        |   |   |        |       

At December 31, 2002, the restructuring
payable was classified as follows:

|                              |  |   |       | 
|----------------------------- |  | - | ----- | 
|Accrued restructuring current |  | $ | 3,937 | 
|Accrued restructuring         |  |   | 5,786 | 
|                              |  |   |       | 
|Accrued restructuring total   |  | $ | 9,723 | 
|                              |  |   |       | 

(8)     Recovery of
Receivables

On March 28, 2001, the United States
Bankruptcy Court, District of Maryland, Northern Division,
entered an order confirming the Amended Joint Plan of
Reorganization Under Chapter 11 (the Plan) for
DCR PCS, Inc. (DCR) and Pocket Communications, Inc.
(Pocket). The Plan provided that the Companys
claim against DCR would be allowed in the amount of
$5.0 million. The Company received payment of
$5.0 million on April 11, 2001 which has been
recognized as a recovery of a bad debt during the quarter ended
June 30, 2001 and was recorded as a reduction in general
and administrative expense. The Plan also provided that the
Companys general unsecured claim against Pocket would be
allowed. The Company received $1.6 million as final
settlement for the Pocket claim during the second quarter of
2002. The Company recorded the receipt as a recovery of bad debt
and as a reduction in general and administrative expense during
the quarter.

During 1997, the Company recorded a charge for
receivables due from a Malaysian corporation. On March 15,
2001, the Company received payment of $2.1 million, net of
taxes withheld at the source of $0.4 million, as complete
settlement on these balances after the Malaysian Corporation
successfully emerged from bankruptcy. This amount has been
recognized as a recovery of bad debt during the quarter ended
March 31, 2001 and was recorded as a reduction in general
and administrative expense.

(9)     Impairment of
Investments

In June 2000, the Company acquired 18.2% of
Mobilocity, Inc. (Mobilocity), which was
subsequently diluted to less than 3 percent as Mobilocity
continued to raise additional capital. During the second quarter
of 2002, the Company evaluated its investment in Mobilocity to
determine if an impairment loss had occurred.

45



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Mobilocity had implemented a voluntary
liquidation plan, leading the Company to determine the
investment was likely not recoverable and recorded a
$0.5 million impairment charge.

The Company invested a total of $4.6 million
($2.9 million in August 2000 and $1.7 million in
February 2001) to maintain its 15.0% interest in Plan +
Design Netcare AG (PDN). The Company used the cost
method to account for this investment. PDN, and its operating
subsidiary, filed for insolvency protection in 2002. During the
second quarter of 2002, the Company evaluated this investment
and determined that the investment was likely not recoverable
and recorded a $4.6 million impairment charge.

(10)     Investments

In September 1999, the Company acquired 19.9% of
Tecnosistemi S.p.A. (formerly, Italtel Sistemi, S.p.A.) for
$1.1 million. Tecnosistemi is an Italian telecommunications
services company. The Company applied the equity method to
account for its investment in Tecnosistemi until September 2000,
when its ownership interest was diluted to 9.4% as a result of a
merger. From the date of acquisition until September 30,
2000, Tecnosistemi incurred cumulative losses of
$3.4 million. The Company recorded its $0.8 million
pro-rata share of these losses in other income (expense).
Subsequent to September 2000, when the Companys ownership
interest was diluted, the investment was accounted for using the
cost method. In July 2001, the Company sold all of its shares in
Tecnosistemi for $1.4 million, resulting in a gain of
approximately $1.0 million, which is recorded in other
income in the accompanying 2001 consolidated statement of
operations.

In June 2001, the US Court of Appeals for
the District of Columbia (the DC Court of
Appeals) issued its decision in the case captioned
NextWave Personal Communications Inc. and NextWave Power
Partners Inc. v. Federal Communications Commission and United
States of America, et. al, Case Nos. 00-1402 and 00-1403.
The US Court of Appeals ruled that federal bankruptcy law
prohibited the Federal Communications Commission (the
FCC) from canceling certain broadband personal
communications services licenses that it had granted to NextWave
Personal Communications Inc. (NPCI). The FCC revoked
these licenses after NPCI filed for bankruptcy protection on
June 8, 1998. On August 6, 2001, NextWave filed its
Second Plan of Reorganization under Chapter 11 with the
US Bankruptcy Court for the Southern District of New York
(the NextWave Plan). Various objections have been
filed in the case. In October 2001, the FCC filed a petition for
certiorari before the U.S. Supreme Court. On March 6,
2002, the U.S. Supreme Court announced its decision to hear
the case. Substantive hearings in the bankruptcy case were
delayed pending the decision of the U.S. Supreme Court. On
January 27, 2003, the U.S. Supreme Court announced its
decision upholding the decision of the DC Court of Appeals.

The Company held 1,666,666 shares of Class B
Common Stock of NextWave Telecom, Inc. (NextWave
Telecom). NextWave Telecom is the parent corporation of
NPCI. The Company acquired the shares of NextWave Telecom in May
1996 for a purchase price of $5.0 million in connection
with a series of transactions entered into between the Company
and NextWave Telecom under an agreement dated March 12,
1996 (the March Agreement). The Company also
acquired warrants to purchase an additional 123,356 shares of
Class B Common Stock at $3.00 per share. Under the March
Agreement, NextWave Telecom agreed to use the Company to provide
not less than (a) $14.0 million of radio frequency
engineering services and (b) $35.0 million of system
deployment services. These services were to be provided in
increments of twenty-percent (20%) each year during the
five-year period following the execution of the March Agreement.
NextWave Telecom filed for bankruptcy protection on
December 23, 1998. The March Agreement has not been assumed
or rejected by NextWave Telecom in the bankruptcy proceeding.
The Company did not carry any assets or liabilities on its books
relating to its equity investment in NextWave, any pre-petition
debts due the Company, or the March Agreement; these balances
were written off in previous years.

The total amount of pre-petition debt owed to the
Company by NextWave Telecom and certain of its subsidiaries
(collectively, NextWave) was approximately
$14.3 million, plus post-petition interest thereon.

46



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

This amount includes the Companys interest,
amounting to approximately $0.7 million plus post-petition
interest thereon, in a general unsecured claim against NextWave
that was acquired by the Company in connection with its
acquisition of Koll Telecommunications LLC in 1997 (the
Koll Claim).

In September 2001, the Company sold all of its
1,666,666 shares of Class B common stock and the
Companys pre-petition debt claims (excluding a 92.5%
interest in pre-petition interest that may be payable with
respect to the claims, the Pre-Petition Interest
Amount) against NextWave Telecom resulting in a gain of
$21.4 million, which equaled the proceeds from the sale.
The gain was recorded in other income in the accompanying
consolidated statement of operations. The September 2001 sale of
current pre-petition debt excluded (a) the Koll Claim,
(b) any claims resulting from the assumption or rejection
of the March Agreement, and (c) the Pre-Petition Interest
Amount.

In February 2003, the Company sold its interest
in the Pre-Petition Interest Amount for $1.0 million in
cash, which was paid in March 2003.

(11)     Business
Combinations

On December 5, 2001, the Company acquired
Transmast Italia S.R.L (Transmast) for approximately
$0.8 million in cash. Transmast is a wireless
infrastructure, deployment, civil engineering and project
management firm located in Milan, Italy. The acquisition is
accounted for under the purchase method of accounting. The
acquisition cost was allocated to net tangible assets and
goodwill. The net tangible assets acquired consisted primarily
of fixed assets and current assets net of assumed liabilities.

On January 31, 2002, the Company acquired
all of the assets of Smith Woolley Telecom (Smith
Woolley). Smith Woolley is a telecommunications
consultancy company that specializes in the provision of search,
acquisition, design, build, management and maintenance services
to the wireless industry in the United Kingdom. Smith Woolley is
based in Cambridge, England, with several regional offices. The
purchase price of the acquisition was approximately
$8.6 million consisting of $7.1 million in cash and
approximately 215,000 shares of LCC Class A common stock,
par value $0.01 per share. The value of the LCC Class A
common stock was approximately $1.5 million and was based
on the closing price on January 31, 2002 of $7.08 per
share. The acquisition was accounted for using the purchase
method of accounting and, therefore, Smith Woolleys
results have been included in the consolidated financial
statements since the date of acquisition.

Allocation of the purchase price to the assets
acquired and liabilities assumed for this acquisition was
finalized by the Company with the assistance of an outside
valuation firm during the second quarter of 2002. The net assets
acquired and liabilities assumed amounted to $0.7 million.
Goodwill recognized in the acquisition amounted to
$5.9 million. Other intangible assets acquired amounted to
$2.0 million. Other intangible assets, including contract
backlog, customer relationships, and the Smith Woolley trade
name, are amortized over two to five years depending on the
estimated remaining useful lives.

On July 9, 2002, the Company acquired
51 percent of the outstanding shares of Detron LCC Network
Services B.V. (Detron), a newly formed corporation
organized under the laws of the Netherlands. Detron specializes
in the provision of deployment, management and maintenance
services to the wireless industry in the Netherlands. LCC
acquired the shares from Westminster Capital B.V.
(Westminster) for an initial purchase price of
$1.9 million. Also included in the acquisition cost were
legal and transaction costs of $0.4 million. The purchase
agreement provided for the payment of an additional
$0.5 million should Detron achieve certain objectives by
the end of the calendar year as confirmed by its adopted annual
accounts. These objectives were achieved and the Company expects
to pay the additional amount in 2003. The acquisition has been
recorded under the purchase method of accounting, and therefore
Detrons results have been included in the consolidated
financial statements since the date of acquisition. Goodwill
recognized in the acquisition amounted to $1.6 million.
Other intangible assets acquired amounted to $0.5 million.
Other intangible assets,

47



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

including backlog, customer relationships, and
the Detron trade name, are amortized over two to five years
depending on the estimated remaining useful lives.

Goodwill and other intangibles with indefinite
useful lives were evaluated at the December 31, 2002 for
possible impairment under the provisions of SFAS No. 142.
The Company concluded that no adjustment was necessary at year
end and will continue to evaluate for possible impairment
annually.

