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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-K

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2003                                             
|          
|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)                    

Registrants Telephone Number, Including
Area Code:

(703) 873-2000

Securities registered pursuant to
Section 12(b) of the Act:

Not Applicable

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

Class A Common Stock, par value $.01 per
share

(Title of Class)


Indicate by check mark whether the
registrant:(1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past
90 days.     Yes 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 30, 2003, the
aggregate market value of the common stock held by
non-affiliates of the registrant is $23,698,543.*

As of March 24, 2004, the registrant had
outstanding 19,792,194 shares of class A common stock, par value
$.01 per share, and 4,537,577 shares of class B common stock,
par value $.01 per share.

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 Stockholders to be held on
May 26, 2004 (the Proxy Statement) are
incorporated by reference into Part III,
Items 10  14 of this Form 10-K.






|  |                                                                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Solely for purposes of this calculation, all
    executive officers and directors of the registrant and all
    shareholders reporting beneficial ownership of more than 5% of
    the registrants class A common stock are assumed to be
    affiliates.



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TABLE OF CONTENTS

|         |  |                                                                                                                      |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                                                      |  | Page
|         |  |                                                                                                                      |  |     
|PART I  
|Item 1.  |  | Business                                                                                                             |  |      | 1  | 
|Item 2.  |  | Properties                                                                                                           |  |      | 20 | 
|Item 3.  |  | Legal Proceedings                                                                                                    |  |      | 21 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 21 | 
|        
|PART II 
|Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 22 | 
|Item 6.  |  | Selected Financial Data                                                                                              |  |      | 23 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                            |  |      | 24 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                       |  |      | 35 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                                                          |  |      | 37 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure                             |  |      | 65 | 
|Item 9A. |  | Controls and Procedures                                                                                              |  |      | 65 | 
|        
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                                                   |  |      | 65 | 
|Item 11. |  | Executive Compensation                                                                                               |  |      | 65 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters                   |  |      | 65 | 
|Item 13. |  | Certain Relationships and Related Transactions                                                                       |  |      | 65 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                               |  |      | 65 | 
|        
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                                                 |  |      | 66 | 



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This Annual Report on Form 10-K contains
certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We
intend our forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements in these
sections. These 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.
Our 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

LCC International, Inc., a Delaware corporation,
was formed in 1983. Unless the context indicates otherwise,
references in this Form 10-K to the company,
our, we, or us are to LCC
International, Inc.

We are an independent provider of integrated
end-to-end solutions for wireless voice and data communications
networks with offerings ranging from high level technical
consulting, to system design and turnkey deployment, to ongoing
operations and maintenance services. We have been successful on
occasion in using 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 us to secure
ongoing operations and maintenance projects. Providing ongoing
operations and maintenance services also positions us well for
additional opportunities as new technologies continue to be
developed and wireless service providers must either upgrade
their existing networks or deploy new networks to utilize the
latest available technologies.

Since our inception, we have delivered wireless
network solution services to more than 350 customers in over 50
countries. Customers outside of the United States accounted for
57.0% and 51.0% of our revenues for the years ended
December 31, 2002 and 2003, respectively.

Industry Background



| |                                     
| | ------------------------------------
| | Wireless Telecommunications Networks

Wireless networks are telecommunications 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
operations 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 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 telecommunications equipment, including radio base
stations, antennae 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.

1



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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.
Operations and maintenance 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 service providers 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 (or 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 operations and
maintenance phases of a new cycle in the life of an existing or
new network.



| |                                                                     
| | --------------------------------------------------------------------
| | Growth and Evolution of the Wireless
    Telecommunications 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 3G to
enable wireless networks to deliver enhanced data capabilities.
Examples of wireless data services include e-mail, messaging
services, music on-demand, m-banking, locations-based services
and interactive games.



| |                                          
| | -----------------------------------------
| | Key Drivers of Change in Our
    Business

Despite some estimates that 2003 capital
expenditures by United States wireless service providers would
be lower than expenditures for 2002, we observed an increase in
spending in the areas of network design, deployment and
operations and maintenance by several wireless service
providers. Historically, the key drivers of change in our
business have been: (i) the issuance of new or additional
licenses to wireless service providers; (ii) the
introduction of new services or technologies; (iii) the
increases in the number of subscribers served by wireless
service providers, the increase in usage by those subscribers
and the scarcity of wireless spectrum; and (iv) the
increasing complexity of wireless systems in operation. Each of
these key drivers is discussed below.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The issuance of new or additional licenses to
    wireless service providers.After
    receiving new or additional licenses necessary to build out
    their wireless systems, wireless service providers must make
    decisions about what type of technology and equipment will be
    used, where it will be located and how it will be configured. In
    addition, detailed site location designs must be prepared and
    radio frequency engineers must review interference to or from
    co-located antennae. Construction and equipment installation
    then must be performed and professional technicians must install
    and commission the new radio equipment, test and integrate it
    with existing networks and tune the components to optimize
    performance. Recently we have seen increased spending by
    wireless service providers as a result of license swaps by
    providers seeking to maximize spectrum use and increase
    coverage. For example, after U.S. Cellular received spectrum
    licenses from AT&T Wireless in August 2003, U.S. Cellular
    engaged us to provide turnkey design and deployment services for
    its wireless networks in several cities covered by these
    licenses. This project will involve the development of a design
    by our radio frequency, or RF, engineers that meets U.S.
    Cellulars requirements, the acquisition of rights to
    existing wireless sites or the development of new sites to match
    the design, the preparation of these sites as necessary to
    receive U.S. Cellulars radio equipment, and the
    installation, powering and testing of the equipment to ensure
    that it meets U.S. Cellulars expectations.
|
| |  | The introduction of new services or
    technologies.Although wireless
    service providers traditionally have relied upon their internal
    engineering workforces to address a significant portion of their
    wireless                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

2



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##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | network needs, the rapid introduction of new
    services or technologies in the wireless market and the need to
    reduce operating costs in many cases has resulted in wireless
    service providers and equipment vendors focusing on their core
    competencies and, as a result, outsourcing an increasing portion
    of their network services. Recently, several wireless service
    providers have upgraded or have begun upgrading their networks
    to reduce the rate at which customers deactivate their wireless
    services and to accommodate two recently introduced services:
    (i) push-to-talk, which allows wireless callers to
    instantly connect directly with other wireless callers using the
    same network simply by pressing a button on their handset
    (similar to a two-way radio); and (ii) multimedia
    messaging, which allows wireless users to send and receive
    messages with a combination of media elements such as text,
    image, sound and video. In addition, in the United States, the
    Federal Communications Commission, or FCC, recently began
    requiring wireless service providers to provide wireless number
    portability to customers, which makes it easier for consumers to
    switch wireless service providers by giving consumers the
    ability to do so without changing their phone numbers. Wireless
    number portability increases the complexity of call processing,
    number administration, service assurance and network operations.
    We believe that nearly every U.S.-based wireless service
    provider is, or will be, upgrading its network in order to
    mitigate the potential for customer termination or churn as a
    result of the implementation of number portability. This
    involves providing both additional network capacity and expanded
    geographic coverage to address wireless customers
    perceptions of network quality. We are currently providing
    design, operations and maintenance and deployment services for a
    number of wireless service providers in preparation for the
    implementation of number portability.
|
| |  | The increases in the number of wireless
    subscribers, the increase in usage by those subscribers, and the
    scarcity of wireless spectrum.The
    increases in the number of subscribers served by wireless
    service providers, the increase in usage by those subscribers,
    and the scarcity of wireless spectrum require wireless service
    providers to expand and optimize system coverage and capacity to
    maintain network quality. The wireless system also must be
    continually updated and optimized to address changes in traffic
    patterns and interference from neighboring or competing networks
    or other radio sources.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The increasing complexity of wireless systems.As new technologies are developed,
    wireless service providers must determine whether to upgrade
    their existing networks or deploy new networks utilizing the
    latest available technologies in order to maintain their market
    share. For example, overlaying new technologies such as 2.5G and
    3G with an existing network or deploying a new network requires
    wireless service providers to reengage in the strategic
    planning, design, deployment, expansion, and operations and
    maintenance phases of a new cycle in the life of an existing or
    new network. We believe the resurgence in spending in 2003 by
    several wireless service providers is the result of, among other
    things, wireless service providers gradually upgrading their
    networks to support enhanced services and/or 3G technologies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



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

As a result of the drivers of change in our
business described above, we believe that wireless service
providers are seeking to outsource an increasing portion of
their wireless network needs and are engaging professional
service firms that:



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

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The LCC Solution

We help wireless service providers around the
world address 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, we believe that we distinguish ourselves
through several competitive advantages:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ability to deliver turnkey solutions.Our ability to provide the full range
    of design, deployment, consulting and operations and maintenance
    services for wireless networks, which we refer to as end-to-end
    or turnkey services, enables our wireless customers to engage us
    as a single responsible party accountable for delivering and
    managing its wireless network under a single contract. We
    coordinate our use of resources for each phase of the project
    from planning to design and deployment to operations and
    maintenance of the wireless network, enabling us to reduce the
    time and cost of our services. In order to supplement such
    services, we have established a presence in Algeria, Brazil,
    China, Greece, Italy, Spain, The Netherlands and the United
    Kingdom. We provide our customers with a primary point of
    accountability and reduce the inefficiencies associated with
    coordinating multiple subcontractors to enable projects to be
    transitioned from discipline to discipline in an efficient
    manner.
|
| |  | Expertise and experience with all major
    wireless technologies, system protocols and equipment vendors.We have experience working with all
    major wireless access technologies, including second generation,
    or 2G, 2.5G and 3G digital system protocols and their respective
    migration paths, including: (i) Global System for Mobile
    Communications (GSM); (ii) Time Division Multiple Access
    (TDMA); (iii) Code Division Multiple Access (CDMA);
    (iv) Integrated Dispatch Enhanced Network (iDEN); (v)
    broadbands Local Multipoint Distribution System (LMDS),
    Multichannel Multipoint Distribution Service (MMDS), 802.11x(Wi-Fi) and 802.16 (WiMax) technologies;
    (vi) Europes equivalent to iDEN referred to as Tetra;
    and (vii) core network technologies.                                                                                                                                                                                                                                                                                        

We are actively engaged in supporting the
development of new and emerging technologies and standards in
the wireless telecommunications industry through participation
in industry panels and industry association forums and through
independent research. We have worked with the equipment made by
all major equipment manufacturers. Our Wireless Institute is an
integral part of our technical development activities.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Speed to market.Our
    expertise, global presence and processes enable us to respond
    quickly to support our customers deployment objectives.
    Members of our 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.                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Worldwide depth of resources.Our 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, 2003,
    approximately 45% of our billable employees were employed
    outside the United States and represented 49 different
    nationalities. During the past 20 years, our professionals
    have designed wireless networks employing all major technologies
    in North America, Europe, Asia, Latin America, the Middle East
    and Africa. Our professional staff is highly educated with many
    of our engineering professionals holding masters degrees or
    doctorates.

LCC Services

We offer to our wireless customers a complete
range of wireless network services, including: (i) high
level technical consulting (3.4% of revenues for fiscal 2002 and
7.8% of revenues for fiscal 2003); (ii) design services
(40.6% of revenues for fiscal 2002 and 30.0% of revenues for
fiscal 2003); (iii) deployment services (54.4% of revenues for
fiscal 2002 and 59.3% of revenues for fiscal 2003); and
(iv) ongoing operations and maintenance services (1.6% of
revenues for fiscal 2002 and 2.9% of revenues for fiscal 2003).
In 2003, we derived 30.4% of our revenues from projects
involving 2G technology, 20.5% of our revenues from projects
involving 2.5G technology, 44.8% of our revenues from projects
involving 3G technology, and 4.3% of our revenues from projects
involving other technologies.

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| |                              
| | -----------------------------
| | Technical Consulting Services

Applying our extensive technical and operational
expertise and experience, we may be initially 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, our team of
senior wireless professionals focuses on providing our 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. We also provide training to our
engineers and our customers through our Wireless Institute,
which covers the latest technologies developed and employed
throughout the world. Over the past four years, our Wireless
Institute has taught over 500 classes worldwide.



| |                
| | ---------------
| | Design Services

Radio frequency and fixed network engineering.We provide both radio frequency
engineering and fixed network engineering services to design
wireless networks for our customers. Our 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 and the most
effective connection to the wireline backbone. Our 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. Our fixed network engineers determine
the most effective method to connect cell sites to the wireline
backbone. We also provide services to cover the core network
including interconnect, switching and microwave engineering for
all access technologies, including connection into the
telecommunications infrastructures of competitive local exchange
carriers, or CLECs, and incumbent local exchange carriers, or
ILECs.

Competitive benchmarking.We provide system analyses to our
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.



| |                    
| | -------------------
| | Deployment Services

Program management.We provide 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 our proprietary software system, Web Integrated
Network Deployment System, or 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 access to
timelines and forecasts for each phase of the project using
remote connectivity and an Internet browser. We maintain
copyright and trade secret protection for our WINDS system.

Site acquisition and development.Our local experts in each geographic
market evaluate the feasibility and desirability of base station
locations in the proposed area according to the wireless
customers requirements, including zoning ordinance
requirements, leasing constraints and building access issues.

Regulatory compliance.We have a regulatory compliance
program in the United States designed to satisfy FCC and
Occupational Safety and Health Administration requirements with
respect to radio frequency emissions.

5



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Architecture and engineering.We manage 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. We also provide other materials and services as may be
necessary to secure building permits and jurisdictional
approvals.

Construction and procurement management.We manage various construction
subcontractors to prepare the rooftop or tower site and secure
the proper electrical and telecommunications connections. We
also manage the procurement of materials and equipment for our
wireless customers and the installation of radio frequency
equipment, including base station electronics and antennae.



| |                                    
| | -----------------------------------
| | Operations and Maintenance Services

We provide operations and maintenance services to
wireless service providers with ongoing outsourcing needs.
Depending on customers needs, the scope of such
arrangements varies greatly  we may assume responsibility
for all or part of the day-to-day operation and maintenance of
wireless networks.

In May 2003, we formed LCC Wireline, Inc., a new
subsidiary of our company, to pursue wireline-related contracts
with CLECs and ILECs. LCC Wireline provides engineering,
furnishing and installation services for transmission,
switching, and DC power systems. We believe that wireline
providers will continue to require additional infrastructure
services in order to address both aging wireline networks and
the growing technical demands generated by integrated voice,
data and video networks.

Geographic Organization

We provide our services through a regional
management organization that comprises two principal regions and
several smaller divisions. In 2003, we redefined our operating
segments as Americas and EMEA (Europe,
Middle East and Africa) to reflect our regional organization.
Our Americas region, which is headquartered outside Los Angeles,
California, provides the full range of service offering to
wireless operators and equipment vendors through a network of
project offices in North America, Central and South America. In
2003, Americas generated approximately 49% of our total revenue.
Our EMEA region, which is based in London, is responsible for
operations in the U.K., Italy, The Netherlands, Algeria,
Germany, Spain and Greece. We have recently established a
marketing office in Dubai for our EMEA region. In 2003, EMEA
also generated approximately 49% of our total revenue.

We also have an Asia and other region
which comprises our Asia operations, our Wireless Institute and
our new Wireline division. In 2003, these combined operations
generated approximately 2% of our total revenues. Our operations
in Asia are comprised of a marketing office in Sydney and
representative offices in Beijing and Singapore. Our joint
venture with Bright Oceans Inter-Telecom Corporation
(BOCO) is also based in Beijing. Through our Wireless
Institute, we provide training to our engineers and customers
covering the latest technologies developed and employed
throughout the world. In 2003, we formed LCC Wireline, Inc. to
pursue wireline-related contracts with CLECs and ILECs.

For financial information about our operating
segments, please see note 19 to our consolidated financial
statements on page 60.

Business Strategy

The principal elements of our business strategy
are to: (i) provide end-to-end services; (ii) increase
our presence in new geographic areas to capitalize on emerging
opportunities; (iii) benefit from parallel market
opportunities by using our current knowledge base; and
(iv) attract and retain highly qualified personnel.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Provide end-to-end services.We provide integrated end-to-end
    solutions ranging from high level technical consulting, to
    system design and deployment, to ongoing operations and
    maintenance services. Our ability to provide end-to-end, or
    turnkey, services enables our wireless customers to engage a
    single, responsible party who is accountable for delivering and
    managing its wireless network

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | under a single contract. Accordingly, we leverage
    initial consulting opportunities to secure later-stage system
    design and deployment contracts, and engagements to provide
    design and deployment services enabling us to secure ongoing
    operations and maintenance projects. Providing ongoing
    operations and maintenance services, in turn, positions us well
    for additional opportunities as wireless service providers must
    either upgrade their existing networks or deploy new networks to
    benefit from the latest available technologies. During 2003, we
    were engaged to perform turnkey services for U.S. Cellular and
    Sprint. In U.S. Cellulars case, we have been retained to
    provide network design, site acquisition, zoning, permitting,
    civil engineering and construction services. In Sprints
    case, Sprint is providing network engineering functions while we
    are performing the remaining turnkey activities. Many clients
    initially engage us to perform specific services, such as
    engineering services. Once we secure a client relationship, we
    work to expand our relationship to provide additional services
    offered by the company. We do this by understanding the
    clients needs and leveraging our reputation and
    demonstrated performance on client engagements. We typically
    self-perform network design, site acquisition and zoning
    services and hire subcontractors to perform civil engineering
    and construction services under our direct management.
    Self-performed work generally carries higher profit margins than
    subcontracted work.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Increase our presence in new geographic areas
    to capture additional growth opportunities.In order to realize the full benefit
    of wireless deployment worldwide, we target areas with strong
    potential growth by creating a localized presence. We pursue
    this effort through establishing a local presence, pursuing
    strategic acquisitions and entering into partnerships to reach
    new markets. We currently have a localized presence in Algeria,
    Brazil, China, Greece, Italy, Spain, The Netherlands and the
    United Kingdom in addition to the United States, and are
    considering expansion into other markets. To increase our local
    presence in emerging areas, we have entered into several
    strategic acquisitions and investments, a strategy that we plan
    to continue as a means to both complement our internal growth
    and position ourselves to capitalize on anticipated high growth
    areas. In particular: (i) in January 2002 we acquired Smith
    Woolley Telecom, a consulting firm in the United Kingdom
    specializing in site search, acquisition, design, build,
    management and maintenance services; (ii) in July 2002 we
    acquired 51% of Detron LCC Network Services, B.V., or Detron, a
    newly formed consulting firm in The Netherlands specializing in
    deployment, management and maintenance services; and
    (iii) in July 2003 we agreed through our wholly-owned
    subsidiary, LCC China Services, L.L.C., to a joint venture with
    BOCO pursuant to which we own 49% of Beijing LCC Bright Oceans
    Communication Consulting Co., Ltd., or LCC/ BOCO, a new entity
    offering a full range of design, implementation and operations
    and maintenance services to wireless service providers
    throughout China. Our acquisition strategy is focused on firms
    that will enable us to cost-effectively add new clients and
    realize the potential benefits of new markets. We intend to
    continue to selectively acquire or partner with high quality
    companies that accelerate our access to, and provide us with a
    local presence in, new markets.
|
| |  | Benefit from parallel market opportunities
    using our current knowledge base.We
    actively seek to expand into new markets through the use of our
    comprehensive knowledge of wireless voice and data
    communications networks. We also believe that the rapid growth
    in the worldwide use of wireless telecommunications has created
    a need for our services in related fields. For example, because
    most wireless calls are ultimately routed through a wireline
    network, traffic from wireless networks must be connected with
    switching centers within wireline networks. Because our fixed
    network engineers determine the most effective method to connect
    cell sites to the wireline backbone, and because many of the
    types of engineering services provided to wireline operators are
    similar to the types of services we provide in the wireless
    area, we have been engaged to provide wireline-related services
    by wireless service providers and equipment vendors. We also
    have formed LCC Wireline to pursue contracts with CLECs and
    ILECs, many of which are in the process of upgrading their
    networks. We expect that wireline carriers will enhance their
    networks as a result of, among other things, the renewed
    interest in digital subscriber lines, or DSL, the expansion of
    long distance services, and the emergence of the surviving CLECs
    from bankruptcy. In addition to the wireline opportunities, we
    are exploring fixed and mobile wireless opportunities in the
    government and enterprise sectors. The United States government
    is exploring ways to provide reliable wireless connectivity for
    all first-responders and other law                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | enforcement and public safety agencies using both
    existing and new networks and technologies. Large enterprises
    also are beginning to explore how wireless technologies such as
    the existing cellular and personal communication system, or PCS,
    services, as well as the new Wi-Fi and WiMax technologies, may
    be used to enhance productivity and reduce operating expenses.
    We have already provided consulting services to both government
    agencies and corporate customers and we intend to expand our
    opportunities in these areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Attract and retain highly qualified personnel.As a service business, our success
    depends on our ability to attract, train and retain highly
    skilled professionals. As a result, we seek to recruit highly
    skilled personnel, facilitate their professional development and
    create a business atmosphere that encourages their continued
    employment. As of December 31, 2003, we had 751 employees,
    of which 578 were billable employees. As of that date,
    approximately 45% of our billable employees were employed
    outside of the United States. Our professional staff is highly
    educated with many of our engineering professionals holding
    masters degrees or doctorates. Recognizing the critical
    importance of retaining highly qualified personnel for our
    business, we work closely with our employees to develop and
    enhance the technical, professional and management skills
    required to be successful at our company. Our senior management
    believes it is critically important to create and maintain an
    open culture that encourages learning, responsibility and
    collaboration. For example, C. Thomas Faulders, III,
    our chief executive officer, hosts monthly teleconference
    meetings with all employees to foster an open working
    environment. We recognize that preserving our culture requires
    our employees to have a stake in the success of our business.
    For that reason, we have granted stock options to a significant
    majority of our employees, including our clerical and
    administrative support staff. We also invest in all of our
    professionals by expanding their professional education through
    our Wireless Institute, which provides training for our
    engineers and our customers covering the latest technologies
    developed and deployed throughout the world.

Customers and Backlog

We provide consulting, design, deployment, and
operations and maintenance services to wireless service
providers, telecommunications equipment vendors, satellite
service providers, systems integrators and tower companies. In
2003, revenues from U.S. Cellular were $16.5 million, or
15.2% of our total revenues, revenues from Nokia were
$13.0 million, or 12.0% of our total revenues, and revenues
from Sprint PCS were $11.5 million, or 10.6% of our total
revenues. Some of our customers include:



| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | AT&T Wireless 
     Ericsson 
     H3G 
     Nextel 
     O2 
     Sprint 
     T-Mobile 
     U.S. Cellular

Our top ten customers accounted for 72.9% of
total revenues for the year ended December 31, 2003.

Our firm backlog was approximately
$109 million at December 31, 2003. We define firm
backlog as the value of work-in-hand to be done with customers
as of a specific date where the following conditions are met:
(i) the price of the work to be done is fixed;
(ii) the scope of the work to be done is fixed, both in
definition and amount (for example, the number of sites has been
determined); and (iii) there is a written contract,
purchase order, agreement or other documentary evidence which
represents a firm commitment by the client to pay us for the
work to be performed. We also had implied backlog of
approximately $5 million as of December 31, 2003. We
define implied backlog as the estimated revenues from master
service agreements and similar arrangements, which have met the
first two conditions set forth above but for which we have not
received a firm contractual commitment. Our contracts typically
include provisions that permit customers to terminate their
contracts under various circumstances, including for customer
convenience. Our firm backlog

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at December 31, 2003 includes backlog arising
from the recent contract awards we received from Sprint and U.S.
Cellular. Our firm backlog was approximately $29 million
and our implied backlog was approximately $21 million at
December 31, 2002.


Sales and Marketing

We sell and market our consulting, design,
deployment, and operations and maintenance services through the
collaborative efforts of our sales force, our senior management,
our marketing group and our Wireless Institute. Excluding our
Wireless Institute staff, as of December 31, 2003, we
employed 31 full-time sales and marketing staff, based in our
offices in Australia, Italy, the United Kingdom, the United
States and The Netherlands. In addition, our LCC/ BOCO joint
venture gives us access to LCC/ BOCOs sales staff
throughout China.



| |      
| | -----
| | Sales

We have established sales forces in three regions
of the world: (i) Americas (North, Central and South);
(ii) Europe, the Middle East and Africa; and
(iii) Asia Pacific. Our sales forces in those regions work
in conjunction with our senior executives to develop new client
relationships. Sales personnel and our senior management
proactively establish contact with targeted prospects to
identify potential sales opportunities and work to establish
awareness and preference for our services. Because
customers purchase decisions often involve an extended
decision making process requiring involvement of their technical
personnel, our sales personnel work collaboratively with our
technical consulting and deployment personnel to develop new
sales leads and secure new contracts.



| |          
| | ---------
| | Marketing

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



| |                   
| | ------------------
| | Wireless Institute

Our Wireless Institute positions us well to
generate additional sales opportunities. For over a decade,
wireless service providers, equipment vendors, and others have
used our Wireless Institute to train their personnel on the
latest wireless technologies. Training customer employees and
management often allows us to identify areas where our services
may be needed by such customers. Members of the Wireless
Institutes staff often serve as an interface point between
our clients and our sales professionals. Over the past four
years, our Wireless Institute has taught more than 500 classes
worldwide.

Competition

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



| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | internal staffs of wireless and wireline service
    providers;                                                                                                                                                     
|
| |  | telecommunications equipment vendors, such as
    Ericsson and Nortel, which frequently provide design and
    deployment services as part of an equipment sale;                                                    
|
| |  | independent service companies, such as Wireless
    Facilities, Inc., which provide 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., 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 we provide, there are
areas where certain competitors may have an advantage over us.
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 our competitors have significantly greater
marketing resources, larger workforces and greater name
recognition than us.

We believe our ability to compete depends on a
number of additional factors, which are outside of our control,
including: (i) the willingness of competitors to finance
customers projects on favorable terms; (ii) the
ability and willingness of customers to rely on their internal
staffs to perform services themselves; and (iii) the
customers desire to bundle equipment and services.

We believe that the principal competitive factors
in our market include expertise in new and evolving
technologies, industry experience, ability to deliver end-to-end
services, ability to provide hardware- and
technology-independent solutions, ability to deliver results
within budget and on time, worldwide depth of resources,
reputation and competitive pricing. In particular, we believe
that the breadth of our service offerings, the efficiencies of
our processes, our ability to integrate new technologies and
equipment from multiple vendors, our ability to provide training
for our customers through our Wireless Institute and the high
quality of our professional staff provide us with a competitive
advantage.

Employees

As of December 31, 2003, we had 751
full-time employees worldwide. We believe that relations with
our employees are good. None of our employees are represented by
a labor union, and we have not experienced any work stoppages.

Recent Developments

On November 28, 2003, we completed an
offering of 8,050,000 shares of our class A common stock, of
which 5,000,000 were sold by certain of our stockholders. We
received net proceeds of approximately $11.5 million in the
offering.

In December 2003, we received the ISO 9001:2000
quality control certification for our North American operations.
ISO 9001:2000 is an internationally recognized quality
management system standard of the International Organization for
Standardization, or the ISO. This standard is designed to
provide guidelines and a basic framework for companies to
establish consistent quality management. ISO 9001 is regarded as
the most rigorous of the ISO 9000 series of standards developed
by the ISO.

In March 2004, we were selected by the Saudi
Telecommunication Company, or STC, to provide engineering
consulting services for the expansion of STCs GSM network
in Saudi Arabia. We expect to provide $27.2 million worth
of these services to STC during the initial 12 month period
of the contract. Final terms and conditions of the contract,
including terms of renewal for a second year, are subject to
completion and execution of a definitive agreement, which we
expect to occur within the next one to two months.

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International Operations

During the last two years, we have entered into a
number of strategic acquisitions and investments to enhance our
international wireless capabilities and establish a local
presence in country. For instance, in July 2003, we agreed
through our wholly-owned subsidiary, LCC China Services, to a
joint venture with BOCO, a publicly-traded Chinese systems
integrator. Through this joint venture, BOCO owns 51% of the
equity of a new entity, LCC/ BOCO, while we own the remaining
49%. The combined capital contributions from our company and
BOCO to LCC/ BOCO was approximately $2.2 million, which the
parties funded over the initial six months of LCC/ BOCOs
operations. LCC/ BOCO is based in Beijing, China, and serves as
our operational arm within China. LCC/ BOCO began operations in
August 2003, and currently has 36 employees and is represented
by approximately 105 sales and marketing professionals located
in BOCOs offices in each of Chinas provinces. LCC/
BOCO offers a full range of design, implementation, and
operations and maintenance services to wireless service
providers throughout China, where we have seen an increased
demand for third-party independent solution providers. LCC/ BOCO
also has access to our RF engineering and deployment skills and
our Wireless Institute as well as to BOCOs wireless
network management, planning and optimization systems and its
research and development department with a staff of
approximately 500.