The Company recognized $0.6 million in
amortization expense for the intangible assets with definite
useful lives from the date of purchase through the end of 2002.
The Company expects amortization expense on the acquired
intangible assets to be as follows (in thousands):

|     |  |                      |       | 
|---- |  | -------------------- | ----- | 
|     |  | Amortization Expense
|     |  |                     
|2003 |  | $                    | 700   | 
|2004 |  |                      | 400   | 
|2005 |  |                      | 400   | 
|2006 |  |                      | 400   | 
|2007 |  |                      | 50    | 
|     |  |                      |       | 
|     |  | $                    | 1,950 | 
|     |  |                      |       | 

The following unaudited pro forma combined
financial information for each of the years ended
December 31, 2001 and 2002 assumes the business combination
of Smith Woolley was effected on January 1, 2001 (in
thousands, except per share data). Detron operations were not
material to the consolidated operating results of the Company.

|                                                  |  |      |         |      |  |   |         |  
|------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                  |  | 2001 |         | 2002
|                                                  |  |      |         |     
|Revenues                                          |  | $    | 139,606 |      |  | $ | 68,146  |  
|Income (loss) from operations before income taxes |  |      | 28,741  |      |  |   | (36,845 | )
|Net income (loss)                                 |  |      | 17,704  |      |  |   | (28,393 | )
|Net income (loss) per share:                      |  |      |         |      |  |   |         |  
|Basic                                             |  | $    | 0.86    |      |  | $ | (1.36   | )
|                                                  |  |      |         |      |  |   |         |  
|Diluted                                           |  | $    | 0.85    |      |  | $ | (1.36   | )
|                                                  |  |      |         |      |  |   |         |  

(12)     Business
Disposals

On October 23, 2002 the Company entered into
an agreement for nominal consideration to convey 82.0% of its
ownership interest in its Egyptian subsidiary, LCC Egypt Ltd.,
with put options to convey the remaining 18.0% ownership
interest upon the resolution of certain items. This subsidiary
was established to execute a contract for a customer, which is
substantially complete. The sale agreement anticipated that the
new owner would collect receivable balances and resolve vendor,
tax, and other obligations of the subsidiary, during the
four-week period from the agreement date. As part of the
agreement the Company assumed specific payroll and other
obligations and agreed to make contributions to the subsidiary
requiring payments of approximately $0.3 million during the
fourth quarter of 2002, and an additional $0.2 million in
February 2003. In December 2002, the Company recorded a recovery
for provisions that were no longer needed for operations in
Egypt of $1.1 million that is recorded in other income and
expense on the accompanying income statement.

48



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(13)     Income
Taxes

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

|          |                 |                |        |       |        |      |       |        |        |  |        |        |        |  
|--------- | --------------- | -------------- | ------ | ----- | ------ | ---- | ----- | ------ | ------ |  | ------ | ------ | ------ | -
|          |                 | 2000           |        | 2001  |        | 2002
|          |                 |                |        |       |        |     
|          |                 |               
|          |                 | (In thousands)
|Current:  |                 |                |        |       |        |      |       |        |        |  |        |       
|          | Federal         |                | $      | 4,009 |        |      | $     | 10,647 |        |  | $      | (8,885 | )     
|          | State and local |                |        | 522   |        |      |       | 1,241  |        |  |        | (560   | )     
|          | Foreign         |                |        | 1,115 |        |      |       | (3,002 | )      |  |        | 590    |       
|          |                 |                |        |       |        |      |       |        |        |  |        |       
|          |                 |                | 5,646  |       |        |      | 8,886 |        |        |  | (8,855 | )     
|          |                 |                |        |       |        |      |       |        |        |  |        |       
|Deferred: |                 |                |        |       |        |      |       |        |        |  |        |       
|          | Federal         |                |        | 9,730 |        |      |       | 1,900  |        |  |        | 433    |       
|          | State and local |                |        | 1,155 |        |      |       | 255    |        |  |        | (29    | )     
|          | Foreign         |                |        |      |        |      |       |       |        |  |        |       |       
|          |                 |                |        |       |        |      |       |        |        |  |        |       
|          |                 |                | 10,885 |       |        |      | 2,155 |        |        |  | 404    |       
|          |                 |                |        |       |        |      |       |        |        |  |        |       
|          |                 | Total          |        | $     | 16,531 |      |       | $      | 11,041 |  |        | $      | (8,451 | )
|          |                 |                |        |       |        |      |       |        |        |  |        |       

The 2000, 2001, and 2002 income tax provisions
(benefits) related to operations do not include a
$3.3 million tax benefit, a $0.1 million tax benefit,
and $25,000 tax benefit, respectively, related to exercising
stock options which was recorded directly to paid-in capital.

Income (loss) before income taxes includes the
following components:

|         |       |                |        |        |  |      |        |        |  |   |         |         |  
|-------- | ----- | -------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------- | ------- | -
|         |       | 2000           |        | 2001   |  | 2002
|         |       |                |        |        |  |     
|         |       |               
|         |       | (In thousands)
|Domestic |       | $              | 34,184 |        |  | $    | 33,550 |        |  | $ | (30,613 | )      
|Foreign  |       |                | 2,965  |        |  |      | (5,537 | )      |  |   | (6,508  | )      
|         |       |                |        |        |  |      |        |        |  |   |         |        
|         | Total |                | $      | 37,149 |  |      | $      | 28,013 |  |   | $       | (37,121 | )
|         |       |                |        |        |  |      |        |        |  |   |         |        

A reconciliation of the statutory Federal income
tax rate and the effective income tax rate for the years ended
December 31, 2000, 2001 and 2002 follows.

|                                  |                                                              |      |      |      |   |      |      |      |   |  |      |      |  
|--------------------------------- | ------------------------------------------------------------ | ---- | ---- | ---- | - | ---- | ---- | ---- | - |  | ---- | ---- | -
|                                  |                                                              | 2000 |      | 2001 |   | 2002
|                                  |                                                              |      |      |      |   |     
|Statutory Federal income tax rate |                                                              |      | 35.0 | %    |   |      | 35.0 | %    |   |  | 35.0 | %   
|Effect of:                        |                                                              |      |      |      |   |      |      |      |   |  |      |     
|                                  | State and local income taxes, net of federal tax
    benefit |      |      | 2.9  |   |      |      | 3.5  |   |  |      | 1.3  |  
|                                  | Foreign                                                      |      |      | (2.8 | ) |      |      | (8.3 | ) |  |      | (8.0 | )
|                                  | Tax credits                                                  |      |      | (0.6 | ) |      |      | 2.0  |   |  |      | (3.8 | )
|                                  | Non deductible expenses                                      |      |      | 7.4  |   |      |      | 0.5  |   |  |      | (1.0 | )
|                                  | Other                                                        |      |      | 2.6  |   |      |      | 3.2  |   |  |      |     |  
|                                  | Valuation allowance of deferred tax assets                   |      |      |     |   |      |      | 3.5  |   |  |      | (0.7 | )
|                                  |                                                              |      |      |      |   |      |      |      |   |  |      |     
|Effective income tax rate         |                                                              |      | 44.5 | %    |   |      | 39.4 | %    |   |  | 22.8 | %   
|                                  |                                                              |      |      |      |   |      |      |      |   |  |      |     

49



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effects of temporary differences that
give rise to significant portions of the net deferred tax assets
at December 31, 2001 and 2002 are presented below:

|                                                                            |                                  |                |        |        |   |   |        |        |  
|--------------------------------------------------------------------------- | -------------------------------- | -------------- | ------ | ------ | - | - | ------ | ------ | -
|                                                                            |                                  | 2001           |        | 2002  
|                                                                            |                                  |                |        |       
|                                                                            |                                  |               
|                                                                            |                                  | (In thousands)
|Deferred tax assets:                                                        |                                  |                |        |        |   |   |        |       
|Accounts receivable, principally due to allowance
    for doubtful accounts |                                  | $              | 115    |        |   | $ | 50     |       
|Other receivables                                                           |                                  |                | 754    |        |   |   |       |       
|Non-cash compensation                                                       |                                  |                | 1,245  |        |   |   | 1,340  |       
|Accrued expenses                                                            |                                  |                | 2,083  |        |   |   | 4,229  |       
|Foreign tax credit carry-forward                                            |                                  |                | 4,031  |        |   |   | 3,049  |       
|Foreign net operating loss carry-forwards                                   |                                  |                | 2,391  |        |   |   | 2,305  |       
|Research tax credit carryover                                               |                                  |                | 281    |        |   |   | 340    |       
|Alternative minimum tax credit                                              |                                  |                | 455    |        |   |   |       |       
|Other                                                                       |                                  |                | 340    |        |   |   | 329    |       
|                                                                            |                                  |                |        |        |   |   |        |       
|                                                                            | Total gross deferred tax assets  |                |        | 11,695 |   |   |        | 11,642 |  
|Less valuation allowance                                                    |                                  |                | (5,941 | )      |   |   | (6,213 | )     
|                                                                            |                                  |                |        |        |   |   |        |       
|Deferred tax assets net of valuation allowance                              |                                  |                | 5,754  |        |   |   | 5,429  |       
|                                                                            |                                  |                |        |        |   |   |        |       
|Deferred tax liabilities:                                                   |                                  |                |        |        |   |   |        |       
|Property and equipment                                                      |                                  |                | (116   | )      |   |   | (281   | )     
|Deferred revenue                                                            |                                  |                | (320   | )      |   |   | (140   | )     
|Other                                                                       |                                  |                | (556   | )      |   |   | (572   | )     
|                                                                            |                                  |                |        |        |   |   |        |       
|                                                                            | Total gross deferred liabilities |                |        | (992   | ) |   |        | (993   | )
|                                                                            |                                  |                |        |        |   |   |        |       
|Net deferred tax assets                                                     |                                  | $              | 4,762  |        |   | $ | 4,436  |       
|                                                                            |                                  |                |        |        |   |   |        |       

The components giving rise to the net deferred
tax assets described above have been included in the
accompanying balance sheet as of December 31, 2001 and 2002
as follows (in thousands):

|                 |  |      |       |      |  |   |       | 
|---------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                 |  | 2001 |       | 2002
|                 |  |      |       |     
|Current asset    |  | $    | 2,724 |      |  | $ | 3,932 | 
|Noncurrent asset |  |      | 2,038 |      |  |   | 504   | 
|                 |  |      |       |      |  |   |       | 
|                 |  | $    | 4,762 |      |  | $ | 4,436 | 
|                 |  |      |       |      |  |   |       | 

At December 31, 2002, the Company had
foreign tax credits for U.S. tax purposes of
$3.0 million, which expire between 2003 and 2005 and a
research and development credit of $0.3 million. The
Company also had $8.5 million of foreign operating loss
carry-forwards from operations, which expire between 2006 and
2009.

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.

In determining the tax valuation allowance,
management considers if it is likely that some portion of the
deferred tax assets will be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those
temporary differences become deductible. Management considers
the scheduled reversal of deferred tax liabilities, projected
future taxable income and tax planning strategies in making this
assessment. A valuation allowance has been provided for deferred
tax assets which management does not believe are more likely
than not to be realized, primarily

50



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

consisting of foreign net operating losses
carried forward, foreign tax credits and non-cash compensation
expense that may not become deductible for tax purposes.

(14)     Health and
Retirement Plans

The Company has a defined contribution profit
sharing plan under Section 401(k) of the Internal Revenue
Code 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 contribution. Company
contributions and other expenses associated with the plan were
approximately $0.6 million, $0.7 million, and
$0.5 million for the years ended December 31, 2000,
2001, and 2002, respectively.