The further development of our international
operations requires us to research and comply with local laws
and regulations, including employment, corporate and tax laws.
For example, if we enter into a longer term contract overseas,
we are 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, we face the task of
obtaining visas and work permits for our assigned employees and
must comply with local tax requirements for our expatriate
employees.

For financial information about our international
operations, please see note 19 to our consolidated financial
statements on page 60.

Government Regulation

Although we are not directly subject to any FCC
or similar government regulations, the wireless networks that we
design, deploy and manage are subject to various FCC regulations
in the United States and other international regulations. These
regulations require that these networks meet certain radio
frequency emission standards, not cause unallowable interference
to other services, and in some cases accept interference from
other services. These networks are also subject to government
regulations and requirements of local standards bodies outside
the United States.

Risk Factors

In any given year, we derive a significant
portion of our revenues from a limited number of large projects,
and, if we are unable to replace these large projects upon
completion, we could have a significant decrease in our revenues
which would negatively impact our ability to generate
income.

We have derived, and believe that we will
continue to derive, a significant portion of our revenues in any
given year from a limited number of large projects. As these
projects wind down to completion, we face the task of replacing
such revenues with new projects. Our inability to replace such
revenues would cause a significant decrease in our revenues and
negatively affect our operating results. For example, for the
year ended December 31, 2001, our largest project was for
XM Satellite Radio, Inc., which comprised 43.9% of our total
revenues. This project was substantially completed during the
fourth quarter of 2001 and wound down in 2002, and we were
unable to generate sufficient revenues from other projects in
2002 to maintain revenue levels.

If we are unable to replace large projects upon
completion, it could cause a significant decrease in our
revenues and negatively affect our ability to generate income.

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We generate a substantial portion of our
revenues from a limited number of customers, and if our
relationships with these customers were harmed our business
would suffer.

For the years ended December 31, 2002 and
2003, we derived 60.3% and 72.9%, respectively, of our total
revenues from our ten largest customers. We believe that a
limited number of customers will continue to be the source of a
substantial portion of our revenues for the foreseeable future.
Key factors in maintaining our relationships with these
customers include, for example, our performance on individual
contracts and the strength of our professional reputation. To
the extent that our performance does not meet client
expectations, or our reputation or relationships with one or
more key clients are impaired, our revenues and operating
results could be materially harmed.

Many of our customers face difficulties in
obtaining financing to fund the expansion of their wireless
networks, including deployments and upgrades, which may reduce
demand for our services.

Due to downturns in the financial markets in
general since 2000, and specifically within the
telecommunications financial markets, many of our customers or
potential customers have had and may continue to have trouble
obtaining financing to fund the expansion or improvement of
their wireless networks. Some customers have also found it
difficult to predict demand for their products and services.
Most vulnerable are customers that are new licensees and
wireless service providers who have limited sources of funds
from operations or have business plans that are dependent on
funding from the capital markets. In addition, many of our
customers have slowed or postponed deployment of new networks
and development of new products, which reduces the demand for
our services.

Further delays in the adoption and deployment
of next generation wireless networks could negatively affect the
demand for our services and our ability to grow our
revenues.

Wireless service providers may continue to delay
their development of next generation technology if, among other
things, they expect slow growth in the adoption of next
generation technology, reduced profitability due to price
competition for subscribers or regulatory delays. For example,
even though wireless service providers have made substantial
investments worldwide in acquiring 3G licenses, many providers
have delayed deployment of 3G networks.

Since we expect that a substantial portion of our
growth will be derived from services related to new
technologies, further delays in the adoption and deployment of
new technologies such as 3G would negatively affect the demand
for our services and our ability to grow our revenues.

We may experience significant fluctuations in
our quarterly results as a result of uncertainties relating to
our ability to generate additional revenues, manage our
expenditures and other factors, certain of which are outside of
our control.

Our quarterly and annual operating results have
varied considerably in the past and are likely to vary
considerably due to a number of factors, including those factors
discussed in this Risk Factors section. Many of
these factors are outside our control and include, among others:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | the timing of receipt of new licenses, use of
    existing spectrum for new services, or financing by potential
    customers;             
|
| |  | service and price competition;                                                                                                             
|
| |  | the commencement, progress, completion or
    termination of contracts during any particular quarter;                                      
|
| |  | the availability of equipment to deploy new
    technologies such as 3G and broadband;                                                     
|
| |  | the growth rate of wireless subscribers, which
    has a direct impact on the rate at which new cell sites are
    developed and built; and
|
| |  | telecommunications market conditions and economic
    conditions generally.                                                                

Due to these factors, our results for a
particular quarter may not meet the expectations of securities
analysts and investors, which could cause the price of our
class A common stock to decline significantly.

12



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Our contracts typically contain provisions
giving customers the ability to terminate their contracts under
various circumstances and we may not be able to replace the
revenues from such projects which may have an adverse effect on
our operating results due to our decreased revenues.

Our contracts typically have provisions that
permit customers to terminate their contracts under various
circumstances, including termination for convenience. We also
believe 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 our revenues, are suspended for
any significant length of time or terminated, we may encounter
difficulty replacing such revenues and our operating results
would decline as a result of our decreased revenues.

We may not receive the full amount of our
backlog, which could harm our business.

Our firm backlog was approximately
$109 million at December 31, 2003. We define firm
backlog as the value of work-in-hand to be done with customers
as of a specific date where the following conditions are met:



| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the price of the work to be done is fixed;                                                                                                                                           
|
| |  | the scope of the work to be done is fixed, both
    in definition and amount (for example, the number of sites has
    been determined); and                                         
|
| |  | there is a written contract, purchase order,
    agreement or other documentary evidence which represents a firm
    commitment by the client to pay us for the work to be performed.

We also had implied backlog of approximately
$5 million as of December 31, 2003. We define implied
backlog as the estimated revenues from master service agreements
and similar arrangements which have met the first two conditions
set forth above but for which we have not received a firm
contractual commitment.

Our backlog includes orders under contracts that
in some cases extend for several years. The amount of our
backlog that we may recognize as revenues during any fiscal
quarter may vary significantly because the receipt and timing of
any revenues is subject to various contingencies, many of which
are beyond our control. Further, the actual realization of
revenues on engagements included in our backlog may never occur
or may change because a project schedule could change or the
project could be cancelled, or a contract could be reduced,
modified, or terminated early. If we fail to realize revenues
from engagements included in our backlog at December 31,
2003, our operating results for our 2004 fiscal year as well as
future reporting periods may be materially harmed due to
decreased revenues.

We may not be able to promptly reduce expenses
in response to any decrease in our revenues, which would result
in lower net margins.

We may not be able to reduce our expenses in
order to timely correspond with any decrease in our revenues and
our failure to do so would decrease our gross profits. Efforts
to reduce costs may include a restructuring of our 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 we anticipate
considerable growth, could be significant. Our efforts to reduce
expenses could give rise to significant accounting charges and
the payment of certain separation or severance benefits. In
2002, we experienced difficulties reducing general and
administrative expenses at the same rate and in the same
proportion as our revenues decreased in that year. Any
significant decrease in our revenues may have an immediate and
material adverse effect on our net margins.

An increasing percentage of our revenues comes
from fixed price contracts, which require us to bear the risk of
cost overruns.

An increasing percentage of our revenues is
derived from fixed price contracts and our reliance on fixed
price contracts may continue to grow. The portion of our
revenues from fixed price contracts for the years ended
December 31, 2001, 2002 and 2003 was 44.5%, 61.1% and
79.1%, respectively. Under fixed price contracts, we provide
specific tasks for a specific price and are typically paid on a
milestone basis. Such

13



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contracts involve greater financial risks because
we bear the risk if actual project costs exceed the amounts we
are paid under the contracts.


Because we recognize revenues on fixed price
contracts using the percentage-of-completion method of
accounting, increases in estimated project costs could cause
fluctuations in our quarterly results and adversely affect our
operating results.

We recognize revenues 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 we recognize expenses as they are incurred and
recognize revenues based on the ratio of the current costs
incurred for the project to the then estimated total costs of
the project. Accordingly, the revenues that we recognize in a
given quarter depend on, among other things, costs we have
incurred for individual projects and our then current estimate
of the total remaining costs to complete individual projects. If
in any period we significantly increase our estimate of the
total costs to complete a project, we may recognize very little
or no additional revenues 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 our cost estimates fluctuate over time
or differ from actual costs, our operating results may be
materially affected. As a result of these challenges associated
with fixed price contracts, our gross profit in future periods
may be significantly reduced or eliminated.

If the percentage of our revenues derived from
construction related activities increases, our gross margins and
our net income may suffer.

We have historically earned lower relative gross
margins on construction related activities. We typically
self-perform network design, site acquisition and zoning
services and hire subcontractors to perform civil engineering
and construction services under our direct management.
Subcontracted work generally carries lower profit margins than
self-performed work. If the proportion of construction related
services we deliver increases, then our gross margins and net
income may suffer.

If we are unable to collect receivables from
development stage customers and other telecommunications
companies, our operating results may be materially
harmed.

We frequently perform services for development
stage customers that carry a higher degree of financial risk for
us. Our customers, established and development stage, have been
and may continue to be impacted by the tightening of available
credit and general economic slowdown. As a result of these
conditions, our customers may be unable to pay, or may delay
payment, for services performed by us. If we are not able to
collect amounts owed to us by our customers, we may be required
to write off significant accounts receivable and recognize bad
debt expense. For example, we recorded a provision for doubtful
accounts of $5.0 million in fiscal 2002, compared to our
recording of a provision of doubtful accounts of
$2.4 million in fiscal 2001. This increase in doubtful
accounts reflected increased losses from customers declaring
bankruptcy or having other financial difficulties during 2002,
including $1.9 million due to one customers inability to
procure additional financing. Our operating results may be
materially harmed if we are not able to collect amounts due from
our customers.

If more of our customers require fixed price
contracts with fewer milestones than in previous years, we may
not have sufficient access to working capital to fund the
operating expenses incurred in connection with such contracts,
and we may not be able to perform under our existing contracts
or accept new contracts with similar terms.

A number of our customers are requiring fixed
price contracts with fewer milestones than in previous years. We
may incur significant operating expenses in connection with such
contracts and may not receive corresponding payments until the
milestones have been completed. We may need to use our available
cash to cover operating expenses incurred in connection with
such contracts until we complete the milestones, invoice our
customers and collect payments. This may result in increased
needs for working capital, and if we do not have access to
sufficient capital to fund our working capital needs, we may not
be able to perform under our existing contracts or accept new
contracts with similar terms.

14



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##### 



The extent of our dependence on international
operations may give rise to increased management challenges and
could harm our results of operations.

Customers outside the United States accounted for
57.0% and 51.0% of our revenues for the years ended
December 31, 2002 and December 31, 2003, respectively.
The multi-jurisdictional nature of our revenues exposes us to
additional risks. Such risks include:



| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the effects of 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;                                                                                                                                                                            
|
| |  | management of a geographically diverse
    organization;                                                                                                                                                 
|
| |  | difficulties and increased expenses in complying
    with a variety of foreign laws and regulations, including labor,
    employment and immigration laws; and                                           
|
| |  | changes in the applicable industry regulatory
    environments in foreign countries, including delays in
    deregulation or privatization affecting the pace at which
    wireless licenses are awarded.

Expansion of our international operations may
require significant expenditure of operating, financial and
management resources and result in increased administrative and
compliance costs that could harm our results of operations.

Providing services outside the United States
carries the additional risk of currency fluctuations and foreign
exchange controls imposed by certain countries since many of our
non-U.S. projects are undertaken in local currency.

Although we generally incur project expenses in
the same currency in which payments are received under the
contract, we do 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 our
operations particularly if: (i) we cannot incur project
expenses in the same currency in which payments are received
under the contract; and (ii) there is a negative impact
when converting back to United States dollars. See
Managements Discussion and Analysis of Financial
Condition and Results of Operation  Quantitative and
Qualitative Disclosures About Market Risk and Foreign Exchange
Risk.

We face intense competition from many
competitors that have greater resources than we do, which could
result in price reductions, reduced profitability and loss of
market share.

We face intense competition in the market for
wireless network design and system deployment services. Wireless
service providers themselves and system equipment vendors, some
of whom are our customers, have developed and continue to
develop capabilities competitive with those provided by us.

Many competitors, including equipment vendors and
system integrators, have substantially greater financial and
other resources than we do and may use such greater resources to
more effectively deliver a full turnkey solution. For example, a
competitor that is able to provide equipment as part of its
solution or to quickly deploy a large number of personnel for a
project poses a threat to our business.

Competition can increase pressure on our pricing.
For example, in a deployment project we typically provide
program management services as well as site development and
construction services. We may be pressured to reduce our pricing
with respect to either our program management services or our
site development and construction services in an attempt to
compete with: (i) the operator, who may be inclined to
provide program management services itself; or (ii) our 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 our subcontractors may build relationships with
our customers over time and compete with us for their business.

15



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##### 



Lastly, as a result of intense competition, we
continue to encounter and may be required to agree to less
favorable contract terms, including provisions such as
liquidated damages, performance guarantees and deferred payment
terms.

If we are not able to compete effectively, our
ability to attract and retain customers will be adversely
affected, which will decrease our revenues and negatively affect
our operating results.

If we fail to manage the size of our billable
workforce to anticipate increases or decreases in market demand
for our services, it could harm our competitive position and
financial results.

If we maintain or increase billable staffing
levels in anticipation of one or more projects and those
projects are delayed, reduced or terminated, or otherwise do not
materialize, we may underutilize these personnel, which would
increase our cost of revenues, harming our results of
operations. Due to current economic conditions and the
corresponding effect on our customers or potential customers, it
is extremely difficult to project accurately the demand for our
services and, correspondingly, maintain an appropriately sized
billable workforce. If we maintain a billable workforce
sufficient to support a resurgence in demand and such demand
does not materialize, then our expenses will be high relative to
revenues. If we reduce the size of our billable workforce in
response to any industry slowdown or decrease in the demand for
services, then we 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,
our competitive position in the industry could be negatively
impacted and we could incur increased recruiting costs to
replace our billable workforce. To the extent that we are unable
to successfully anticipate increases or decreases in market
demand for our services and manage the size of our billable
workforce accordingly, we could lose customers to our
competitors or underutilize our personnel. In either case, our
financial results will suffer.

Competitors that offer financing to wireless
customers pose a threat to our ability to compete for
business.

Wireless service providers, particularly new
providers and new licensees, depend increasingly on wireless
telecommunications 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. We face similar
competition from tower ownership and management companies that
provide tower deployment services as part of their overall
leasing package or as part of a build-to-suit financing package.
We do not typically provide these types of financing to our
wireless customers. To the extent that wireless companies
continue to seek such financing, it would harm our ability to
compete for such business.

Our inability to anticipate or adapt to
changes in technology may harm our competitive position,
reputation and opportunities for revenue growth.

We operate in a highly competitive environment
that is subject to rapid technological changes and the emergence
of new technologies. Our future revenues depend significantly
upon the adoption and deployment by wireless customers of new
technologies. Our success will depend on our ability to timely
enhance our current service offerings to keep pace with new
technologies and the changing needs of our customers. If we are
not successful in responding to technological changes or
industry or marketplace developments, we may not be able to
compete effectively, which could harm our reputation and
opportunities for future revenue growth.

We may not be able to hire or retain a
sufficient number of qualified engineers and other employees to
meet our contractual commitments or maintain the quality of our
services.

As a service business our success depends
significantly on our 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

16



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##### 



times we have had difficulty recruiting and
retaining qualified technical personnel to properly and quickly
staff large customer projects. In addition to recruitment
difficulties, we must fully and properly train our employees
according to our customers technology requirements and
deploy and fully integrate each employee into our
customers projects. 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 our ability to quickly and effectively train and
deploy all of the personnel required to staff a large project.


Because we have experienced, and expect to
continue to experience, long sales cycles, we expect to incur
significant costs to generate new business and our customer base
may not experience growth commensurate with such
costs.

Purchases of our services by customers often
entail a lengthy decision-making process for the customer.
Selecting wireless network deployment services involves
substantial costs and has strategic implications. Senior
management of the customer is often involved in this process,
given the importance of the decision, as well as the risks faced
by the customer if the services do not meet the customers
particular needs. We may expend substantial funds and effort to
negotiate agreements for these services, but may ultimately be
unable to consummate agreements for services and expand our
customer base. In addition, we have increasingly been required
to change both our personnel and the techniques we employ to
respond to customer organizational changes and expanded
geographic reach. Customer buying habits currently seem to favor
a regionalized sales force, which can increase costs, and may
prove to be ineffective. As a result of our lengthy sales cycles
and these potential increased costs, we expect to continue to
incur relatively high costs to generate new business.

We may not be able to successfully achieve the
expected benefits of our acquisitions.

We have made three acquisitions 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 between the principals of
such companies and our customers.

Our acquisition strategy is designed to leverage
the acquired companys relationships with our customers in
the local market in order to either: (i) build a turnkey
services offering to the customer in the respective market; or
(ii) expand the customer relationship to additional
markets. We may not be able to successfully increase our
services to the customer in the same market, leverage the
relationship to expand outside the market, or ultimately build
customer loyalty at a company-wide level.

Future acquisitions of new companies or
technologies may result in disruption to our business and expose
us to risks associated with acquisitions.

We may make future acquisitions of, 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 our existing stockholders. In addition, our
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
(please see note 11 to our consolidated financial statements on
page 51). In addition, acquisitions could expose us 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 our expenses and working capital
    requirements; and                                 
|
| |  | exposure to unanticipated contingent liabilities
    of acquired companies.                           

Any of these and other factors could disrupt our
business and harm our ability to achieve the anticipated
benefits of an acquisition.

17



---



##### 



If wireless service providers, network
equipment vendors and enterprises perform more network
deployment services themselves, our business will
suffer.

Our success depends upon the continued trend by
wireless service providers and network equipment vendors to
outsource their network design, deployment and management needs.
If this trend does not continue or is reversed and wireless
service providers and network equipment vendors elect to perform
more network deployment services themselves, our operating
results may be adversely affected due to the decline in the
demand for our services.

The consolidation of equipment vendors or
wireless service providers could adversely impact our
business.

The wireless telecommunications industry has been
characterized by significant consolidation activity. This
consolidation and the potential continuing trend towards future
consolidation within the wireless telecommunications industry
may lead to a greater ability among equipment vendors and
wireless service providers to provide a comprehensive range of
network services, and may simplify integration and installation,
which could lead to a reduction in demand for our services.
Moreover, the consolidation of equipment vendors or wireless
service providers could reduce the number of our current or
potential customers and increase the bargaining power of our
remaining customers which may put downward pressure on our
prices and cause our revenues and operating results to decline.

Government regulations may adversely affect
our business.

The wireless networks that we design, deploy and
manage are subject to various FCC regulations in the United
States and other international regulations. These regulations
require that these networks meet certain radio frequency
emission standards, not cause unallowed interference to other
services, and in some cases accept interference from other
services. Changes in the regulation of our activities, including
changes in the allocation of available spectrum by the United
States government and other governments or exclusion of our
technology by a standards body, could have a harmful effect on
our business, operating results, liquidity and financial
position.

If we fail to retain our key personnel and
attract and retain additional qualified personnel, our ability
to operate our business may be adversely affected.

Our future success and our ability to sustain our
revenue growth depend upon the continued service of our
executive officers and other key personnel. The loss of any of
our key employees, in particular C. Thomas
Faulders, III, our chairman of the board and chief
executive officer, could adversely affect our ability to
generate revenues and operate our business. We do not have an
employment agreement or any other agreement that obligates
Mr. Faulders to remain with us.

RF Investors, L.L.C., whose interests may
not be aligned with yours, controls our company, which could
result in actions of which you or other stockholders do not
approve.

RF Investors owns all of the outstanding
shares of our outstanding class B common stock, which
carries 10 to 1 voting rights and represents approximately 70%
of the combined voting power of our class A and
class B common stock. These shares may be sold without the
participation of any other stockholder in the sale; however,
when shares of class B common stock are sold, the shares
automatically convert to class A common stock and lose the
10 to 1 voting rights. RF Investors, its parent company
Telcom Ventures, L.L.C., and its equity holders (which include
our directors Dr. Rajendra and Neera Singh) are able,
without approval of any other stockholder, to control our
operations and maintenance and the outcome of all matters that
our stockholders vote upon, including the election of directors,
amendments to our certificate of incorporation, and mergers or
other business combinations.

RF Investors may also, by converting its
shares of our class B common stock into shares of our
class A common stock, obtain a sufficient number of shares
of class A common stock (approximately 19% of the total
outstanding shares of class A common stock) to influence
the outcome of any vote on which the holders of class A
common stock are entitled to vote together as a class.

18



---



##### 



Dr. Rajendra and Neera Singh, who with
certain Singh family trusts indirectly control Telcom Ventures,
are our directors. Telcom Ventures is principally engaged in
making investments in wireless service providers and emerging
wireless and Internet technologies. If we desire to pursue a
transaction requiring stockholder approval that may conflict
with the interests of Telcom Ventures, RF Investors may
elect to vote its shares to block such transaction and could
prevent our stockholders from receiving a premium over the
market price if a change of control of our company is proposed.
These individuals and entities, in their capacity as
stockholders, may choose to vote their shares in whatever manner
they view to be in their best interest.

Significant sales of class A common stock
in the future may depress the trading price of our class A
common stock.

Ownership of a significant portion of our
class A common stock is concentrated in the hands of a few
stockholders. Assuming the conversion of all of
RF Investors shares of class B common stock into
shares of class A common stock, RF Investors owns 4,537,577
shares of class A common stock. MCI owns 1,420,549 shares
of class A common stock.

An aggregate of approximately 4,699,786 shares of
our class A common stock (including shares issuable upon
conversion of class B common stock) held by
RF Investors, Telcom Ventures, and our directors and
executive officers are eligible for sale pursuant to the
provisions of Rule 144 under the Securities Act of 1933, as
amended. In addition, all of the shares of our class A
common stock held by MCI may be resold without compliance with
the resale restrictions of Rule 144.

Sales of a significant number of shares (whether
by these stockholders or by stockholders who own, or may
accumulate in the future, a significant number of shares) in a
single public transaction or over a period of time, or the
market perception that such sales may occur, could depress the
trading price of our class A common stock and may make it
more difficult for us to sell our equity securities in the
future at a time and price deemed to be appropriate.

Our relationship with Telcom Ventures may
result in potential conflicts of interest.

Telcom Ventures, RF Investors parent
company, is principally engaged in making investments in
wireless service providers and emerging wireless and Internet
technologies. Dr. Rajendra and Neera Singh, who are members
of our board of directors, are also directors of Telcom Ventures
and its subsidiaries and have certain fiduciary obligations to
each organization. Telcom Ventures and directors of Telcom
Ventures and its subsidiaries who are also our directors may be
subject to conflicts of interest in transactions concerning us.
For example, we may have an interest in pursuing acquisitions,
divestitures, financings or other transactions that, in our
judgment, could be beneficial to us, even though such
transactions might conflict with the interests of Telcom
Ventures. These individuals and entities, in their capacity as
stockholders, may choose to vote their shares in whatever manner
they view to be in their best interest.

We currently allow the employees of Telcom
Ventures to participate in our employee benefit plans in
exchange for full reimbursement of our cash costs, and we may
provide other services to Telcom Ventures in the future. If we
do not receive reimbursement for our costs and expenses
associated with such services, Telcom Ventures and its
affiliates would receive a benefit not shared by, and to the
detriment of, our other stockholders.

Prior to our initial public offering, both our
employees and the employees of Telcom Ventures were eligible to
participate in our life, medical, dental and 401(k) plans. In
connection with our initial public offering in 1996, we agreed
to allow the employees of Telcom Ventures to continue to
participate in our life, medical, dental and 401(k) plans in
exchange for full reimbursement of our cash costs and expenses
as well as the payment (until December 2001) of an
administrative fee. Telcom Ventures had ten employees in 1996
and currently has three employees. We entered into this
agreement as an accommodation to Telcom Ventures.

Pursuant to our audit committee charter adopted
in March 2003, our audit committee must review the settlement of
any dispute under this agreement, if one should arise, and must
review in the future any agreements of this type that we may
enter into with Telcom Ventures or other related parties. If in
the future

19



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##### 



we do not receive from Telcom Ventures full
reimbursement of our costs and expenses, Telcom Ventures will
receive a benefit not shared by, and to the detriment of, our
other stockholders.


During 2000, we had an understanding with Telcom
Ventures pursuant to which we retained five employees who had
previously worked in our business development group while these
employees pursued business opportunities on Telcom
Ventures behalf. Telcom Ventures reimbursed us for the
costs incurred in employing these persons. Further, we have
provided engineering services to Telcom Ventures and various
other companies majority-owned or controlled by Telcom Ventures.

Our stock price and trading volume are
volatile and could decline, resulting in a substantial loss on
your investment.

The stock market in general, and the market for
technology-related stocks in particular, is highly volatile. As
a result, the market price of our class A common stock is
likely to be similarly volatile, and investors in our
class A common stock may experience a decrease in the value
of their stock, including decreases unrelated to our operating
performance or prospects. In addition, for the period from
January 1 to December 31, 2003, the average daily
trading volume for our class A common stock as reported by
The NASDAQ National Market was approximately 62,644 shares.
Accordingly, the price of our class A common stock and the
trading volume of our class A common stock could be subject
to wide fluctuations in response to a number of factors,
including those listed in this Risk Factors section
and others such as:



| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our operating performance and the performance of
    other similar companies or companies deemed to be similar;                                                                                
|
| |  | actual or anticipated differences in our
    quarterly operating results;                                                                                                                      
|
| |  | changes in our revenues or earnings estimates or
    recommendations by securities analysts;                                                                                                   
|
| |  | publication of research reports about us or our
    industry by securities analysts;                                                                                                           
|
| |  | additions and departures of key personnel;                                                                                                                                                     
|
| |  | strategic decisions by us or our competitors,
    such as acquisitions, consolidations, divestments, spin-offs,
    joint ventures, strategic investments, or changes in business
    strategy;
|
| |  | the passage of legislation or other regulatory
    developments that adversely affect us or our industry;                                                                                      
|
| |  | speculation in the press or investment community;                                                                                                                                              
|
| |  | changes in accounting principles;                                                                                                                                                              
|
| |  | terrorist acts;                                                                                                                                                                                
|
| |  | general market conditions, including economic
    factors unrelated to our performance; and                                                                                                    
|
| |  | political or military events related to
    international conflicts, wars, or otherwise.                                                                                                       

In the past, securities class action litigation
has often been instituted against companies following periods of
volatility in their stock price. This type of litigation could
result in substantial costs and divert our managements
attention and resources.



|        |           
|------- | ----------
|Item 2. | Properties

We currently lease approximately 155,000 square
feet of office space at our headquarters in McLean, Virginia,
under a ten-year lease expiring in 2007. We occupy approximately
40,000 square feet of the McLean facility and currently sublease
approximately 55,000 square feet to subtenants. Approximately
60,000 square feet were vacant as of December 31, 2003 and
we are actively pursuing additional subleasing opportunities.

We lease approximately 8,600 square feet of
office space at our Europe, Middle East and Africa, or EMEA,
regional headquarters in London, England, under a 13-year lease
expiring in September 2014. We occupy approximately 2,200 square
feet of the London facility. In 2003, we assigned approximately
2,200

20



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##### 



square feet to a third party assignee.
Approximately 4,200 square feet were vacant as of
December 31, 2003 and we are actively pursuing subleasing
opportunities.


In addition, we lease office space in connection
with our local operations in North and South America (Mission
Viejo, California and São Paulo, Brazil), the United
Kingdom (Cambridge, Bath, Newark, Enfield and Glasgow), Italy
(Rome and Milan), The Netherlands (s Hertogenbosch). We
also lease space in connection with our regional marketing
efforts in Spain.

All of our facilities are used for current
operations of all segments.



|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

From time to time we are party to legal
proceedings. We do not believe that any of the pending
proceedings would have a material adverse effect on our
business, financial condition or results of operations. However,
we have no assurance that an unfavorable decision in any such
legal proceeding would not have a material adverse effect.



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

None.