The Companys subsidiary, LCC UK Ltd., has a
defined contribution pension plan under Chapter 1
Part XIV of the Income and Corporation Taxes Act, 1988. The
plan provides for voluntary employee contributions of 1.0 to
5.0 percent of an employees base salary. It is
available to all full-time employees who have completed their
three-month probation period. The Company contributes
5.0 percent of an employees base salary and matches
the employees contribution up to 5.0 percent. LCC UK
Ltd., contributions and other expenses related to the plan were
approximately $0.2 million, $0.2 million, and
$0.2 million for the years ended December 31, 2000,
2001 and 2002, respectively.

Transmast has two statutory pension plans and one
voluntary plan for directors of Transmast. The contributions are
in accordance with the National Contract Agreement. Transmast
contributions and related expenses to the plans were
approximately $0.4 million for the year ended
December 31, 2002.

The Company is self-insured for group health
benefits and claims up to $0.1 million in stop loss
coverage.



|     |                
|---- | ---------------
|(15) | Incentive Plans

At December 31, 2000, 2001, and 2002, the
Company had two stock-based incentive plans, an employee stock
purchase plan and an employee stock option plan, which are
described below. No compensation cost has been recognized for
the companys fixed stock option plans and employee stock
purchase plan.

Pro forma information regarding net income (loss)
and net income (loss) per share for stock options under the fair
values method of SFAS 123 is described in Note 1. The
per share weighted-average fair value of stock options granted
during 2000, 2001 and 2002 was $10.93, $7.93, and $1.91
respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average
assumptions:

|                        |  |           |  |           |  |          
|----------------------- |  | --------- |  | --------- |  | ---------
|                        |  | 2000      |  | 2001      |  | 2002     
|                        |  |           |  |           |  |          
|Expected dividend yield |  | 0%        |  | 0%        |  | 0%       
|Risk-free interest rate |  | 6.0%      |  | 5.0%      |  | 4.0%     
|Expected life           |  | 3-7 years |  | 3-8 years |  | 2-7 years
|Volatility              |  | 75-100%   |  | 75-125%   |  | 55-115%  

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. The amount of shares available for issuance under the plan
was increased by 500,000 as approved by the stockholders at the
2002 Annual Meeting. 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 43,888
shares in 2000, 102,530 shares in 2001, and
34,565 shares in 2002 to employees. Compensation cost of
approximately $138,000, $127,000, and

51



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$11,000 respectively, would have been recognized
under SFAS No. 123 for the fair value of the employees
purchase rights. Compensation cost was estimated using the Black
Scholes model with the following assumptions.

|                        |  |         |  |         |  |        
|----------------------- |  | ------- |  | ------- |  | -------
|                        |  | 2000    |  | 2001    |  | 2002   
|                        |  |         |  |         |  |        
|Expected dividend yield |  | 0%      |  | 0%      |  | 0%     
|Risk-free interest rate |  | 3.0%    |  | 2.0%    |  | 1.1%   
|Expected life           |  | 1 month |  | 1 month |  | 1 month
|Volatility              |  | 75-100% |  | 75-125% |  | 55-115%

The weighted average fair value of the purchase
rights granted in 2000, 2001, and 2002 was $3.15, $1.23, and
$0.32 respectively.

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. In late 1999 and early 2000, the Board of Directors
adopted amendments to the 1996 Employee Stock Option Plan, which
were subsequently approved by the shareholders at the 2000
annual meeting, increasing the total number of shares reserved
by 4,100,000 shares so that the aggregate number of shares
reserved for issuance is 8,825,000.

Also in connection with the Companys
initial public offering, the Company established the 1996
Directors Stock Option Plan. The Directors 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 Directors Plan in 1998 and an additional 110,000 shares of
Class A Common Stock were reserved under the Directors Plan
in 2000. The option exercise price for options granted under the
Directors 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 was 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 continued to be an eligible director.
Options granted with respect to Class A Common Stock become
immediately exercisable with respect to directors who were
directors of the Company prior to July 1, 1996, and 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 Directors Plan currently provides that
directors are entitled to receive options to purchase shares of
Class A Common Stock in an amount determined at the
discretion of the Board of Directors. The Companys
directors are also entitled to receive option grants under the
Companys 1996 Employee Stock Option Plan in an amount
determined at the discretion of the Board of Directors.

The Company 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,
of which 40,000 expired in 2002. 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
offering, with the additional option to purchase 15,000 shares
of Class A Common Stock on each of the four anniversaries
of the initial date of grant. Options granted vested
immediately. The options will expire no later than the fifth
anniversary of the date of grant.

52



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

On October 17, 2001, the Company offered to
exchange all eligible outstanding options under the Amended and
Restated LCC International, Inc. 1996 Employee Stock Option Plan
(the 1996 Plan) for new options the Company granted
under the 1996 Plan on May 21, 2002. Eligible outstanding
options were all options with an exercise price of $10.50 or
more that were held by an employee of the Company other than the
Companys Chief Executive Officer. The Company granted an
option to purchase one share of the Companys Class A
Common Stock for every option to purchase two shares tendered
and accepted for exchange. The terms of the new options other
than the exercise price are substantially the same as the terms
of the options tendered for exchange. The Companys offer
to exchange expired on November 20, 2001 and eligible
employees had tendered 1,460,250 options on that date. In
exchange for the options tendered, the Company granted 592,619
new options on May 21, 2002 with an exercise price of
$2.96, which is equal to the closing price of the Companys
Class A Common Stock on the business day immediately
preceding the date the Company granted the new options.

Changes in stock options outstanding were as
follows:

|                             |  |                |       |                |  |                |       |                |  |                |        |                |  |   |       |  |  |  |        |   |  |   |      | 
|---------------------------- |  | -------------- | ----- | -------------- |  | -------------- | ----- | -------------- |  | -------------- | ------ | -------------- |  | - | ----- |  |  |  | ------ | - |  | - | ---- | 
|                             |  |                |       |                |  |               
|                             |  | 2000           |       | 2001           |  | 2002          
|                             |  |                |       |                |  |               
|                             |  |                |       | Weighted-      |  |                |       | Weighted-      |  |                |        | Weighted-     
|                             |  | Number of      |       | Average        |  | Number of      |       | Average        |  | Number of      |        | Average       
|                             |  | Shares         |       | Exercise Price |  | Shares         |       | Exercise Price |  | Shares         |        | Exercise Price
|                             |  |                |       |                |  |                |       |                |  |                |        |               
|                             |  | (in thousands) |       |                |  | (in thousands) |       |                |  | (in thousands) |        |               
|Balance at beginning of year |  |                | 2,799 |                |  | $              | 7.62  |                |  |                | 4,461  |                |  | $ | 12.11 |  |  |  | 3,596  |   |  | $ | 9.83 | 
|Granted                      |  |                | 2,645 |                |  |                | 16.06 |                |  |                | 2,182  |                |  |   | 11.05 |  |  |  | 2,097  |   |  |   | 3.14 | 
|Exercised                    |  |                | (361  | )              |  |                | 4.48  |                |  |                | (83    | )              |  |   | 5.21  |  |  |  | (22    | ) |  |   | 4.84 | 
|Cancelled                    |  |                | (622  | )              |  |                | 13.18 |                |  |                | (2,964 | )              |  |   | 14.28 |  |  |  | (1,295 | ) |  |   | 8.05 | 
|                             |  |                |       |                |  |                |       |                |  |                |        |                |  |   |       |  |  |  |        |   |  |   |      | 
|Balance at end of year       |  |                | 4,461 |                |  |                | 12.11 |                |  |                | 3,596  |                |  |   | 9.83  |  |  |  | 4,376  |   |  |   | 7.18 | 
|                             |  |                |       |                |  |                |       |                |  |                |        |                |  |   |       |  |  |  |        |   |  |   |      | 

The following table summarizes information about
options at December 31, 2002.

|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 
|--------------- |  | ------------------- | ----- | ------------------- |  | ------------- | ---- | ----------------- |  | ------------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|                |  |                     |       |                    
|                |  | Options Outstanding |       | Options Exercisable
|                |  |                     |       |                    
|                |  |                     |       | Weighted Avg.       |  | Weighted Avg. |      |                   |  | Weighted Avg.
|Range of        |  | Number at           |       | Remaining           |  | Exercise      |      | Number at         |  | Exercise     
|Exercise Prices |  | December 31, 2002   |       | Contractual Life    |  | Price         |      | December 31, 2002 |  | Price        
|                |  |                     |       |                     |  |               |      |                   |  |              
|                |  | (In thousands)      |       | (In years)          |  |               |      | (In thousands)    |  |              
|$ 1.67   2.12  |  |                     | 836   |                     |  |               | 9.45 |                   |  | $             | 2.09  |  |  |  |      |  |  | $ |      | 
|$ 2.71   2.96  |  |                     | 605   |                     |  |               | 7.93 |                   |  |               | 2.93  |  |  |  | 264   |  |  |   | 2.96  | 
|$ 4.00   5.00  |  |                     | 819   |                     |  |               | 6.22 |                   |  |               | 4.76  |  |  |  | 657   |  |  |   | 4.86  | 
|$ 5.09   8.25  |  |                     | 659   |                     |  |               | 7.78 |                   |  |               | 6.01  |  |  |  | 395   |  |  |   | 5.81  | 
|$10.69  12.25  |  |                     | 584   |                     |  |               | 7.60 |                   |  |               | 12.20 |  |  |  | 244   |  |  |   | 12.18 | 
|$12.38  13.56  |  |                     | 524   |                     |  |               | 7.00 |                   |  |               | 13.54 |  |  |  | 516   |  |  |   | 13.55 | 
|$16.00  20.13  |  |                     | 349   |                     |  |               | 6.18 |                   |  |               | 16.61 |  |  |  | 293   |  |  |   | 16.66 | 
|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 
|                |  |                     | 4,376 |                     |  |               | 7.58 |                   |  |               | 7.18  |  |  |  | 2,369 |  |  |   | 8.91  | 
|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 



|     |                  
|---- | -----------------
|(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 thirteen years.
The lease agreements include renewal options and provisions for
rental escalations based on the Consumer Price Index and require
the Company to

53



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 that have been
terminated, the applicable portion of the benefit has been
offset against the lease termination penalty.