21



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##### 



PART II



|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuers Purchases of
    Equity Securities

Since completion of our initial public offering
in September 1996, our class A common stock has been quoted on
the NASDAQ National Market under the trading symbol
LCCI. As of March 22, 2004, there were 103
stockholders of record of the class A common stock and one
stockholder of record of the class B common stock. As of
March 22, 2004, we estimate there were in excess of 5,000
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 2002 and 2003 as reported on the
NASDAQ National Market:

|               |  |      |               | 
|-------------- |  | ---- | ------------- | 
|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 | 

|               |  |      |               | 
|-------------- |  | ---- | ------------- | 
|Quarter Ended: |  | 2003
|               |  |     
|March 31       |  | $    | 1.87 to $2.67 | 
|June 30        |  | $    | 2.05 to $3.15 | 
|September 30   |  | $    | 2.48 to $6.00 | 
|December 31    |  | $    | 4.15 to $6.85 | 

We have never paid any cash dividends on Common
Stock and we do 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, our
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

The following table presents a summary of
outstanding stock options and securities available for future
grant under our equity compensation plans.

|                                                               |                                                         |                      |           |                      |  |                              |      |       |  |  |           |           | 
|-------------------------------------------------------------- | ------------------------------------------------------- | -------------------- | --------- | -------------------- |  | ---------------------------- | ---- | ----- |  |  | --------- | --------- | 
|                                                               |                                                         |                      |           |                      |  | 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                              |                      |           | 4,142,057            |  |                              | $    | 5.80  |  |  |           | 2,507,353 | 
|                                                               | Directors Stock Option Plan (Class A
    Common Stock)  |                      |           | 158,400              |  |                              |      | 8.11  |  |  |           | 91,600    | 
|                                                               | Directors Stock Option Plan (Class B
    Common Stock)* |                      |           | 90,000               |  |                              |      | 10.56 |  |  |           |          | 
|                                                               | Employee Stock Purchase Plan                            |                      |           |                     |  |                              |      |      |  |  |           | 440,513   | 
|Equity compensation plans not approved by
    security holders |                                                         |                      |          |                      |  |                              |     |       |  |  |          |          
|                                                               |                                                         |                      |           |                      |  |                              |      |       |  |  |           |          
|Total                                                          |                                                         |                      | 4,390,457 |                      |  | $                            | 5.98 |       |  |  | 3,039,466 |          
|                                                               |                                                         |                      |           |                      |  |                              |      |       |  |  |           |          




|  |                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Although the directors stock option plan
    authorizes the issuance of up to 250,000 shares of class B
    common stock, the final grant of such options occurred in May
    2000 pursuant to the terms of the directors stock option plan.

Note:We have also
granted options to purchase 30,000 shares of class A common
stock to TC Group L.L.C. These options were not issued
under one of our equity compensation plans and therefore are not
included in the above table.

22



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##### 



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, 2003, which have been derived
from our 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 consolidated financial statements
and related notes thereto included in this Form 10-K.

|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |         |         | 
|-------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------- | ------ | ------ | ------ | ---- | ------ | ------- | ------- | ---- | ------ | ------- | ------- | - | ------- | ------ | ------ | - | ------ | ------- | ------- | 
|                                                                     |                                                             |                                      
|                                                                     |                                                             | Years Ended December 31,             
|                                                                     |                                                             |                                      
|                                                                     |                                                             | 1999(1)                               |        | 2000   |        | 2001 |        | 2002    |         | 2003
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |     
|                                                                     |                                                             |                                      
|                                                                     |                                                             | (in thousands, except per share data)
|Revenues:                                                            |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Service                                                     |                                       | $      | 73,289 |        |      | $      | 149,385 |         |      | $      | 130,609 |         |   | $       | 67,069 |        |   | $      | 108,439 |        
|                                                                     | Tower ownership and management                              |                                       |        | 2,504  |        |      |        | 1,008   |         |      |        |        |         |   |         |       |        |   |        |        |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     |                                                             | Total revenues                        |        |        | 75,793 |      |        |         | 150,393 |      |        |         | 130,609 |   |         |        | 67,069 |   |        |         | 108,439 | 
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Cost of revenues:                                                    |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Service                                                     |                                       |        | 53,080 |        |      |        | 109,952 |         |      |        | 103,535 |         |   |         | 58,429 |        |   |        | 88,998  |        
|                                                                     | Tower ownership and management                              |                                       |        | 1,176  |        |      |        | 333     |         |      |        |        |         |   |         |       |        |   |        |        |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     |                                                             | Total cost of revenues                |        |        | 54,256 |      |        |         | 110,285 |      |        |         | 103,535 |   |         |        | 58,429 |   |        |         | 88,998  | 
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Gross profit                                                         |                                                             |                                       | 21,537 |        |        |      | 40,108 |         |         |      | 27,074 |         |         |   | 8,640   |        |        |   | 19,441 |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Operating expenses:                                                  |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Sales and marketing                                         |                                       |        | 5,464  |        |      |        | 7,833   |         |      |        | 7,068   |         |   |         | 8,095  |        |   |        | 6,624   |        
|                                                                     | General and administrative                                  |                                       |        | 18,128 |        |      |        | 19,673  |         |      |        | 15,978  |         |   |         | 20,311 |        |   |        | 18,508  |        
|                                                                     | Restructuring charge                                        |                                       |        |       |        |      |        | (108    | )       |      |        |        |         |   |         | 13,522 |        |   |        | (2      | )      
|                                                                     | Non-cash compensation                                       |                                       |        | (12    | )      |      |        |        |         |      |        |        |         |   |         |       |        |   |        |        |        
|                                                                     | Gain on sale of tower portfolio and
    administration, net |                                       |        |       |        |      |        | (26,437 | )       |      |        | (2,998  | )       |   |         | (2,000 | )      |   |        |        |        
|                                                                     | Depreciation and amortization                               |                                       |        | 3,628  |        |      |        | 2,899   |         |      |        | 3,012   |         |   |         | 2,884  |        |   |        | 3,860   |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     |                                                             | Total operating expenses              |        |        | 27,208 |      |        |         | 3,860   |      |        |         | 23,060  |   |         |        | 42,812 |   |        |         | 28,990  | 
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Operating income (loss)                                              |                                                             |                                       | (5,671 | )      |        |      | 36,248 |         |         |      | 4,014  |         |         |   | (34,172 | )      |        |   | (9,549 | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Other income (expense)                                               |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Interest income (expense), net                              |                                       |        | (1,827 | )      |      |        | 1,688   |         |      |        | 1,886   |         |   |         | 818    |        |   |        | 325     |        
|                                                                     | Other                                                       |                                       |        | (1,391 | )      |      |        | (787    | )       |      |        | 22,113  |         |   |         | (3,767 | )      |   |        | 1,218   |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     |                                                             | Total other income (expense)          |        |        | (3,218 | )    |        |         | 901     |      |        |         | 23,999  |   |         |        | (2,949 | ) |        |         | 1,543   | 
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Income (loss) from continuing operations before
    income taxes     |                                                             |                                       | (8,889 | )      |        |      | 37,149 |         |         |      | 28,013 |         |         |   | (37,121 | )      |        |   | (8,006 | )      
|Provision (benefit) for income taxes                                 |                                                             |                                       | (2,677 | )      |        |      | 16,531 |         |         |      | 11,041 |         |         |   | (8,451  | )      |        |   | (1,483 | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Income (loss) from continuing operations                             |                                                             |                                       | (6,212 | )      |        |      | 20,618 |         |         |      | 16,972 |         |         |   | (28,670 | )      |        |   | (6,523 | )      
|Gain on disposal of discontinued operations net
    of tax provision |                                                             |                                       | 803    |        |        |      |       |         |         |      |       |         |         |   |        |        |        |   |       |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Net income (loss)                                                    |                                                             | $                                     | (5,409 | )      |        | $    | 20,618 |         |         | $    | 16,972 |         |         | $ | (28,670 | )      |        | $ | (6,523 | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Income (loss) per share:                                             |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Continuing operations:                                               |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Basic                                                       |                                       | $      | (0.36  | )      |      | $      | 1.01    |         |      | $      | 0.83    |         |   | $       | (1.37  | )      |   | $      | (0.31   | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Diluted                                                     |                                       | $      | (0.36  | )      |      | $      | 0.93    |         |      | $      | 0.81    |         |   | $       | (1.37  | )      |   | $      | (0.31   | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Discontinued operations:                                             |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Basic                                                       |                                       | $      | 0.05   |        |      |        |        |         |      |        |        |         |   |         |       |        |   |        |        |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Diluted                                                     |                                       | $      | 0.05   |        |      |        |        |         |      |        |        |         |   |         |       |        |   |        |        |        
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Net income (loss) per share:                                         |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Basic                                                       |                                       | $      | (0.31  | )      |      | $      | 1.01    |         |      | $      | 0.83    |         |   | $       | (1.37  | )      |   | $      | (0.31   | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Diluted                                                     |                                       | $      | (0.31  | )      |      | $      | 0.93    |         |      | $      | 0.81    |         |   | $       | (1.37  | )      |   | $      | (0.31   | )      
|                                                                     |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|Weighted average shares outstanding:                                 |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Basic                                                       |                                       |        | 17,302 |        |      |        | 20,360  |         |      |        | 20,571  |         |   |         | 20,902 |        |   |        | 21,292  |        
|                                                                     | Diluted                                                     |                                       |        | 17,302 |        |      |        | 22,110  |         |      |        | 20,916  |         |   |         | 20,902 |        |   |        | 21,292  |        
|Consolidated Balance Sheet Data (at year-end):                       |                                                             |                                       |        |        |        |      |        |         |         |      |        |         |         |   |         |        |        |   |        |        
|                                                                     | Cash and short-term investments                             |                                       | $      | 2,037  |        |      | $      | 42,335  |         |      | $      | 53,142  |         |   | $       | 39,329 |        |   | $      | 31,031  |        
|                                                                     | Working capital                                             |                                       |        | (8,039 | )      |      |        | 59,460  |         |      |        | 72,134  |         |   |         | 49,959 |        |   |        | 54,980  |        
|                                                                     | Goodwill and intangibles, net                               |                                       |        | 430    |        |      |        | 57      |         |      |        | 637     |         |   |         | 11,273 |        |   |        | 11,958  |        
|                                                                     | Total assets                                                |                                       |        | 82,868 |        |      |        | 110,045 |         |      |        | 112,231 |         |   |         | 96,723 |        |   |        | 118,591 |        
|                                                                     | Total debt                                                  |                                       |        | 4,535  |        |      |        |        |         |      |        |        |         |   |         |       |        |   |        | 1,840   |        
|                                                                     | Shareholders equity                                        |                                       |        | 42,426 |        |      |        | 68,416  |         |      |        | 85,804  |         |   |         | 61,088 |        |   |        | 69,768  |        




|    |                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 1999, our board of directors adopted a
    plan to dispose of the operations comprising our hardware and
    software products segments, which were sold to Ericsson Radio
    Systems AB in October 1999.

23



---



##### 



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 our consolidated financial
statements and the notes thereto and the other financial data
appearing elsewhere in this Form 10-K.

Overview

We provide integrated end-to-end solutions for
wireless voice and data communications networks with offerings
ranging from high level technical consulting, to system design
and turnkey deployment, to ongoing management and optimization
services. We have been successful on occasion in using 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 us to secure ongoing management
and operations projects. Providing ongoing operations and
maintenance services also positions us well for additional
opportunities as new technologies continue to be developed and
wireless service providers must either upgrade their existing
networks or deploy new networks utilizing the latest available
technologies.

We provide these services through a regional
organization, which comprises two principal regions and several
smaller divisions. In 2003, we redefined our operating segments
to be compatible with this regional organization. Our primary
operating segments are Americas and EMEA (Europe, Middle East
and Africa).

Americas:Headquartered near Los Angeles, California, the Americas region
provides the full range of service offerings to wireless
operators and equipment vendors through a network of project
offices in North America, Central and South America. In 2003,
Americas generated approximately 49% of our total revenue.

EMEA:Based in
London, the Europe, Middle East and Africa region is responsible
for operations in the U.K., Italy, Netherlands, Algeria,
Germany, Spain and Greece. EMEA also undertakes projects
throughout its region and we have recently established a
marketing office in Dubai. In 2003, EMEA also generated
approximately 49% of our total revenue.

Asia & other:This includes our operations in Asia, the Wireless Institute and
our new Wireline division. In 2003, these combined operations
generated approximately 2% of our total revenues. Our operations
in Asia comprise a marketing office in Sydney and representative
offices in Beijing and Singapore. Our joint venture with BOCO is
also based in Beijing. We provide training to our engineers and
customers through our Wireless Institute, which covers the
latest technologies developed and employed throughout the world.
In 2003, we formed LCC Wireline, Inc., to pursue
wireline-related contracts with CLECs and ILECs.

The key drivers of growth in our wireless
services business have been:



| |   |                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the issuance of new or additional licenses to
    wireless service providers, which generates new network build
    out;                                                                                                                                                                                         
|
| |  | the introduction of new services or technologies
    such as wireless number portability, or WNP, satellite digital
    radio, wireless broadband, and push-to-talk services;                                                                                                                                    
|
| |  | the increases in the number of subscribers served
    by wireless service providers, the increase in usage by those
    subscribers, and the scarcity of wireless spectrum, which
    require wireless service providers to expand and optimize system
    coverage and capacity to maintain network quality; and
|
| |  | the increasing complexity of wireless systems in
    operation, which requires wireless service providers to upgrade
    their existing networks or deploy new networks to benefit from
    the latest available technologies.                                                                                   

Our primary sources of revenues are from
engineering design and system deployment services. Revenues from
services are derived both from fixed price and time and
materials contracts. We recognize revenues from fixed price
service contracts using the percentage-of-completion method and
therefore recognize revenues 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. We recognize revenues on time
and materials contracts as the services are performed.

24



---



##### 



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 our marketing,
sales and customer support plans.

We generate cash from fixed price contracts by
billings associated with contract milestones, which are
typically agreed with our customers at the time the contracts
are negotiated. For our time and materials contracts, we usually
bill our customers on a monthly basis as services are performed.
On large network deployment contracts, which involve the design
and construction of complex wireless networks, it is
increasingly common for our customers to require fewer contract
milestones than in previous years. This results in extending the
periods during which we are obliged to fund our operating costs
until a milestone can be billed to the customer. This increases
the capital that we require to operate the business, and is
evidenced by increases in unbilled receivables on our balance
sheet. This is an integral part of our business and we are
constantly striving to manage our working capital requirements.
We expect to experience increasing demands for working capital
in the future as we grow our revenues.

Another critical statistic that we monitor is our
contract backlog, which at December 31, 2003, comprised
firm backlog of $109 million and implied backlog of
$5 million. We expect that our contract backlog will vary
from time to time as we deliver contract revenues and win new
awards. Given that our backlog in 2003 reached a record level
for our design and deployment services, it is reasonable to
expect that our backlog may decrease over the near term.

Since 1999, we have engaged in a number of
business dispositions, acquisitions and investments, some of
which have either generated significant cash proceeds or created
significant requirements for cash and these transactions
significantly affect the year-to-year comparability of our
financial statements. For example, in 1999 we disposed of our
hardware and software products business for cash proceeds of
about $22 million; in 2000, we sold our tower business for
cash proceeds of about $72 million; and in 2001, we sold
certain of our interests in NextWave Telecom, Inc., or NextWave,
for cash proceeds of about $21 million. Later in that year
and during 2002, we acquired operations in our EMEA region,
which required cash of approximately $10 million. In 2003 we
sold further interests in NextWave for another $1 million
and we initiated our investment in the joint venture in China,
which has a total cash commitment of about $1 million. We
expect to continue to consider business dispositions,
acquisitions and investments as a way of supporting our
longer-term strategies.

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

The major trends that have affected or may affect
our business are as follows:



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | project related revenues derived from a limited
    set of customers in each market where we do business;                                      
|
| |  | the difficulties that our customers often face in
    obtaining financing to fund the development, expansion and
    upgrade of their networks;
|
| |  | the acceleration or the delay associated with the
    introduction of new technologies and services by our customers;                          
|
| |  | the management and the services composition of
    our fixed price contracts; and                                                              
|
| |  | increased spending by wireless service providers
    in the areas of network design, deployment and optimization.                              

Our business is characterized by a limited number
of projects awarded by a limited number of customers. This can
lead to volatility in our results as projects initially ramp up
and then wind down. As projects are completed, we are faced with
the task of replacing project revenues with new projects, either
from the same

25



---



##### 



customer or from new customers. For example, the
completion of the XM Satellite Radio project (the
XM Project) in the first quarter of 2002 caused
our revenues in 2002 to decline dramatically from our revenues
in 2001. The delay in replacing revenues derived from the
XM Project contract and the difficult marketplace caused
gross profit as a percentage of total revenues to decline and
our cost reduction measures were not sufficient to return us to
profitability. In addition, the wireless industry is composed of
a relatively small number of wireless service providers and
equipment vendors, and this inevitably leads to issues of
customer concentration. Consequently, our business may be
affected in any single market by the changing priorities of a
small group of customers.


Some of our customers have faced difficulty in
obtaining the necessary financing to fund the development,
expansion and upgrade of their networks. The slowdown in the
world economies since 2000 and the volatility in the financial
markets have made it increasingly difficult for our customers to
predict both future demand for their services and future levels
of capital expenditure. This has resulted in the delay or
postponement of the development of new networks and expansion
and the upgrade of existing networks, all of which have had and
may continue to have a negative impact on our business.

We tend to benefit from projects undertaken by
our customers to introduce new technologies and services in
their networks and we tend to suffer when projects are delayed.
For example, the introduction of 3G equipment and services by
several major wireless service providers in Europe has resulted
in an increase in demand for our services in certain markets.
Revenues from 3G networks constituted approximately 20.0% and
44.8% of our total revenues for the years ended
December 31, 2002 and 2003, respectively, and it is
expected to continue to be an area of business growth in the
future.

We have experienced an increase in the percentage
of fixed price contracts awarded by our customers, and we expect
this trend to continue. A recent trend is for the award of fixed
price contracts to cover the design and deployment of a certain
geographic network area on a full turnkey basis, including
planning, engineering design, site acquisition, construction and
deployment services. In 2003, approximately 21.2% of our
revenues were generated by work done by subcontractors,
principally for construction related activities, and
approximately 78.8% of our revenues were generated by work that
we perform through our own workforce. To the extent that these
large turnkey projects include a relatively large proportion of
construction related activities, we expect that the composition
of our revenues by delivery method will vary so as to decrease
the proportion of services that we perform ourselves through our
own workforce and increase the services that we deliver through
third parties, typically subcontractors for construction. A
consequence of this change in mix may be to reduce our average
gross margins because subcontracted work generally commands
lower margins.

We believe our Americas region may benefit from
increased spending by certain United States wireless service
providers. Despite some estimates that 2003 capital expenditures
by United States wireless service providers would be lower than
expenditures for 2002, we observed an increase in spending in
the areas of network design, deployment and optimization by
several of these providers. This increased spending can be
attributed to several trends: (i) the preparation for
number portability which was implemented on November 24,
2003; (ii) license swaps as a result of wireless service
providers trying to maximize spectrum utilization and increase
coverage; (iii) network quality enhancement programs to
reduce churn; (iv) network expansion and capacity programs
geared toward enabling new and enhanced services; and
(v) other miscellaneous network upgrades and enhancements
required for market share maintenance and competitive reasons.

For example, Sprint engaged us in July 2003 to
perform project management and deployment services in
Sprints Northern Central region and to provide radio
frequency engineering and cell site acceptance testing
throughout several of Sprints other regions. We estimate
that the value of the Sprint contract is approximately
$66 million and the duration of the engagement to be
between 15 to 20 months.

U.S. Cellular engaged us in April 2003 to perform
project management and radio frequency engineering services
primarily in Midwest and Northeast markets. We estimate that the
value of the U.S. Cellular contract is approximately
$39 million and the duration of the engagement to be
between 12 to 18 months.

We have also observed an increase in spending on
wireless networks in developing countries. For example, in early
2003, we commenced two new projects in Algeria, building upon
the presence that we

26



---



##### 



established in that country in 2001. The projects
in Algeria include consulting services, equipment supply and
turnkey deployment. Our business in Algeria contributed a
significant part of our revenues in 2003 for the EMEA region,
and we anticipate that we will continue to generate significant
revenues from opportunities of this nature in the future. For
example, we were selected in March 2004 by STC to provide
approximately $27.2 million worth of engineering consulting
services for the expansion of STCs GSM network in Saudi
Arabia over 12 months, with the possibility of renewal for
an additional year at STCs discretion.


Results of Operations

The discussion below provides information which
management believes is relevant to an assessment and
understanding of our 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.

Revenues, Cost of Revenues and Gross
Margins

|          |                |                          |         |         |  |                |  |  |  |                |        |        |  |  |  |  |  |   |         |        |  |  |  |  | 
|--------- | -------------- | ------------------------ | ------- | ------- |  | -------------- |  |  |  | -------------- | ------ | ------ |  |  |  |  |  | - | ------- | ------ |  |  |  |  | 
|          |                |                         
|          |                | Years Ended December 31,
|          |                |                         
|          |                |                          |         |         |  |               
|          |                | 2001                     |         | 2002    |  | 2003          
|          |                |                          |         |         |  |               
|          |                |                          |         |         |  |                |  |  |  |               
|          |                | (in thousands)           |         |         |  | (in thousands) |  |  |  | (in thousands) |        |       
|Revenues: |                |                          |         |         |  |                |  |  |  |                |        |        |  |  |  |  |  |   |         |        |  |  |  | 
|          | Americas       |                          | $       | 101,780 |  |                |  |  |  |                | $      | 29,706 |  |  |  |  |  |   | $       | 53,086 |  |  |  |  | 
|          | EMEA           |                          |         | 23,385  |  |                |  |  |  |                |        | 34,755 |  |  |  |  |  |   |         | 53,296 |  |  |  |  | 
|          | Asia and other |                          |         | 5,444   |  |                |  |  |  |                |        | 2,608  |  |  |  |  |  |   |         | 2,057  |  |  |  |  | 
|          |                |                          |         |         |  |                |  |  |  |                |        |        |  |  |  |  |  |   |         |        |  |  |  | 
|          |                | $                        | 130,609 |         |  |                |  |  |  | $              | 67,069 |        |  |  |  |  |  | $ | 108,439 |        |  |  |  | 
|          |                |                          |         |         |  |                |  |  |  |                |        |        |  |  |  |  |  |   |         |        |  |  |  | 

|                  |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |      |  
|----------------- | -------------- | - | ------- | -------------- |  |  | ---- | -------------- | - | - | ------ | -------------- |  |  | ---- | ---- | - | - | ------ | ------ |  |  | ---- | ---- | -
|                  |                |   |         | (% of revenue) |  |  |      | (% of revenue) |   |   |        | (% of revenue)
|Cost of revenues: |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |     
|                  | Americas       |   | $       | 77,475         |  |  |      | 76.1           | % |   | $      | 26,965         |  |  |      | 90.8 | % |   | $      | 45,334 |  |  |      | 85.4 | %
|                  | EMEA           |   |         | 22,832         |  |  |      | 97.6           |   |   |        | 29,600         |  |  |      | 85.2 |   |   |        | 42,196 |  |  |      | 79.2 |  
|                  | Asia and other |   |         | 3,228          |  |  |      | 59.3           |   |   |        | 1,864          |  |  |      | 71.5 |   |   |        | 1,468  |  |  |      | 71.4 |  
|                  |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |     
|                  |                | $ | 103,535 |                |  |  | 79.3 | %              |   | $ | 58,429 |                |  |  | 87.1 | %    |   | $ | 88,998 |        |  |  | 82.1 | %   
|                  |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |     
|Gross margin:     |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |     
|                  | Americas       |   | $       | 24,305         |  |  |      | 23.9           | % |   | $      | 2,741          |  |  |      | 9.2  | % |   | $      | 7,752  |  |  |      | 14.6 | %
|                  | EMEA           |   |         | 553            |  |  |      | 2.4            |   |   |        | 5,155          |  |  |      | 14.8 |   |   |        | 11,100 |  |  |      | 20.8 |  
|                  | Asia and other |   |         | 2,216          |  |  |      | 40.7           |   |   |        | 744            |  |  |      | 28.5 |   |   |        | 589    |  |  |      | 28.6 |  
|                  |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |     
|                  |                | $ | 27,074  |                |  |  | 20.7 | %              |   | $ | 8,640  |                |  |  | 12.9 | %    |   | $ | 19,441 |        |  |  | 17.9 | %   
|                  |                |   |         |                |  |  |      |                |   |   |        |                |  |  |      |      |   |   |        |        |  |  |      |     

Americas

In 2001, the XM Project accounted for
$57.3 million or 56% of total revenue for the Americas
region. Revenues for the XM Project decreased to
$3.4 million or 11% in 2002 and, at the same time, there
was a general slow down in wireless infrastructure spending and
deployment in the US market. Revenue from projects other than
the XM Project fell from $44.5 million in 2001 to
$26.3 million in 2002. Cost of revenues and gross margins
in 2001 were dominated by the XM Project, and in 2002 we
incurred a loss of $0.2 million to complete the XM Project.
In addition in 2002, the region was not able to generate
sufficient volumes from work not related to the XM Project
to fully absorb our overhead costs and this led to a reduced
gross margin of approximately 9%.

In 2003, the wireless market improved and
opportunities increased for both RF/wireless design work and for
network deployment. In the second half of 2003, we began to
recognize revenues associated with two large network deployment
contracts awarded earlier in the year, US Cellular and Sprint.
The award of these major contracts, together with the steady
growth in the regions RF/wireless design business, enabled
the region to bring its gross margins into a more normal
expected range. During the year, the region increased its use of
subcontractors for the construction of cell sites in its network
deployment business, and this also contributed to

27



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##### 



an increase in its cost of revenues. In 2003,
subcontractors represented 17% of the total revenue delivered by
the region.


It is expected that the revenues in the immediate
future will be dominated by the execution of the existing
network deployment contracts already in backlog, while the
RF/wireless design business should continue to exhibit steady
growth. We will continue to use subcontractors to construct cell
sites as part of network deployment activities. It is reasonable
to expect that composition of revenues by delivery method, being
the mix of self-perform and subcontract revenues, will continue
to change as the existing network deployment projects are
implemented and the emphasis moves from design and acquisition
to cell site construction. Despite this anticipated change in
the mix of delivery, it is expected that gross margins will not
be materially different for the immediate future.

EMEA

In 2001, the EMEA region was composed of a number
of stand-alone projects, including one large project in Egypt,
which accounted for $4.3 million of the regions total
revenue. We incurred a $2.3 million loss in the same year
to complete our project in Egypt resulting in a negative impact
on 2001 gross margin. Following a change in strategy in late
2001, we acquired operations in local markets in the region,
specifically Transmast in Italy in December 2001, Smith Woolley
Telecom in the United Kingdom in January 2002 and 51% of Detron
in The Netherlands in July 2002. The increase in revenues in the
EMEA region between 2001 and 2002 is mostly attributable to the
acquisition and subsequent growth of these operations. In
addition, we won our first contract in Algeria and this
contributed approximately $1.9 million of revenue in 2002
but it had no effect on the gross margin. The absolute increase
in cost of revenues from 2001 to 2002 was mostly attributable to
the operations acquired in late 2001 and 2002, as described
above.

In 2003, the acquired operations continued to
grow, and we won additional programs in Algeria. Total revenue
from Algeria in 2003 amounted to $12.5 million or 23% of
the total revenue for the region. Total gross margin in 2003 for
the region increased to approximately 21% of revenue. This
reflected improved efficiencies as the acquired operations grew
in volume, coupled with a higher proportion of self-perform
services from the Algerian projects, which typically carry lower
cost of revenues.

It is expected that revenues in the immediate
future are likely to reflect the continued growth of the
acquired operations, together with the growth of new operations
in emerging markets in the region, at gross margins broadly
consistent with those experienced in 2003. While it is expected
that Algeria will contribute less revenues going forward, we
will continue to pursue large multi-year services projects in
the region such as the new Saudi Arabian project, leveraging our
reputation for engineering and technical consultancy.

Asia and other

Asia and other generated revenues of
$5.4 million, $2.6 million and $2.0 million in 2001,
2002 and 2003, respectively, which consisted of revenues from
our Asian operations, our Wireless Institute and LCC Wireline.
In 2003, we closed an investment for a 49% share in a joint
venture in Beijing, China, with BOCO. It is anticipated that we
will pursue opportunities in China primarily through this joint
venture.

In 2003, we formed LCC Wireline, which focuses on
providing technical services to CLECs and ILECs. Although
revenues were minimal, these operations may be a source of
meaningful revenues in the future at gross margins broadly
consistent with the gross margins generally achieved by our
company on other projects.