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

|           |  |                |        |                    |  |   |       | 
|---------- |  | -------------- | ------ | ------------------ |  | - | ----- | 
|           |  |                |        | Rental Receivables
|           |  | Rental Payable |        | Under Subleases   
|           |  |                |        |                   
|           |  |               
|           |  | (In thousands)
|2003       |  | $              | 4,792  |                    |  | $ | 523   | 
|2004       |  |                | 4,678  |                    |  |   | 517   | 
|2005       |  |                | 4,559  |                    |  |   | 502   | 
|2006       |  |                | 4,545  |                    |  |   | 517   | 
|2007       |  |                | 2,535  |                    |  |   | 244   | 
|Thereafter |  |                | 3,611  |                    |  |   |      | 
|           |  |                |        |                    |  |   |       | 
|           |  | $              | 24,720 |                    |  | $ | 2,303 | 
|           |  |                |        |                    |  |   |       | 

Rent expense under operating leases was
approximately, $8.7 million, $8.6 million, and
$4.1 million, net of $2.2 million charged against the
restructuring payable, for the years ended December 31,
2000, 2001, and 2002, respectively. During 2002, the Company
recorded a restructuring charge for excess office space. See
note 7 above.



|     |              
|---- | -------------
|(17) | Contingencies

The Company is party to various legal proceedings
and claims incidental to its 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) | Income (Loss) Per Share

Income (loss) per share is presented on both a
basic and diluted basis in accordance with the provisions of
Financial Accounting Standards Board Statement No. 128,
Earnings per Share (SFAS
No. 128). 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

54



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

earnings of the Company. The reconciliation of
the basic and diluted earnings per share computations for the
years ended December 31, 2000, 2001 and 2002 are as follows:

|                                                        |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |       |  
|------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | ------ | ------ |  | --------- | ------ | ------ |  | ------ | ---- | --------- |  | -------- | ------ | --------- |  | ------ | ------ | ------ |  | - | ---- | ---- |  | - | ------- | ------- | - |  | ------ | ------ |  | - | ----- | ----- | -
|                                                        |                                                                                 |                                       |        |        |  |          
|                                                        |                                                                                 | 2000                                  |        | 2001   |  | 2002     
|                                                        |                                                                                 |                                       |        |        |  |          
|                                                        |                                                                                 | Net                                   |        |        |  | Per Share |        | Net    |  |        |      | Per Share |  |          |        | Per Share
|                                                        |                                                                                 | Income                                |        | Shares |  | Amount    |        | Income |  | Shares |      | Amount    |  | Net Loss |        | Shares    |  | Amount
|                                                        |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |       
|                                                        |                                                                                 |                                      
|                                                        |                                                                                 | (In thousands, except per share data)
|Basic EPS                                               |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |      
|Net income (loss) available to common
    shareholders: |                                                                                 | $                                     | 20,618 |        |  |           | 20,360 |        |  | $      | 1.01 |           |  | $        | 16,972 |           |  |        | 20,571 |        |  | $ | 0.83 |      |  | $ | (28,670 | )       |   |  | 20,902 |        |  | $ | (1.37 | )    
|                                                        |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |      
|Effect of Dilutive Securities                           |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |      
|                                                        | Stock option plans                                                              |                                       |        |        |  |           |        | 1,750  |  |        |      |           |  |          |        |           |  |        |        | 345    |  |   |      |      |  |   |         |         |   |  |        |       |  |   |       |       |  
|                                                        |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |      
|Dilutive EPS                                            |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |      
|                                                        | Net income (loss) available to common
    shareholders and assumed conversions: |                                       | $      | 20,618 |  |           |        | 22,110 |  |        | $    | 0.93      |  |          | $      | 16,972    |  |        |        | 20,916 |  |   | $    | 0.81 |  |   | $       | (28,670 | ) |  |        | 20,902 |  |   | $     | (1.37 | )
|                                                        |                                                                                 |                                       |        |        |  |           |        |        |  |        |      |           |  |          |        |           |  |        |        |        |  |   |      |      |  |   |         |         |   |  |        |        |  |   |       |      

Under SFAS No. 128, options that have an
anti-dilutive effect or that reduce the loss per share should be
excluded from the computation of diluted earnings. As a result,
options to purchase 0.1 million and 3.8 million shares
of Class A Common Stock outstanding during 2000 and 2001,
respectively, were not included in the computation of diluted
earnings per share because the effect would have been
anti-dilutive. In addition, outstanding options of
4.4 million in 2002 were excluded from above because their
inclusion would have reduced the loss per share amount.

(19)     Segment
Reporting

The Company has adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information (SFAS No. 131). 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 comprises the Chief Executive Officer and the
senior vice presidents of the Company. 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 (Design Services and Deployment Services) and Tower
Ownership and Management. Design Services provides engineering
and design services for cellular phone system operators,
personal communication system (PCS) operators and
other wireless communication systems providers. Deployment
Services provides program and construction management services
related to the build-out of wireless communication systems.

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.

55



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segments:

(In thousands)


|     |                                     |          |   |            |   |       |   |       |   |  |   |         |  
|---- | ----------------------------------- | -------- | - | ---------- | - | ----- | - | ----- | - |  | - | ------- | -
|     |                                     |          |   | Tower      |   |      
|     |                                     |          |   | Ownership  |   |      
|     |                                     |          |   | and        |   |      
|     |                                     | Services |   | Management |   | Total
|     |                                     |          |   |            |   |      
|2000 |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Net revenue from external customers |          | $ | 149,385    |   |       | $ | 1,008 |   |  | $ | 150,393 |  
|     | Intersegment revenues               |          |   |           |   |       |   |      |   |  |   |        |  
|     |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Total revenues                      |          | $ | 149,385    |   |       | $ | 1,008 |   |  | $ | 150,393 |  
|     |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Depreciation and amortization       |          |   | 1,812      |   |       |   | 265   |   |  |   | 2,077   |  
|     | Interest income                     |          |   | 277        |   |       |   |      |   |  |   | 277     |  
|     | Interest expense                    |          |   | 10         |   |       |   |      |   |  |   | 10      |  
|     | Income tax expense (benefit)        |          |   | 7,580      |   |       |   | 93    |   |  |   | 7,673   |  
|     | Income before taxes                 |          |   | 17,035     |   |       |   | 207   |   |  |   | 17,242  |  
|     | Segment assets                      |          |   | 60,017     |   |       |   | 1,390 |   |  |   | 61,407  |  
|     | Expenditures for property           |          |   | 2,645      |   |       |   | 96    |   |  |   | 2,741   |  
|2001 |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Net revenue from external customers |          | $ | 130,609    |   |       | $ |      |   |  | $ | 130,609 |  
|     | Intersegment revenues               |          |   |           |   |       |   |      |   |  |   |        |  
|     |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Total revenues                      |          | $ | 130,609    |   |       | $ |      |   |  | $ | 130,609 |  
|     |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Depreciation and amortization       |          |   | 1,808      |   |       |   |      |   |  |   | 1,808   |  
|     | Interest income                     |          |   | 318        |   |       |   |      |   |  |   | 318     |  
|     | Interest expense                    |          |   | 12         |   |       |   |      |   |  |   | 12      |  
|     | Income tax expense                  |          |   | 1,597      |   |       |   |      |   |  |   | 1,597   |  
|     | Income (loss) before taxes          |          |   | 4,050      |   |       |   | (14   | ) |  |   | 4,036   |  
|     | Segment assets                      |          |   | 51,248     |   |       |   | 149   |   |  |   | 51,397  |  
|     | Expenditures for property           |          |   | 2,134      |   |       |   | 13    |   |  |   | 2,147   |  
|2002 |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Net revenue from external customers |          | $ | 67,069     |   |       | $ |      |   |  | $ | 67,069  |  
|     | Intersegment revenues               |          |   |           |   |       |   |      |   |  |   |        |  
|     |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Total revenues                      |          |   | 67,069     |   |       |   |      |   |  |   | 67,069  |  
|     |                                     |          |   |            |   |       |   |       |   |  |   |        
|     | Depreciation and amortization       |          |   | 2,188      |   |       |   |      |   |  |   | 2,188   |  
|     | Interest income                     |          |   | 103        |   |       |   |      |   |  |   | 103     |  
|     | Interest expense                    |          |   | 15         |   |       |   |      |   |  |   | 15      |  
|     | Income tax expense                  |          |   | (4,152     | ) |       |   | 26    |   |  |   | (4,126  | )
|     | Loss before taxes                   |          |   | (15,740    | ) |       |   | 97    |   |  |   | (15,643 | )
|     | Segment assets                      |          |   | 46,965     |   |       |   |      |   |  |   | 46,965  |  
|     | Expenditures for property           |          |   | 2,756      |   |       |   |      |   |  |   | 2,756   |  

56



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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):

|                          |                                                 |                                 |         |         |        |      |         |         |        |   |        |        |        | 
|------------------------- | ----------------------------------------------- | ------------------------------- | ------- | ------- | ------ | ---- | ------- | ------- | ------ | - | ------ | ------ | ------ | 
|                          |                                                 | 2000                            |         | 2001    |        | 2002
|                          |                                                 |                                 |         |         |        |     
|Revenues                  |                                                 |                                 |         |         |        |      |         |         |        |   |        |       
|                          | Revenues for reportable segments                |                                 | $       | 150,393 |        |      | $       | 130,609 |        |   | $      | 67,069 |       
|                          | Eliminations                                    |                                 |         |        |        |      |         |        |        |   |        |       |       
|                          |                                                 |                                 |         |         |        |      |         |         |        |   |        |       
|                          | Total consolidated revenues                     |                                 | $       | 150,393 |        |      | $       | 130,609 |        |   | $      | 67,069 |       
|                          |                                                 |                                 |         |         |        |      |         |         |        |   |        |       
|Assets                    |                                                 |                                 |         |         |        |      |         |         |        |   |        |       
|                          | Total assets for reportable segments            |                                 | $       | 61,407  |        |      | $       | 51,397  |        |   | $      | 46,965 |       
|                          | Assets not attributable to reportable segments: |                                 |         |         |        |      |         |         |        |   |        |        |       
|                          |                                                 | Cash and cash equivalents       |         |         | 19,279 |      |         |         | 49,124 |   |        |        | 34,088 | 
|                          |                                                 | Short-term investments          |         |         | 19,038 |      |         |         | 484    |   |        |        | 514    | 
|                          |                                                 | Deferred and prepaid tax assets |         |         | 6,916  |      |         |         | 7,394  |   |        |        | 12,720 | 
|                          |                                                 | Property and equipment          |         |         | 2,778  |      |         |         | 2,854  |   |        |        | 1,568  | 
|                          |                                                 | Receivables                     |         |         |       |      |         |         |       |   |        |        |       | 
|                          |                                                 | Prepaids                        |         |         | 292    |      |         |         | 684    |   |        |        | 622    | 
|                          |                                                 | Other                           |         |         | 335    |      |         |         | 294    |   |        |        | 246    | 
|                          |                                                 |                                 |         |         |        |      |         |         |        |   |        |       
|Total consolidated assets |                                                 | $                               | 110,045 |         |        | $    | 112,231 |         |        | $ | 96,723 |       
|                          |                                                 |                                 |         |         |        |      |         |         |        |   |        |       

|                                                              |                                                             |      |        |        |   |      |        |        |   |   |         |         |  
|------------------------------------------------------------- | ----------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ------ | - | - | ------- | ------- | -
|                                                              |                                                             | 2000 |        | 2001   |   | 2002
|                                                              |                                                             |      |        |        |   |     
|Income (loss) before income taxes for reportable
    segments |                                                             | $    | 17,242 |        |   | $    | 4,036  |        |   | $ | (15,643 | )      
|                                                              | Gain on sale of tower portfolio and
    administration, net |      |        | 26,437 |   |      |        | 2,998  |   |   |         | 2,000   |  
|                                                              | Sale of investments and assets                              |      |        |       |   |      |        | 22,395 |   |   |         |        |  
|                                                              | Restructuring charge                                        |      |        |       |   |      |        |       |   |   |         | (13,522 | )
|                                                              | Impairment of investments                                   |      |        |       |   |      |        |       |   |   |         | (5,139  | )
|                                                              | Bad debt recoveries                                         |      |        | 1,012  |   |      |        | 7,492  |   |   |         | 1,589   |  
|                                                              | General corporate expenses                                  |      |        | (7,542 | ) |      |        | (8,908 | ) |   |         | (6,406  | )
|                                                              |                                                             |      |        |        |   |      |        |        |   |   |         |        
|Income (loss) from operations before income taxes             |                                                             | $    | 37,149 |        |   | $    | 28,013 |        |   | $ | (37,121 | )      
|                                                              |                                                             |      |        |        |   |      |        |        |   |   |         |        

|                        |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |        | 
|----------------------- | ----------------------------- | ------- | - | ------------ |  | ------------ | - | ------------ |  |  | - | - |  |  | - | ------ | 
|                        |                               |         |   | Unallocated  |  |              |   |             
|                        |                               | Segment |   | Corporate    |  |              |   | Consolidated
|Other Significant Items |                               | Total   |   | Expenditures |  | Eliminations |   | Total       
|                        |                               |         |   |              |  |              |   |             
|2000                    |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |       
|                        | Depreciation and amortization |         | $ | 2,077        |  |              | $ | 822          |  |  |   |  |  |  | $ | 2,899  | 
|                        | Interest income               |         |   | 277          |  |              |   | 1,674        |  |  |   |  |  |  |   | 1,951  | 
|                        | Interest expense              |         |   | 10           |  |              |   | 253          |  |  |   |  |  |  |   | 263    | 
|                        | Income taxes                  |         |   | 7,673        |  |              |   | 8,858        |  |  |   |  |  |  |   | 16,531 | 
|                        | Expenditures for property     |         |   | 2,741        |  |              |   | 1,129        |  |  |   |  |  |  |   | 3,870  | 
|2001                    |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |       
|                        | Depreciation and amortization |         | $ | 1,808        |  |              | $ | 1,204        |  |  | $ |  |  |  | $ | 3,012  | 
|                        | Interest income               |         |   | 318          |  |              |   | 1,581        |  |  |   |  |  |  |   | 1,899  | 
|                        | Interest expense              |         |   | 12           |  |              |   | 1            |  |  |   |  |  |  |   | 13     | 
|                        | Income taxes                  |         |   | 1,597        |  |              |   | 9,444        |  |  |   |  |  |  |   | 11,041 | 
|                        | Expenditures for property     |         |   | 2,147        |  |              |   | 1,230        |  |  |   |  |  |  |   | 3,377  | 

57



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                        |                               |         |   |              |   |              |   |              |   |  |   |   |  |  |   |        |  
|----------------------- | ----------------------------- | ------- | - | ------------ | - | ------------ | - | ------------ | - |  | - | - |  |  | - | ------ | -
|                        |                               |         |   | Unallocated  |   |              |   |             
|                        |                               | Segment |   | Corporate    |   |              |   | Consolidated
|Other Significant Items |                               | Total   |   | Expenditures |   | Eliminations |   | Total       
|                        |                               |         |   |              |   |              |   |             
|2002                    |                               |         |   |              |   |              |   |              |   |  |   |   |  |  |   |       
|                        | Depreciation and amortization |         | $ | 2,188        |   |              | $ | 696          |   |  | $ |  |  |  | $ | 2,884  |  
|                        | Interest income               |         |   | 103          |   |              |   | 737          |   |  |   |  |  |  |   | 840    |  
|                        | Interest expense              |         |   | 15           |   |              |   | 7            |   |  |   |  |  |  |   | 22     |  
|                        | Income taxes                  |         |   | (4,126       | ) |              |   | (4,325       | ) |  |   |  |  |  |   | (8,451 | )
|                        | Expenditures for property     |         |   | 2,756        |   |              |   | 98           |   |  |   |  |  |  |   | 2,854  |  

Information concerning services revenue is as
follows (in thousands):

|                           |  |      |         |      |  |      |         |  |  |   |        | 
|-------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------ | 
|                           |  | 2000 |         | 2001 |  | 2002
|                           |  |      |         |      |  |     
|Design and deployment      |  | $    | 142,566 |      |  | $    | 123,210 |  |  | $ | 63,695 | 
|Operations and maintenance |  |      | 1,655   |      |  |      | 2,056   |  |  |   | 1,089  | 
|Consulting                 |  |      | 5,164   |      |  |      | 5,343   |  |  |   | 2,285  | 
|Towers                     |  |      | 1,008   |      |  |      |        |  |  |   |       | 
|                           |  |      |         |      |  |      |         |  |  |   |        | 
|Total revenues             |  | $    | 150,393 |      |  | $    | 130,609 |  |  | $ | 67,069 | 
|                           |  |      |         |      |  |      |         |  |  |   |        | 

Information concerning principal geographic areas
was as follows (in thousands):

|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |       | 
|------------------------------------ | ------------------------ | -------- | ------- | -------- |  | -------- | ----- | -------- |  | -------- | ------- | -------- |  | - | ----- | ----- |  | - | ------ | ------ |  | - | ----- | ----- | 
|                                     |                          |          |         |          |  |         
|                                     |                          | 2000     |         | 2001     |  | 2002    
|                                     |                          |          |         |          |  |         
|                                     |                          |          |         | Net      |  |          |       | Net      |  |          |         | Net     
|                                     |                          | Revenues |         | Property |  | Revenues |       | Property |  | Revenues |         | Property
|                                     |                          |          |         |          |  |          |       |          |  |          |         |         
|Americas:                            |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|                                     | United States of America |          | $       | 106,781  |  |          | $     | 4,215    |  |          | $       | 100,204  |  |   | $     | 3,609 |  |   | $      | 28,812 |  |   | $     | 1,978 | 
|                                     | Other                    |          |         | 4,909    |  |          |       | 307      |  |          |         | 3,136    |  |   |       | 340   |  |   |        | 1,807  |  |   |       | 95    | 
|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|Total Americas                       |                          |          | 111,690 |          |  |          | 4,522 |          |  |          | 103,340 |          |  |   | 3,949 |       |  |   | 30,619 |        |  |   | 2,073 |      
|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|Europe, Middle East and Africa:      |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|                                     | United Kingdom           |          |         | 3,859    |  |          |       | 914      |  |          |         | 7,477    |  |   |       | 1,473 |  |   |        | 14,864 |  |   |       | 1,430 | 
|                                     | Netherlands              |          |         | 10,213   |  |          |       |         |  |          |         | 9,516    |  |   |       |      |  |   |        | 10,425 |  |   |       | 230   | 
|                                     | Italy                    |          |         | 2,275    |  |          |       |         |  |          |         | 937      |  |   |       | 103   |  |   |        | 5,686  |  |   |       | 1,215 | 
|                                     | Other                    |          |         | 19,568   |  |          |       | 202      |  |          |         | 5,631    |  |   |       | 205   |  |   |        | 4,056  |  |   |       | 18    | 
|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|Total Europe, Middle East and Africa |                          |          | 35,915  |          |  |          | 1,116 |          |  |          | 23,561  |          |  |   | 1,781 |       |  |   | 35,031 |        |  |   | 2,893 |      
|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|Asia-Pacific                         |                          |          | 2,788   |          |  |          |      |          |  |          | 3,708   |          |  |   |      |       |  |   | 1,419  |        |  |   | 44    |      
|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      
|Total revenues and net property      |                          | $        | 150,393 |          |  | $        | 5,638 |          |  | $        | 130,609 |          |  | $ | 5,730 |       |  | $ | 67,069 |        |  | $ | 5,010 |      
|                                     |                          |          |         |          |  |          |       |          |  |          |         |          |  |   |       |       |  |   |        |        |  |   |       |      

(20)     Quarterly
Data (Unaudited)

|                                  |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |       |  
|--------------------------------- | ------- | ---------------------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ | ---- |  | - | ------ | ----- | -
|                                  |         |                                         
|                                  |         | 2001                                    
|                                  |         |                                         
|                                  |         | 1st                                      |        | 2nd     |  | 3rd     |        | 4th    
|                                  |         | Quarter                                  |        | Quarter |  | Quarter |        | Quarter
|                                  |         |                                          |        |         |  |         |        |        
|                                  |         |                                         
|                                  |         | (In thousands, except per share amounts)
|Revenues                          |         | $                                        | 42,655 |         |  | $       | 29,532 |         |  | $ | 34,347 |      |  | $ | 24,075 |      
|Operating income (loss)           |         |                                          | 4,600  |         |  |         | 790    |         |  |   | 568    |      |  |   | (1,944 | )    
|Income (loss) before income taxes |         |                                          | 5,140  |         |  |         | 1,148  |         |  |   | 23,358 |      |  |   | (1,633 | )    
|Net income (loss)                 |         |                                          | 3,084  |         |  |         | 689    |         |  |   | 14,015 |      |  |   | (816   | )    
|Net income (loss) per share:      |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |      
|                                  | Basic   |                                          | $      | 0.15    |  |         | $      | 0.03    |  |   | $      | 0.68 |  |   | $      | (0.04 | )
|                                  |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |      
|                                  | Diluted |                                          | $      | 0.15    |  |         | $      | 0.03    |  |   | $      | 0.68 |  |   | $      | (0.04 | )
|                                  |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |      

58



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                         |         |                                          |        |         |   |         |         |         |   |   |        |       |   |   |        |       |  
|------------------------ | ------- | ---------------------------------------- | ------ | ------- | - | ------- | ------- | ------- | - | - | ------ | ----- | - | - | ------ | ----- | -
|                         |         |                                         
|                         |         | 2002                                    
|                         |         |                                         
|                         |         | 1st                                      |        | 2nd     |   | 3rd     |         | 4th    
|                         |         | Quarter                                  |        | Quarter |   | Quarter |         | Quarter
|                         |         |                                          |        |         |   |         |         |        
|                         |         |                                         
|                         |         | (In thousands, except per share amounts)
|Revenues                 |         | $                                        | 17,398 |         |   | $       | 12,219  |         |   | $ | 17,425 |       |   | $ | 20,027 |      
|Operating loss           |         |                                          | (6,963 | )       |   |         | (11,326 | )       |   |   | (8,501 | )     |   |   | (7,382 | )    
|Loss before income taxes |         |                                          | (6,659 | )       |   |         | (16,319 | )       |   |   | (8,116 | )     |   |   | (6,027 | )    
|Net loss                 |         |                                          | (5,061 | )       |   |         | (11,244 | )       |   |   | (7,016 | )     |   |   | (5,349 | )    
|Net loss per share:      |         |                                          |        |         |   |         |         |         |   |   |        |       |   |   |        |      
|                         | Basic   |                                          | $      | (0.24   | ) |         | $       | (0.54   | ) |   | $      | (0.34 | ) |   | $      | (0.26 | )
|                         |         |                                          |        |         |   |         |         |         |   |   |        |       |   |   |        |      
|                         | Diluted |                                          | $      | (0.24   | ) |         | $       | (0.54   | ) |   | $      | (0.34 | ) |   | $      | (0.26 | )
|                         |         |                                          |        |         |   |         |         |         |   |   |        |       |   |   |        |      

During the first quarter of 2001, the Company
received payment of $2.1 million, net of taxes withheld at
the source of $0.4 million, related to a recovery of bad
debt. (see note 8). The Company also recorded gains on its
tower sale of $1.6 million (see note 3).