28



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Operating Expenses

|                    |                                    |                                  |        |        |        |      |        |        |        |   |        |        |        | 
|------------------- | ---------------------------------- | -------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                    |                                    |                                 
|                    |                                    | Years Ended December 31,        
|                    |                                    |                                 
|                    |                                    | 2001                             |        | 2002   |        | 2003
|                    |                                    |                                  |        |        |        |     
|                    |                                    |                                 
|                    |                                    | (in thousands)                  
|Operating expenses: |                                    |                                  |        |        |        |      |        |        |        |   |        |       
|                    | Net bad debt expense or (recovery) |                                  | $      | (5,368 | )      |      | $      | 2,729  |        |   | $      | (2,419 | )     
|                    | General and administrative         |                                  |        | 21,346 |        |      |        | 17,582 |        |   |        | 20,927 |       
|                    |                                    |                                  |        |        |        |      |        |        |        |   |        |       
|                    |                                    | Total general and administrative |        |        | 15,978 |      |        |        | 20,311 |   |        |        | 18,508 | 
|                    |                                    |                                  |        |        |        |      |        |        |        |   |        |       
|                    | Sale and marketing                 |                                  |        | 7,068  |        |      |        | 8,095  |        |   |        | 6,624  |       
|                    | Restructuring                      |                                  |        |       |        |      |        | 13,522 |        |   |        | (2     | )     
|                    | Tower gain                         |                                  |        | (2,998 | )      |      |        | (2,000 | )      |   |        |       |       
|                    | Depreciation                       |                                  |        | 3,012  |        |      |        | 2,884  |        |   |        | 3,860  |       
|                    |                                    |                                  |        |        |        |      |        |        |        |   |        |       
|                    |                                    | $                                | 23,060 |        |        | $    | 42,812 |        |        | $ | 28,990 |       
|                    |                                    |                                  |        |        |        |      |        |        |        |   |        |       

In 2001, net bad debt recoveries of
$5.4 million included recoveries of $7.5 million,
offset by expenses of $2.1 million. Recoveries were
primarily related to our bankruptcy claims against DCR PCS, Inc.
and Pocket Communications, Inc. of about $5.0 million and a
Malaysian corporation of about $2.5 million. These
receivables had been fully reserved for in previous years. In
2002, net expense of $2.7 million included expenses of
$4.3 million, offset by a final settlement from Pocket
Communications, Inc. of $1.6 million. Included in the
expenses of $4.3 million were $1.9 million
attributable to a provision against the receivable arising on a
project in Algeria, and $1.4 million attributable to the final
settlement of the XM Project. In 2003, the entire amount
previously provided for in 2002 for the Algerian project was
subsequently recovered.

General and administrative expenses, exclusive of
bad debts (recoveries), decreased by $3.7 million or 17%
from $21.3 million in 2001 to $17.6 million in 2002.
General and administrative expenses in the Americas region and
corporate decreased by about $5.6 million as a result of
our efforts to restructure the business following the completion
of the XM Project and the general reduction in the US
markets wireless infrastructure spending. At the same
time, general and administrative expenses in EMEA increased by
about $1.9 million in 2002 as a result of acquiring the
operations in the region in late 2001 and 2002. In 2003, general
and administrative expenses increased by $3.3 million or
19%, reflecting a full years cost of support for the
acquired operations, their subsequent growth, and support for
the additional contracts in Algeria.

Sales and marketing expenses increased initially
from 2001 to 2002 by approximately $1.0 million or 15%,
mostly as the result of acquiring and then building local market
operations in EMEA. In 2003, we decreased sales and marketing
expenses by $1.5 million or 18% through efficiencies in the
EMEA region and the reduction of costs in Asia following the
strategic decision to focus on the joint venture in China.

In 2002, following the completion of the XM
Project and the general reduction in the US markets
wireless infrastructure spending, we restructured our operations
and recorded a restructuring charge of $13.5 million. Of
this total charge, approximately $12.5 million related to
excess office space and $1.0 million to severance costs for
about 140 employees.

In 2000, we agreed to sell certain
telecommunication towers, and, as part of that agreement, we
agreed to lease unoccupied space on those towers. Consequently,
about $5 million of the gain realized on the sale of the
towers in 2000 was deferred until the unoccupied space was
leased, and this resulted in us recognizing $3 million of
the gain in 2001 and the balance of $2 million in 2002.

In 2003, we ceased using the trade name acquired
at the time of the purchase of Smith Woolley Telecom in January
2002. Therefore, depreciation and amortization expense in 2003
included the write off about $0.5 million, which was the
unamortized balance of intangible cost allocated to the trade
name.

29



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##### 



Other Income and Expense

|                        |                  |                            |        |       |        |      |        |     |        |   |       |      |       | 
|----------------------- | ---------------- | -------------------------- | ------ | ----- | ------ | ---- | ------ | --- | ------ | - | ----- | ---- | ----- | 
|                        |                  |                           
|                        |                  | Years Ended December 31,  
|                        |                  |                           
|                        |                  | 2001                       |        | 2002  |        | 2003
|                        |                  |                            |        |       |        |     
|                        |                  |                           
|                        |                  | (in thousands)            
|Other income (expense): |                  |                            |        |       |        |      |        |     |        |   |       |     
|                        | Interest income  |                            | $      | 1,899 |        |      | $      | 840 |        |   | $     | 447  |      
|                        | Interest expense |                            |        | (13   | )      |      |        | (22 | )      |   |       | (122 | )    
|                        | Other:           |                            |        |       |        |      |        |     |        |   |       |      |      
|                        |                  | Gain (loss) on investments |        |       | 22,394 |      |        |     | 1,104  |   |       |      | 1,000 | 
|                        |                  | Impairment of assets       |        |       |       |      |        |     | (5,139 | ) |       |      |      | 
|                        |                  | Other                      |        |       | (281   | )    |        |     | 268    |   |       |      | 218   | 
|                        |                  |                            |        |       |        |      |        |     |        |   |       |     
|                        |                  |                            | 22,113 |       |        |      | (3,767 | )   |        |   | 1,218 |     
|                        |                  |                            |        |       |        |      |        |     |        |   |       |     
|                        |                  | $                          | 23,999 |       |        | $    | (2,949 | )   |        | $ | 1,543 |     
|                        |                  |                            |        |       |        |      |        |     |        |   |       |     

Interest income reduced in 2001, 2002, and 2003
as a result of lower average balances of cash deposits combined
with decreases in available yields on short-term investments.

Gain on investments in 2001 related to the sale
of our interests in NextWave ($21.4 million) and
Tecnosistemi ($1.0 million). In 2002, we disposed of 82% of
our interest in an Egyptian operation and subsequently recorded
a gain of $1.1 million. In 2003, we sold a prepetition
bankruptcy interest in NextWave and recorded a gain of
$1.0 million.

In 2002, we recorded impairment charges for our
investments in Plan + Design Netcare AG ($4.6 million) and
Mobilocity, Inc. ($0.5 million).

Tax Benefit or (Expense)

|                                  |                                                              |                          |      |      |   |      |      |       |   |  |      |       |  
|--------------------------------- | ------------------------------------------------------------ | ------------------------ | ---- | ---- | - | ---- | ---- | ----- | - |  | ---- | ----- | -
|                                  |                                                              |                         
|                                  |                                                              | Years Ended December 31,
|                                  |                                                              |                         
|                                  |                                                              | 2001                     |      | 2002 |   | 2003
|                                  |                                                              |                          |      |      |   |     
|Statutory federal income tax rate |                                                              |                          | 35.0 | %    |   |      | 35.0 | %     |   |  | 35.0 | %    
|Effect of:                        |                                                              |                          |      |      |   |      |      |       |   |  |      |      
|                                  | State and local income taxes, net of federal tax
    benefit |                          |      | 3.5  |   |      |      | 1.3   |   |  |      | 1.4   |  
|                                  | Foreign and tax credits                                      |                          |      | (6.3 | ) |      |      | (11.8 | ) |  |      | 9.4   |  
|                                  | Non deductible expenses and permanent items                  |                          |      | 0.5  |   |      |      | (1.0  | ) |  |      | (2.2  | )
|                                  | Other                                                        |                          |      | 3.2  |   |      |      |      |   |  |      | 1.2   |  
|                                  | Valuation allowance of deferred tax assets                   |                          |      | 3.5  |   |      |      | (0.7  | ) |  |      | (26.3 | )
|                                  |                                                              |                          |      |      |   |      |      |       |   |  |      |      
|Effective income tax rate         |                                                              |                          | 39.4 | %    |   |      | 22.8 | %     |   |  | 18.5 | %    
|                                  |                                                              |                          |      |      |   |      |      |       |   |  |      |      

The effective income tax rate is estimated on the
basis of the income or loss before tax, and is subject to change
following the completion of our annual tax returns. This rate is
also subject to considerable variation quarter by quarter during
the year, depending on the latest estimates of operating
performance by tax jurisdiction, assumptions regarding the
treatment of foreign losses and the possible treatment of
existing tax provisions and foreign tax credits. Adjustment to
this rate during the year can result in cumulative adjustments
for tax benefits or expenses already recorded during the year.
See further discussion under Critical Accounting
Policies.

Net Income or (Loss)

In 2001, revenues of $130.6 million
generated operating income of $4.0 million, which included tower
gains of $3.0 million. Gains on the sale of investments
plus interest income contributed $24.0 million, resulting
in income before taxes of $28.0 million. Tax expense was
$11.0 million, equivalent to an effective tax rate of 39%,
resulting in a reported net income of $17.0 million.

In 2002, revenues of $67.1 million generated
an operating loss of $34.2 million, which included restructuring
charges of $13.5 million offset by tower gains of
$2.0 million. Impairment charges, gain on sale of

30



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##### 



an investment plus net interest income resulted
in further losses of $2.9 million, resulting in a loss
before taxes of $37.1 million. Tax benefit was
$8.5 million, equivalent to an effective tax rate of 23%,
resulting in a reported net loss of $28.7 million.


In 2003, revenues of $108.4 million
generated an operating loss of $9.5 million. Gain on sale of an
investments plus net interest income contributed
$1.5 million, resulting in a loss before taxes of
$8.0 million. Tax benefit was $1.5 million, equivalent
to an effective tax rate of 18%, resulting in a reported net
loss of $6.5 million.

Liquidity and Capital Resources

The following discussion relates to our sources
and uses of cash and cash requirements during 2001, 2002, and
2003.



| |                         
| | ------------------------
| | Sources and Uses of Cash

|                                                        |                                                          |                          |        |        |  |      |         |         |   |   |         |        |  
|------------------------------------------------------- | -------------------------------------------------------- | ------------------------ | ------ | ------ |  | ---- | ------- | ------- | - | - | ------- | ------ | -
|                                                        |                                                          |                         
|                                                        |                                                          | Years Ended December 31,
|                                                        |                                                          |                         
|                                                        |                                                          | 2001                     |        | 2002   |  | 2003
|                                                        |                                                          |                          |        |        |  |     
|                                                        |                                                          |                         
|                                                        |                                                          | (in thousands)          
|Net cash used in operating activities                   |                                                          | $                        | (7,666 | )      |  | $    | (2,830  | )       |   | $ | (19,584 | )     
|Net cash provided by (used in) investing
    activities |                                                          |                          | 37,101 |        |  |      | (11,871 | )       |   |   | (2,791  | )     
|Net cash provided by (used in) financing
    activities |                                                          |                          | 952    |        |  |      | (450    | )       |   |   | 13,811  |       
|                                                        |                                                          |                          |        |        |  |      |         |         |   |   |         |       
|                                                        | Net increase (decrease) in cash and cash
    equivalents |                          | $      | 30,387 |  |      | $       | (15,151 | ) |   | $       | (8,564 | )
|                                                        |                                                          |                          |        |        |  |      |         |         |   |   |         |       

In 2001, operations that generated revenues of
$130.6 million and operating income of $4.0 million,
used $7.7 million of cash, before investing and financing
activities are considered. Net cash used in operations consisted
of $3.3 million to fund operating losses and another
$4.4 million was used to finance increases in operating
assets and liabilities. The sale of short-term investments in
2001 generated another $19.6 million and the sale of our
primary interests in NextWave generated another
$21.7 million (net). After deducting the purchase of
property and equipment of $3.3 million and the acquisition
of Transmast operations in Italy for $0.8 million, total
cash provided by financing activities amounted to
$37.1 million. Overall, cash increased $30.4 million
primarily due to non-operational reasons.

In 2002, the level of operational activity
declined and cash used in operations decreased to
$2.8 million. Net cash used in operations consisted of
$5.9 million to fund operating losses, offset by
$3.1 million provided by operating assets and liabilities.
We used about $9.0 million to acquire operations in the
EMEA region and used another $2.8 million for the purchase
of property and equipment. Overall, cash was reduced by about
$15.2 million during 2002, primarily reflecting our
strategic acquisitions in EMEA.

In 2003, the level of operational activities
increased significantly, with revenues increasing to
$108.4 million and an operating loss decreasing to $9.5
million. Cash used in operations increased to $19.6 million
which consisted of $5.0 million to fund operating losses
and $23.2 million to finance growth in our operating assets
and liabilities, offset by the receipt of $8.6 million of
tax refunds. Cash used in investing activities was
$2.8 million, of which $1.7 million was for property and
equipment purchases and $1.0 million for business
acquisitions (primarily the joint venture in China). Financing
activities generated $13.8 million, of which
$11.5 million was the net proceeds from the public offering
of 3,050,000 shares of our class A common stock. Additionally,
$1.8 million was provided by the drawdowns on the line of
credit established for Detron in The Netherlands. Overall, cash
decreased by $8.6 million in 2003.

31



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##### 





| |                  
| | -----------------
| | Cash Requirements

|                          |                                       |                |        |        |  |   |        |        | 
|------------------------- | ------------------------------------- | -------------- | ------ | ------ |  | - | ------ | ------ | 
|                          |                                       |               
|                          |                                       | Years Ended   
|                          |                                       | December 31,  
|                          |                                       |               
|                          |                                       | 2002           |        | 2003  
|                          |                                       |                |        |       
|                          |                                       |               
|                          |                                       | (in thousands)
|Cash and cash equivalents |                                       | $              | 37,507 |        |  | $ | 28,943 |       
|Restricted cash           |                                       |                | 1,308  |        |  |   | 1,568  |       
|Short-term investments    |                                       |                | 514    |        |  |   | 520    |       
|                          |                                       |                |        |        |  |   |        |       
|                          | Total cash and short-term investments |                | $      | 39,329 |  |   | $      | 31,031 | 
|                          |                                       |                |        |        |  |   |        |       
|                          | Line of credit                        |                | $      |       |  |   | $      | 1,840  | 
|                          |                                       |                |        |        |  |   |        |       
|                          | Working capital                       |                | $      | 49,959 |  |   | $      | 54,980 | 
|                          |                                       |                |        |        |  |   |        |       

During 2003, as described above, the principal
requirements for cash were to fund operating losses and finance
the increase in working capital, driven by the growth in
receivables resulting from the increase in revenue. These
requirements were partly satisfied by the sale of new shares in
the public offering and the receipt of federal and state tax
refunds. However, as stated above, cash and cash equivalents was
reduced by $8.6 million during the year. Future
requirements of cash are likely to be affected by the continued
growth in working capital, which is anticipated as contract
revenues currently in backlog are delivered over the next twelve
to eighteen months. These increases are primarily caused by
growth in unbilled receivables and work in progress as work is
performed ahead of contractual billing milestones. Working
capital then reduces as those milestones are achieved, billings
are made and payments received from the customers. Over the next
year, it is expected that working capital will grow during the
first half of the year and then reduce during the second half as
the implementation plans on the major network deployment
contracts in the Americas region are performed. Consequently, we
expect our total cash balances to further decline in the short
term, primarily due to the implementation of these major network
deployment contracts. Despite this expected decline, we believe
that for at least the next twelve months we have adequate cash
and short-term investments to fund our operations

Existing contractual obligations are primarily
limited to operating leases, mostly for office facilities. Those
obligations are set out below. Fixed lease obligations are
partly offset by income from sublease agreements. Our operating
lease obligations at December 31, 2003 are as follows (in
thousands):

|                            |  |                       |        |           |  |           |       |           |  |         |       |  |  |   |       |  |  |   |       | 
|--------------------------- |  | --------------------- | ------ | --------- |  | --------- | ----- | --------- |  | ------- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                            |  |                      
|                            |  | Payment Due by Period
|                            |  |                      
|                            |  |                       |        | Less than |  |           |       | More than
|Contractual Obligations     |  | Total                 |        | 1 year    |  | 1-3 years |       | 3-5 years |  | 5 years
|                            |  |                       |        |           |  |           |       |           |  |        
|Operating lease obligations |  | $                     | 21,396 |           |  | $         | 5,035 |           |  | $       | 9,484 |  |  | $ | 3,460 |  |  | $ | 3,417 | 
|Sublease income             |  | $                     | 5,055  |           |  | $         | 263   |           |  | $       | 2,303 |  |  | $ | 963   |  |  | $ | 1,526 | 

Purchases of property and equipment are primarily
related to project requirements, but are relatively
insignificant compared to other requirements. From time to time,
we have made acquisitions and investments in joint ventures, and
it is possible that this may be a source of cash requirements at
some time in the future. There are no immediate plans or
commitments of this nature, which would result in significant
cash requirements.