During the second quarter of 2001, the Company
received payment of $5.0 million related to the
reorganization of Pocket Communications (see note 8). This
gain was offset by increased operating costs related to an
increase in estimated costs to complete a large fixed-price
contract in the Middle East of $2.2 million, and an
additional provision for expatriate employee reimbursed taxes of
$1.3 million. The Company also recorded gains on its tower
sale of $0.7 million (see note 3).

During the third quarter of 2001, the Company
sold all of its shares and pre-petition interest debt claims
against NextWave Telecom resulting in a gain of
$21.4 million. The Company also sold its interest in
Tecnosistemi resulting in a gain of $1.0 million during the
third quarter of 2001. (see note 10)

During the fourth quarter of 2001, the Company
incurred an operating loss as a result of increased cost to
complete the XM Satellite contract of $1.7 million and
reduced gross profit resulting from lower revenues. The Company
also recorded gains on its tower sale of $0.7 million (see
note 3).

During the second quarter of 2002, the Company
took an impairment charge for $5.1 million for its
investments in Mobilocity and PDN (see Note 9). The Company
took a restructuring charge in the same quarter for
$10.0 million related to the low utilization of
professional employees as well as for excess facility costs (see
note 7). There were gains of $2.0 million related to
the sale of the tower business (see note 3) and the
recovery of $1.6 million related to the settlement of a
claim (see note 8).

During the third quarter, the Company took a bad
debt charge of $3.1 million related to two large contracts.

During the fourth quarter, the Company increased
its restructuring charge by $3.5 million to provide for
additional excess facility costs (see note 7). The Company
recorded a recovery for excess provisions that were no longer
needed for operations in Egypt of $1.1 million (see
note 12).

59



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

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 Election of Directors 
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.

Item 14:     Controls
and Procedures

(a) Evaluation
of disclosure controls and procedures

Within 90 days prior to the date of this
report (the Evaluation Date), the Companys President and
Chief Executive Officer and Senior Vice President and Chief
Financial Officer, carried out an evaluation of the
effectiveness of the Companys disclosure controls
and procedures (as defined in the Securities Exchange Act
of 1934 Rules 13a-14(c) and 15(d)-14(c)). Based on that
evaluation, these officers have concluded that as of the
Evaluation Date, the Companys disclosure controls and
procedures were adequate and designed to ensure that material
information relating to the Company and the Companys
consolidated subsidiaries would be made known to them by others
within those entities.

(b) Changes
in internal controls

There were no significant changes in the
Companys internal controls or other factors that could
significantly affect the Companys disclosure controls and
procedures subsequent to the Evaluation Date.

PART IV

Item 15.     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.

60



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##### 





| |  |                                                                                                         
| |  | --------------------------------------------------------------------------------------------------------
| |  | Report of Independent Auditors.                                                                         
|
| |  | Consolidated Statements of Operations 
    Years Ended December 31, 2000, 2001, and 2002.              
|
| |  | Consolidated Balance Sheets as of
    December 31, 2001 and 2002.                                       
|
| |  | Consolidated Statements of Shareholders
    Equity  Years Ended December 31, 2000, 2001, and
    2002.
|
| |  | Consolidated Statements of Cash Flows 
    Years Ended December 31, 2000, 2001, and 2002.              
|
| |  | 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:

|        |      |  |  |                     |  |                                                                                                                                                                                                                                                      
|------- | ---- |  |  | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |                    
|No.     |      |  |  | Exhibit Description
|        |      |  |  |                    
|        | 3.1  |  |  |                    |  | Restated Certificate of Incorporation of the
    Company (incorporated by reference to Exhibit 3.1 to
    Amendment No. 2 to the Companys Registration
    Statement on Form S-1, Registration No. 333-6067,
    filed on September 20, 1996).      
|       
|        | 3.2  |  |  |                    |  | Amended and Restated Bylaws of the Company
    (incorporated by reference to Exhibit 3.2 to Amendment No.
    2 to the Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20, 1996).                    
|       
|        | 4.1  |  |  |                    |  | Form of Class A and Class B Common
    Stock certificates (incorporated by reference to
    Exhibit 4.1 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).     
|       
|        | 10.1 |  |  |                    |  | LCC International, Inc. 1996 Directors Stock
    Option Plan (incorporated by reference to Exhibit 10.13 to
    Amendment No. 2 to the Companys Registration
    Statement on Form S-1, Registration No. 333-6067,
    filed on September 20, 1996).
|       
|        | 10.2 |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated April 22, 1997
    (incorporated by reference to Exhibit 4.6 to the
    Companys Annual Report on Form 10-K filed on March
    30, 1999).                          
|       
|        | 10.3 |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated April 16, 1998
    (incorporated by reference to Exhibit 4.7 to the
    Companys Annual Report on Form 10-K filed on March
    30, 1999).                          
|       
|        | 10.4 |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated February 1, 2000
    (incorporated by reference to the Companys definitive
    proxy statement on Schedule 14A filed on April 24, 2000).                           
|       
|        | 10.5 |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated January 30, 2001
    (incorporated by reference to Exhibit 4.5 to the
    Companys Annual Report on Form 10-K filed on April 2,
    2002).                         
|       
|        | 10.6 |  |  |                    |  | Amended and Restated LCC International, Inc. 1996
    Employee Stock Option Plan, dated February 1, 2000
    (incorporated by reference to Exhibit 4.6 to the
    Companys Annual Report on Form 10-K filed on April 2,
    2002).                  

61



---



##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                   
|------- | ----- |  |  | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|       
|        | 10.7  |  |  |                    |  | LCC International, Inc. 1996 Employee Stock
    Purchase Plan, as amended May 25, 1999 (incorporated by
    reference to Exhibit 4.7 to the Companys Annual
    Report on Form 10-K filed on April 2, 2002).                                                                                                                                                     
|       
|        | 10.8  |  |  |                    |  | 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
    (incorporated by reference to Exhibit 10.44 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).
|       
|        | 10.9  |  |  |                    |  | Form of LCC International, Inc. Directors Stock
    Option Plan stock option agreement for Mark D. Ein (incorporated
    by reference to Exhibit 10.45 to Amendment No. 2 to
    the Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                               
|       
|        | 10.10 |  |  |                    |  | Form of LCC International, Inc. Directors Stock
    Option Plan stock option agreement for directors who will
    receive Class B Common Stock (incorporated by reference to
    Exhibit 10.35 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).                           
|       
|        | 10.11 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
    Stock Option Plan incentive stock option agreement (incorporated
    by reference to Exhibit 10.41 to Amendment No. 2 to
    the Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                                 
|       
|        | 10.12 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
    Stock Option Plan non-incentive stock option agreement
    (incorporated by reference to Exhibit 10.42 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                                             
|       
|        | 10.13 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
    Stock Option Plan, as amended, non-incentive stock option
    agreement for eligible persons who have executed grant letters
    on or after January 30, 2001 (incorporated by reference to
    Exhibit 10.26 to the Companys Annual Report on
    Form 10-K filed on April 2, 2001).                          
|       
|        | 10.14 |  |  |                    |  | Form of Stock Option Agreement between LCC
    International, Inc. and the Carlyle Option Designees.
    (incorporated by reference to Exhibit 10.40 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                                                 
|       
|       
|        | 10.15 |  |  |                    |  | Letter Agreement dated February 22, 1999,
    between LCC International, Inc. and Terri Feely
    (incorporated by reference to Exhibit 10.9 to the
    Companys Annual Report on Form 10-K filed on April 2,
    2001).                                                                                                                                         
|       
|        | 10.16 |  |  |                    |  | Letter Agreement dated May 26, 1999, between
    LCC International, Inc. and David Walker (incorporated by
    reference to Exhibit 10.10 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                                                                                                
|       
|        | 10.17 |  |  |                    |  | Letter Agreement dated May 31, 1996 between
    LCC International, Inc. and Michael McNelly (incorporated
    by reference to Exhibit 10.11 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                                                                                              
|       
|        | 10.18 |  |  |                    |  | Employee Agreement on Ideas, Inventions and
    Confidential Information between Michael S. McNelly and
    LCC International, Inc. dated July 20, 1998
    (incorporated by reference to Exhibit 10.41 to Amendment
    No. 1 to the Companys Annual Report on Form 10-K
    filed on December 20, 2001).                                                       
|       
|        | 10.19 |  |  |                    |  | Letter Agreement, dated December 12, 2002,
    between LCC International, Inc. and Graham Perkins                                                                                                                                                                                                                                                                 

62



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##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- |  |  | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|       
|        | 10.20 |  |  |                    |  | Letter Agreement, dated February 13, 2002
    between LCC International, Inc. and Vincent Gwiazdowski.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        | 10.21 |  |  |                    |  | Employment Agreement, dated May 24, 1999,
    between LCC International, Inc. and C. Thomas
    Faulders, III (incorporated by reference to Exhibit 10
    to the Companys Current Report on Form 8-K filed on
    May 27, 1999).                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10.22 |  |  |                    |  | Loan Agreement between C. Thomas
    Faulders, III, and LCC International, Inc. dated
    December 22, 1999 (incorporated by reference to
    Exhibit 10.42 to Amendment No. 1 to the Companys
    Annual Report on Form 10-K filed on December 20, 2001).                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10.23 |  |  |                    |  | Contract of Employment dated April 30, 2001
    between LCC UK Ltd. and Carlo Baravalle (incorporated in by
    reference to Exhibit 10.22 to the Companys Annual
    Report on Form 10-K filed on March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10.24 |  |  |                    |  | Letter dated January 11, 2001, from
    LCC International, Inc. to Susan Mayer (incorporated by
    reference to Exhibit 10.14 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10.25 |  |  |                    |  | Letter dated June 19, 2001, from
    LCC International, Inc. to Susan Ness (incorporated by
    reference to Exhibit 10.24 to the Companys Annual
    Report on Form 10-K filed on March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10.26 |  |  |                    |  | Form of Indemnity Agreement between
    LCC International, Inc. and the current and former officers
    and directors of LCC International, Inc. (incorporated by
    reference to Exhibit 10.32 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                                                                                                                                                                                                                                                        
|       
|        | 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. (incorporated by reference to
    Exhibit 10.30 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).
|       
|        | 10.28 |  |  |                    |  | Registration Rights Agreement dated July 25,
    1996 among LCC International, Inc.,
    RF Investors, L.L.C. and MCI Telecommunications
    Corporation (incorporated by reference to Exhibit 10.31 to
    Amendment No. 1 to the Companys Registration
    Statement on Form S-1, Registration No. 333-6067,
    filed on August 16, 1996).                                                                                                                                                                                                                                                                                       
|       
|        | 10.29 |  |  |                    |  | Overhead and Administrative Services Agreement
    dated August 27, 1996 between LCC International, Inc.
    and Telcom Ventures, L.L.C. (incorporated by reference to
    Exhibit 10.33 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                                    
|       
|        | 10.30 |  |  |                    |  | Agreement of Merger dated September 15, 1996
    between LCC, L.L.C. and LCC International, Inc.
    (incorporated by reference to Exhibit 10.34 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                                                                                                                                                                                                                                                                                                                        
|       
|        | 10.31 |  |  |                    |  | Form of Promissory Note by Telcom
    Ventures, L.L.C. to LCC International, Inc.
    (incorporated by reference to Exhibit 10.39 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10.32 |  |  |                    |  | First Amendment to Promissory Note by Telcom
    Ventures, L.L.C. to LCC International, Inc.
    (incorporated by reference to Exhibit 10.32 to the
    Companys Annual Report on Form 10-K filed on
    March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                           

63



---



##### 



|        |        |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|------- | ------ |  |  | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  |  |                    
|No.     |        |  |  | Exhibit Description
|        |        |  |  |                    
|       
|        | 10.33  |  |  |                    |  | Amended and Restated Shareholders Rights
    Agreement dated February, 1996 between NextWave
    Telecom Inc. and LCC, L.L.C. (incorporated by reference to
    Exhibit 10.16 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on August 16, 1996).                                                 
|       
|        | 10.34  |  |  |                    |  | Subscription Agreement dated March 12, 1996
    between NextWave Telecom, Inc. and LCC, L.L.C. (incorporated by
    reference to Exhibit 10.18 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                                          
|       
|        | 10.35  |  |  |                    |  | Convertible Loan and Investment Agreement dated
    March 20, 1996 by and between LCC, L.L.C. and
    DCR Communications, Inc. (incorporated by reference to
    Exhibit 10.21 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on August 16, 1996).                                                 
|       
|        | 10.36  |  |  |                    |  | 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
    (incorporated by reference to Exhibit 10.23 to Amendment
    No. 1 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    August 16, 1996).
|       
|        | 10.37  |  |  |                    |  | 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
    (incorporated by reference to Exhibit 10.24 to Amendment
    No. 1 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    August 16, 1996).
|       
|        | 10.38 |  |  |                    |  | Contract for Engineering and Construction of
    Terrestrial Repeater Network System between XM Satellite
    Radio Inc. and LCC International, Inc. dated
    August 18, 1999 (incorporated by reference to
    Exhibit 10 to the Companys Quarterly Report on
    Form 10-Q filed on November 12, 1999).                                                          
|       
|        | 10.39 |  |  |                    |  | Amendment No. 6 to the Terrestrial Repeater
    Network System Contract between XM Satellite Radio Inc. and
    LCC International, Inc. dated January 8, 2001
    (incorporated by reference to Exhibit 10.34 to the
    Companys Annual Report on Form 10-K filed on
    April 2, 2001).                                                                           
|       
|        | 10.40  |  |  |                    |  | Ericsson Radio Systems AB Asset Purchase
    Agreement dated August 25, 1999 (incorporated by reference
    to Exhibit 2.1 to the Companys Current Report on
    Form 8-K filed on November 8, 1999).                                                                                                                                                               
|       
|        | 10.41  |  |  |                    |  | Letter, dated October 22, 1999, among
    LCC International, Inc., LCC Europe AS and
    Ericsson Radio Systems AB (incorporated by reference to
    Exhibit 2.2 to the Companys Current Report on
    Form 8-K filed on November 8, 1999).                                                                                                                         
|       
|        | 10.42  |  |  |                    |  | Master Antenna Site Lease between Pinnacle Towers
    Inc. and Microcell Management, Inc. dated February 24, 2000
    (incorporated by reference to Exhibit 2.3 to the
    Companys Current Report on Form 8-K filed on
    March 20, 2000).                                                                                                                        
|       
|        | 10.43  |  |  |                    |  | Settlement and Release between
    LCC International, Inc. and minority shareholders of
    Microcell Management Inc. dated February 15, 2000
    (incorporated by reference to Exhibit 10.40 to Amendment
    No. 1 to the Companys Annual Report on Form 10-K
    filed on December 20, 2001).                                                                    
|       
|        | 21     |  |  |                    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                         
|       
|        | 23.1   |  |  |                    |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 99.1   |  |  |                    |  | Written Statement of Chief Executive Officer
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                          

64



---



##### 



|        |      |  |  |                     |  |                                                                                                            
|------- | ---- |  |  | ------------------- |  | -----------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |                    
|No.     |      |  |  | Exhibit Description
|        |      |  |  |                    
|       
|        | 99.2 |  |  |                    |  | Written Statement of Chief Financial Officer
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|       
|        | 99.3 |  |  |                    |  | LCC International, Inc. Corporate Standards
    of Conduct.                                                



---

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

(b) Reports on Form 8-K.

On November 14, 2002, the Company filed a
Current Report on Form 8-K, which reported that on
November 12, 2002, the Company issued a press release
announcing its financial results for the third quarter of 2002.

On December 23, 2002, the Company filed a
Current Report on Form 8-K, which reported that on
December 23, 2002, the Company issued a press release
announcing that its 51%-owned subsidiary in the Netherlands,
Detron LCC Network Services, B.V. (Detron-LCC),
had entered into two agreements with Ericsson Telecommunicatie
B.V. (Ericsson) pursuant to which
Detron-LCC had been engaged by Ericsson to outsource
certain network rollout, site acquisition and field maintenance
services in the Benelux countries, i.e., the Netherlands,
Belgium and Luxemburg.

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

(d) None.

65



---



##### 



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.



| |                        
| | -----------------------
| | LCC INTERNATIONAL, INC.



| |     |                            
| | --- | ---------------------------
| | By: | /s/ C. THOMAS FAULDERS, III

| | 
| | 
| | 



| |                                     
| | ------------------------------------
| | C. Thomas Faulders, III             
| | Chairman and Chief Executive Officer
|
| | Date: March 28, 2003                

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.

|                                                   |  |                                                                                                                                     |  |      |                | 
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------------- | 
|Signatures                                         |  | Title                                                                                                                               |  | Date
|                                                   |  |                                                                                                                                     |  |     
|                                                  
|/s/ C. THOMAS FAULDERS, IIIC. Thomas Faulders, III |  | Chairman of the Board of Directors and Chief
    Executive Officer (Principal Executive Officer)                                    |  |      | March 28, 2003 | 
|                                                  
|/s/ GRAHAM B. PERKINSGraham B. Perkins             |  | Senior Vice President, Chief Financial Officer
    and Treasurer (Principal Financial Officer and Principal
    Accounting Officer) |  |      | March 28, 2003 | 
|                                                  
|/s/ MARK D. EINMark D. Ein                         |  | Director                                                                                                                            |  |      | March 28, 2003 | 
|                                                  
|/s/ STEVEN GILBERTSteven Gilbert                   |  | Director                                                                                                                            |  |      | March 28, 2003 | 
|                                                  
|/s/ SUSAN MAYERSusan Mayer                         |  | Director                                                                                                                            |  |      | March 28, 2003 | 
|                                                  
|/s/ SUSAN NESSSusan Ness                           |  | Director                                                                                                                            |  |      | March 25, 2003 | 
|                                                  
|/s/ NEERA SINGHNeera Singh                         |  | Director                                                                                                                            |  |      | March 28, 2003 | 
|                                                  
|/s/ RAJENDRA SINGHRajendra Singh                   |  | Director                                                                                                                            |  |      | March 28, 2003 | 

66



---



##### 



CERTIFICATIONS

I, C. Thomas Faulders, III, certify that:

1. I have reviewed this annual report on
Form 10-K of LCC International, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officer and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                                     
| | ------------------------------------
| | /s/ C. THOMAS FAULDERS, III         
| | C. Thomas Faulders, III             
| | Chairman and Chief Executive Officer

Date: March 28, 2003

67



---



##### 



I, Graham B. Perkins, certify that:

1. I have reviewed this annual report on
Form 10-K of LCC International, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officer and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                                                                       
| | ----------------------------------------------------------------------
| | /s/ GRAHAM B. PERKINS                                                 
| | Graham B. Perkins                                                     
| | Senior Vice President, Chief Financial Officer
    
     and Treasurer

Date: March 28, 2003

68



---



##### 



SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)


|                             |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |       | 
|---------------------------- | ------------------------------- | ------------------- |  | ------------------ |  | -------------- |  | ------------- | - | ------------- |  | --- |  |  |  | ----- |  |  |  | ----- | 
|                             |                                 |                     |  |                    |  |                |  |              
|                             |                                 |                     |  | 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
|                             |                                 |                     |  |                    |  |                |  |               |   |              
|Year ended December 31, 2000 |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |      
|                             | Allowance for doubtful accounts |                     |  | 7,860              |  |                |  | (306          | ) |               |  | 81  |  |  |  | 5,806 |  |  |  | 1,829 | 
|Year ended December 31, 2001 |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |      
|                             | Allowance for doubtful accounts |                     |  | 1,829              |  |                |  | 2,123         |   |               |  | 316 |  |  |  | 2,220 |  |  |  | 2,048 | 
|Year ended December 31, 2002 |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |      
|                             | Allowance for doubtful accounts |                     |  | 2,048              |  |                |  | 4,317         |   |               |  | 724 |  |  |  | 3,967 |  |  |  | 3,122 | 




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

69



---



##### 



EXHIBIT INDEX

|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                   
|------- | ----- |  |  | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 3.1   |  |  |                    |  | Restated Certificate of Incorporation of the
    Company (incorporated by reference to Exhibit 3.1 to
    Amendment No. 2 to the Companys Registration
    Statement on Form S-1, Registration No. 333-6067,
    filed on September 20, 1996).                                                                                                                   
|        | 3.2   |  |  |                    |  | Amended and Restated Bylaws of the Company
    (incorporated by reference to Exhibit 3.2 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                                                                                                             
|        | 4.1   |  |  |                    |  | Form of Class A and Class B Common
    Stock certificates (incorporated by reference to
    Exhibit 4.1 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).                                                                                                                  
|        | 10.1  |  |  |                    |  | LCC International, Inc. 1996 Directors Stock
    Option Plan (incorporated by reference to Exhibit 10.13 to
    Amendment No. 2 to the Companys Registration
    Statement on Form S-1, Registration No. 333-6067,
    filed on September 20, 1996).                                                                                                             
|        | 10.2  |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated April 22, 1997
    (incorporated by reference to Exhibit 4.6 to the
    Companys Annual Report on Form 10-K filed on
    March 30, 1999).                                                                                                                                       
|        | 10.3  |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated April 16, 1998
    (incorporated by reference to Exhibit 4.7 to the
    Companys Annual Report on Form 10-K filed on
    March 30, 1999).                                                                                                                                       
|        | 10.4  |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated February 1, 2000
    (incorporated by reference to the Companys definitive
    proxy statement on Schedule 14A filed on April 24,
    2000).                                                                                                                                    
|        | 10.5  |  |  |                    |  | Amendment to LCC International, Inc. 1996
    Directors Stock Option Plan, dated January 30, 2001
    (incorporated by reference to Exhibit 4.5 to the
    Companys Annual Report on Form 10-K filed on
    April 2, 2002).                                                                                                                                      
|        | 10.6  |  |  |                    |  | Amended and Restated LCC International, Inc. 1996
    Employee Stock Option Plan, dated February 1, 2000
    (incorporated by reference to Exhibit 4.6 to the
    Companys Annual Report on Form 10-K filed on
    April 2, 2002).                                                                                                                               
|        | 10.7  |  |  |                    |  | LCC International, Inc. 1996 Employee Stock
    Purchase Plan, as amended May 25, 1999 (incorporated by
    reference to Exhibit 4.7 to the Companys Annual
    Report on Form 10-K filed on April 2, 2002).                                                                                                                                                     
|        | 10.8  |  |  |                    |  | 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
    (incorporated by reference to Exhibit 10.44 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).
|        | 10.9  |  |  |                    |  | Form of LCC International, Inc. Directors Stock
    Option Plan stock option agreement for Mark D. Ein (incorporated
    by reference to Exhibit 10.45 to Amendment No. 2 to
    the Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                               
|        | 10.10 |  |  |                    |  | Form of LCC International, Inc. Directors Stock
    Option Plan stock option agreement for directors who will
    receive Class B Common Stock (incorporated by reference to
    Exhibit 10.35 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).                           

70



---



##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                         
|------- | ----- |  |  | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 10.11 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
    Stock Option Plan incentive stock option agreement (incorporated
    by reference to Exhibit 10.41 to Amendment No. 2 to
    the Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                       
|        | 10.12 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
    Stock Option Plan non-incentive stock option agreement
    (incorporated by reference to Exhibit 10.42 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                   
|        | 10.13 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
    Stock Option Plan, as amended, non-incentive stock option
    agreement for eligible persons who have executed grant letters
    on or after January 30, 2001 (incorporated by reference to
    Exhibit 10.26 to the Companys Annual Report on
    Form 10-K filed on April 2, 2001).
|        | 10.14 |  |  |                    |  | Form of Stock Option Agreement between LCC
    International, Inc. and the Carlyle Option Designees
    (incorporated by reference to Exhibit 10.40 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    September 20, 1996).                                        
|        | 10.15 |  |  |                    |  | Letter Agreement dated February 22, 1999,
    between LCC International, Inc. and Terri Feely (incorporated by
    reference to Exhibit 10.9 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                                                                   
|        | 10.16 |  |  |                    |  | Letter Agreement dated May 26, 1999, between
    LCC International, Inc. and David Walker (incorporated by
    reference to Exhibit 10.10 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                                                                      
|        | 10.17 |  |  |                    |  | Letter Agreement dated May 31, 1996 between
    LCC International, Inc. and Michael McNelly (incorporated by
    reference to Exhibit 10.11 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                                                                    
|        | 10.18 |  |  |                    |  | Employee Agreement on Ideas, Inventions and
    Confidential Information between Michael S. McNelly and LCC
    International, Inc. dated July 20, 1998 (incorporated by
    reference to Exhibit 10.41 to Amendment No. 1 to the
    Companys Annual Report on Form 10-K filed on
    December 20, 2001).                             
|        | 10.19 |  |  |                    |  | Letter Agreement, dated December 12, 2001,
    between LCC International, Inc. and Graham Perkins                                                                                                                                                                                                                                       
|        | 10.20 |  |  |                    |  | Letter Agreement, dated February 13, 2002,
    between LCC International, Inc. and Vincent Gwiazdowski.                                                                                                                                                                                                                                 
|        | 10.21 |  |  |                    |  | Employment Agreement, dated May 24, 1999,
    between LCC International, Inc. and C. Thomas Faulders, III
    (incorporated by reference to Exhibit 10 to the
    Companys Current Report on Form 8-K filed on
    May 27, 1999).                                                                                                      
|        | 10.22 |  |  |                    |  | Loan Agreement between C. Thomas Faulders, III,
    and LCC International, Inc. dated December 22, 1999
    (incorporated by reference to Exhibit 10.42 to Amendment
    No. 1 to the Companys Annual Report on Form 10-K
    filed on December 20, 2001).                                                                             
|        | 10.23 |  |  |                    |  | Contract of Employment dated April 30, 2001
    between LCC UK Ltd. and Carlo Baravalle (incorporated by
    reference to Exhibit 10.22 to the Companys Annual
    Report on Form 10-K filed on March 28, 2002).                                                                                                                       
|        | 10.24 |  |  |                    |  | Letter dated January 11, 2001, from LCC
    International, Inc. to Susan Mayer (incorporated by reference to
    Exhibit 10.14 to the Companys Annual Report on
    Form 10-K filed on April 2, 2001).                                                                                                                                 

71



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##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ----- |  |  | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 10.25 |  |  |                    |  | Letter dated June 19, 2001, from LCC
    International, Inc. to Susan Ness. (incorporated by reference to
    Exhibit 10.24 to the Companys Annual Report on
    Form 10-K filed on March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.26 |  |  |                    |  | Form of Indemnity Agreement between LCC
    International, Inc. and the current and former officers and
    directors of LCC International, Inc. (incorporated by reference
    to Exhibit 10.32 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                                                                                                                                                                                                                                                   
|        | 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. (incorporated by reference to
    Exhibit 10.30 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).
|        | 10.28 |  |  |                    |  | Registration Rights Agreement dated July 25,
    1996 among LCC International, Inc., RF Investors, L.L.C. and MCI
    Telecommunications Corporation (incorporated by reference to
    Exhibit 10.31 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                                                                      
|        | 10.29 |  |  |                    |  | Overhead and Administrative Services Agreement
    dated August 27, 1996 between LCC International, Inc. and
    Telcom Ventures, L.L.C. (incorporated by reference to
    Exhibit 10.33 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                               
|        | 10.30 |  |  |                    |  | Agreement of Merger dated September 15, 1996
    between LCC, L.L.C. and LCC International, Inc. (incorporated by
    reference to Exhibit 10.34 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                                                                                                                                                                                                                                                                                                   
|        | 10.31 |  |  |                    |  | Form of Promissory Note by Telcom Ventures,
    L.L.C. to LCC International, Inc. (incorporated by reference to
    Exhibit 10.39 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                                                                                      
|        | 10.32 |  |  |                    |  | First Amendment to Promissory Note by Telcom
    Ventures, L.L.C. to LCC International, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.33 |  |  |                    |  | Amended and Restated Shareholders Rights
    Agreement dated February, 1996 between NextWave Telecom Inc. and
    LCC, L.L.C. (incorporated by reference to Exhibit 10.16 to
    Amendment No. 1 to the Companys Registration
    Statement on Form S-1, Registration No. 333-6067,
    filed on August 16, 1996).                                                                                                                                                                                                                                                                                                            
|        | 10.34 |  |  |                    |  | Subscription Agreement dated March 12, 1996
    between NextWave Telecom, Inc. and LCC, L.L.C. (incorporated by
    reference to Exhibit 10.18 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-6067, filed on September 20,
    1996).                                                                                                                                                                                                                                                                                                                                     
|        | 10.35 |  |  |                    |  | Convertible Loan and Investment Agreement dated
    March 20, 1996 by and between LCC, L.L.C. and DCR
    Communications, Inc. (incorporated by reference to
    Exhibit 10.21 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1, Registration
    No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                                                                                            
|        | 10.36 |  |  |                    |  | 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
    (incorporated by reference to Exhibit 10.23 to Amendment
    No. 1 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    August 16, 1996).                                                                                                                                                                                                                                                           

72



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##### 



|        |        |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|------- | ------ |  |  | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  |  |                    
|No.     |        |  |  | Exhibit Description
|        |        |  |  |                    
|        | 10.37  |  |  |                    |  | 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
    (incorporated by reference to Exhibit 10.24 to Amendment
    No. 1 to the Companys Registration Statement on
    Form S-1, Registration No. 333-6067, filed on
    August 16, 1996).
|        | 10.38 |  |  |                    |  | Contract for Engineering and Construction of
    Terrestrial Repeater Network System between XM Satellite Radio
    Inc. and LCC International, Inc. dated August 18, 1999
    (incorporated by reference to Exhibit 10 to the
    Companys Quarterly Report on Form 10-Q filed on
    November 12, 1999).                                                          
|        | 10.39 |  |  |                    |  | Amendment No. 6 to the Terrestrial Repeater
    Network System Contract between XM Satellite Radio Inc. and LCC
    International, Inc. dated January 8, 2001 (incorporated by
    reference to Exhibit 10.34 to the Companys Annual
    Report on Form 10-K filed on April 2, 2001).                                                                               
|        | 10.40  |  |  |                    |  | Ericsson Radio Systems AB Asset Purchase
    Agreement dated August 25, 1999 (incorporated by reference
    to Exhibit 2.1 to the Companys Current Report on
    Form 8-K filed on November 8, 1999).                                                                                                                                                               
|        | 10.41  |  |  |                    |  | Letter, dated October 22, 1999, among LCC
    International, Inc., LCC Europe AS and Ericsson Radio Systems AB
    (incorporated by reference to Exhibit 2.2 to the
    Companys Current Report on Form 8-K filed on
    November 8, 1999).                                                                                                                         
|        | 10.42  |  |  |                    |  | Master Antenna Site Lease between Pinnacle Towers
    Inc. and Microcell Management, Inc. dated February 24, 2000
    (incorporated by reference to Exhibit 2.3 to the
    Companys Current Report on Form 8-K filed on
    March 20, 2000).                                                                                                                        
|        | 10.43  |  |  |                    |  | Settlement and Release between LCC International,
    Inc. and minority shareholders of Microcell Management Inc.
    dated February 15, 2000 (incorporated by reference to
    Exhibit 10.40 to Amendment No. 1 to the Companys
    Annual Report on Form 10-K filed on December 20, 2001).                                                                        
|        | 21     |  |  |                    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                         
|        | 23.1   |  |  |                    |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                 
|        | 99.1   |  |  |                    |  | Written Statement of Chief Executive Officer
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                          
|        | 99.2   |  |  |                    |  | Written Statement of Chief Financial Officer
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                          
|        | 99.3   |  |  |                    |  | LCC International, Inc. Corporate Standards of
    Conduct.                                                                                                                                                                                                                                                                                                          



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

73