Taxes are likely to be a cash requirement in the
future, but no significant needs are projected in the immediate
future. We do not expect to collect significant federal or state
tax refunds in the immediate future similar to those received in
2003.

In 2003, we have established a line of credit for
our subsidiary in The Netherlands, collateralized by
Detrons outstanding accounts receivable. From time to
time, we may establish other lines of credit to discount trade
receivables. Cash or outstanding accounts receivable may
collateralize such accounts.

During 2003, we sold 3,050,000 shares of our
class A common stock for net proceeds of approximately
$11.5 million as part of a public offering. We may consider
selling additional shares in the future, either to provide
additional working capital or for specific purposes, such as
acquisitions.

32



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##### 



In 2004, we negotiated the terms and conditions
of a line of credit of $3 million for the issue of standby
letters of credit, which, when executed, will be used to support
the issue of bid and performance bonds and guarantees. Each
standby letter of credit issued under such line of credit is
required to be fully collateralized by cash. In the case of any
standby letter of credit denominated in a foreign currency, the
cash collateral requirement is 110% of the U.S. dollar
equivalent of the foreign currency amount of the letter of
credit. We expect to finalize this line of credit in the
immediate future.

We had no material cash commitments as of
December 31, 2003 other than to fund the third and final
installment of $0.4 million for our joint venture in China
with BOCO, which was funded in January 2004. We have not engaged
in any off-balance sheet financing as of December 31, 2003.

Critical Accounting Policies

Our critical accounting policies are as follows:



| |   |                                 
| | - | --------------------------------
| |  | revenue recognition;            
|
| |  | allowance for doubtful accounts;
|
| |  | accounting for income taxes; and
|
| |  | restructuring charge.           



| |                    
| | -------------------
| | Revenue Recognition

Our principal sources of revenues consists of
design and system deployment services. We provide design
services on a contract basis, usually in a customized plan for
each client, and generally charge for engineering services on a
time and materials or fixed price basis. We generally offer
deployment services on a fixed price, time-certain basis. The
portion of our revenues from fixed-price contracts was 61.1% in
2002 and 79.1% in 2003. We recognize revenues 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, revenues
recognized in a given period depend on, among other things, the
costs incurred on each individual project and our then current
estimate of the total remaining costs to complete individual
projects. Considerable judgment on the part of our 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 we significantly increase the estimate of the total costs
to complete a project, we may recognize very little or no
additional revenues 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. At
December 31, 2002 and 2003, respectively, we had
$12.4 million and $35.0 million of unbilled
receivables. The increase in unbilled receivables is
attributable to an increase in fixed-price contracts and the
overall growth in revenues.



| |                                    
| | -----------------------------------
| | Allowance for Doubtful
    Accounts

The preparation of our consolidated financial
statements requires our 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, our management must make estimates of the
probability of collection of accounts receivable. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in customer payment terms when evaluating the
adequacy of the valuation allowance for doubtful accounts. For
the years ended December 31, 2002 and 2003, we derived
60.3% and 72.9%, respectively, of total revenues from our ten
largest customers, indicating significant customer concentration
risk with our receivables. These ten largest customers
constituted 66.4% and 81.2% of our net receivable balance as of
December 31, 2002 and 2003, respectively. Lastly, we
frequently perform services for development stage customers,
which carry a higher degree of risk, particularly as to the
collection of accounts receivable. These

33



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##### 



customers may be particularly vulnerable to the
current tightening of available credit and general economic
slowdown.




| |                            
| | ---------------------------
| | Accounting for Income Taxes

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

Considerable management judgment may be required
in determining our provision for income taxes, the deferred tax
assets and liabilities and any valuation allowance recorded
against the net deferred tax assets. We have recorded a
valuation allowance of $6.2 million and $8.3 million
as of December 31, 2002 and 2003, respectively, due to
uncertainties related to our ability to utilize some of the
deferred tax assets before they expire. These deferred tax
assets primarily consist of foreign net operating losses carried
forward, foreign tax credits and non-cash compensation accruals
relating to stock options issued under a phantom membership plan
in effect prior to our initial public offering. The net deferred
tax assets as of December 31, 2002 and 2003, were
$4.4 million and $5.0 million, respectively.



| |                     
| | --------------------
| | Restructuring Charge

We 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 $12.5 million. This facility charge primarily
relates to leased office space, which we no longer occupy. The
facility charge equals the existing lease obligation less
anticipated rental receipts to be received from existing and
potential subleases. Anticipating such rental receipts requires
significant judgments about the length of time the space will
remain vacant, anticipated cost escalators and operating costs
associated with the leases, the market rate at which the space
will be subleased, 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 as of
December 31, 2003 that we will receive $10.7 million
in sublease income, of which $5.1 million is committed.

Related Party Transactions

Prior to our initial public offering, both our
employees and the employees of Telcom Ventures were eligible to
participate in our life, medical, dental and 401(k) plans. In
connection with our initial public offering in 1996, we agreed
pursuant to an Overhead and Administrative Services Agreement to
allow the employees of Telcom Ventures to continue to
participate in our employee benefit plans in exchange for full
reimbursement of our cash costs and expenses. We billed Telcom
Ventures $141,000 and $71,000 during the years ended
December 31, 2002 and 2003, respectively, for payments made
by us pursuant to this agreement. We received reimbursements
from Telcom Ventures of $324,000 during 2002 (which included
payments for prior periods) and $65,000 during 2003. At
December 31, 2002 and 2003, outstanding amounts associated
with payments made by us under this agreement were $9,000 and
$6,000, respectively, and are included as due from related
parties and affiliates within the consolidated balance sheets in
the accompanying financial statements.

We also had an understanding with Telcom Ventures
pursuant to which from July 1, 2000 to December 31,
2000 we retained five employees who had worked in the business
development group of our tower subsidiary, Microcell Management,
Inc., before the assets of that subsidiary were sold in March
2000.

34



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##### 



During the six-month period, these employees
pursued international telecommunications tower business
opportunities on Telcom Ventures behalf. In return, we
would be Telcom Ventures exclusive provider of project
management, radio frequency engineering and deployment services
for any tower-related projects secured by these employees during
this six-month period. In addition, Telcom Ventures reimbursed
us for all costs incurred in employing these persons (including
payroll and benefit costs). This arrangement has been
terminated. We received reimbursements from Telcom Ventures of
$140,000 during 2002 for outstanding amounts associated with
this arrangement. At December 31, 2002, outstanding amounts
associated with payments made by us under this arrangement were
$100,000 in expense reimbursements and other payments for 2001
that were disputed by Telcom Ventures. This matter was fully
resolved in April 2003 with Telcom Ventures payment of the full
$100,000 in dispute. At December 31, 2003, no amounts were
outstanding under this arrangement. The amounts outstanding as
of December 31, 2002, less reserves, are included as due
from related parties and affiliates within the consolidated
balance sheets in the accompanying financial statements


In July 2002, we acquired 51% of the outstanding
shares of Detron, a newly formed corporation in The Netherlands.
We acquired the shares from Westminster B.V.
(Westminster), which transferred the shares to
Detron Corporation B.V. in January 2003. 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 to
December 31, 2002 and $0.1 million for the year ended
December 31, 2003. During the second half 2002 and all of
2003, Detron seconded various idle employees to Detron
Telematics, Westminsters wholly-owned subsidiary and
recorded revenue of approximately $0.2 million and
$0.3 million for the years ended December 31, 2002 and
2003, respectively.

Recent Accounting Pronouncements

In May 2003, the Financial Accounting Standards
Board (the FASB) issued Statement of Financial
Accounting No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity(SFAS No. 150). This statement establishes
standards for how an issuer classifies and measures certain
financial instruments with both liability and equity
characteristics. It requires that an issuer classify a
freestanding financial instrument that is within its scope as a
liability (or as an asset in some circumstances). Many of these
freestanding financial instruments were previously classified as
equity. SFAS No. 150 became effective for financial
instruments entered into or modified after May 31, 2003. We
have evaluated the impact of SFAS No. 150 on our
consolidated financial statements with respect to our right to
buy out the minority interests in several of our subsidiaries.
The adoption of SFAS No. 150 did not have a material
impact on our consolidated financial statements.

Item 7A.     Quantitative
and Qualitative Disclosures about Market Risk

We are exposed to the impact of foreign currency
fluctuations. The exposure to exchange rates relates primarily
to our foreign subsidiaries. Subsidiaries with material foreign
currency exposure are in Great Britain, The Netherlands, Italy
and Brazil. For our foreign subsidiaries, exchange rates can
have an impact on the United States dollar value of their
reported earnings and the intercompany transactions with the
subsidiaries.

Customers outside of the United States accounted
for 57.0% and 51.0% of our revenues for the years ended
December 31, 2002 and 2003, respectively, the majority of
which were in Europe. In connection with our recent acquisitions
and the increased availability of 3G equipment in Europe, we
anticipate continued growth of its international operations,
particularly in Europe, the Middle East and Africa, in 2004 and
beyond. As a result, fluctuations in the value of foreign
currencies against the United States dollar may have a
significant impact on our reported results. 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 our 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 United States dollar amount of our
shareholders equity. The assets and liabilities of the
non-U.S. subsidiaries are translated into United States dollars
at the exchange rate in effect on the date of the balance sheet
for the respective reporting period.

35



---



##### 



The resulting translation adjustments are
recorded in shareholders equity as accumulated other
comprehensive loss. The Euro was stronger relative to many of
the foreign currencies at December 31, 2003, compared to
December 31, 2002. Consequently, the accumulated other
comprehensive loss component of shareholders equity
decreased $2.9 million during the year ended
December 31, 2003. As of December 31, 2003, 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 $11.7 million.


We are exposed to the impact of foreign currency
fluctuations due to the operations of short-term intercompany
transactions between the London office and the consolidated
foreign subsidiaries. While these intercompany balances are
eliminated in consolidation, exchange rate changes do affect
consolidated earnings. Foreign subsidiaries with amounts owed to
or from the London operations at December 31, 2003
(denominated in Euros) include Italy in the amount of
$1.1 million and The Netherlands in the amount of
$0.2 million. These balances generated a foreign exchange
gain of $0.1 million included in our consolidated results
at December 31, 2003. A hypothetical appreciation of the
Euro and British Pound of 10% would result in a
$0.1 million net increase to our operating losses generated
outside the United States. This was estimated using a 10%
appreciation factor to the average monthly exchange rates
applied to net income or loss for each of our subsidiaries in
the respective period. Foreign exchange gains and losses
recognized on any transactions are included in our consolidated
statements of operations.

Although currency fluctuations can have an impact
on our reported results and shareholders equity, such
fluctuations generally do not affect our cash flow or result in
actual economic gains or losses. We currently do not hedge any
of these risks in its foreign subsidiaries because: (i) our
subsidiaries generally earn revenues and incur expenses within a
single country and, consequently, do not incur currency risks in
connection with the conduct of their normal operations;
(ii) other foreign operations are minimal; and (iii) we do
not believe that hedging transactions are justified by the
current exposure and cost at this time.

36



---



##### 



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 its subsidiaries
(the Company) as of December 31, 2002 and 2003,
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, 2003. 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
its subsidiaries as of December 31, 2002 and 2003, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2003, 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 19, 2004


37



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

Years ended December 31, 2001, 2002 and
2003


(In thousands, except per share
data)


|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |        |  
|------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | -
|                                                                                |                                                                      | 2001 |         | 2002   |   | 2003
|                                                                                |                                                                      |      |         |        |   |     
|Revenues                                                                        |                                                                      | $    | 130,609 |        |   | $    | 67,069  |        |   | $ | 108,439 |       
|Cost of revenues                                                                |                                                                      |      | 103,535 |        |   |      | 58,429  |        |   |   | 88,998  |       
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Gross profit                                                                    |                                                                      |      | 27,074  |        |   |      | 8,640   |        |   |   | 19,441  |       
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Operating expenses:                                                             |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|                                                                                | Sales and marketing                                                  |      |         | 7,068  |   |      |         | 8,095  |   |   |         | 6,624  |  
|                                                                                | General and administrative                                           |      |         | 15,978 |   |      |         | 20,311 |   |   |         | 18,508 |  
|                                                                                | Restructuring charge (note 7)                                        |      |         |       |   |      |         | 13,522 |   |   |         | (2     | )
|                                                                                | Gain on sale of tower portfolio and
    administration, net (note 3) |      |         | (2,998 | ) |      |         | (2,000 | ) |   |         |       |  
|                                                                                | Depreciation and amortization                                        |      |         | 3,012  |   |      |         | 2,884  |   |   |         | 3,860  |  
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Total operating expenses                                                        |                                                                      |      | 23,060  |        |   |      | 42,812  |        |   |   | 28,990  |       
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Operating income (loss)                                                         |                                                                      |      | 4,014   |        |   |      | (34,172 | )      |   |   | (9,549  | )     
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Other income (expense):                                                         |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|                                                                                | Interest income                                                      |      |         | 1,899  |   |      |         | 840    |   |   |         | 447    |  
|                                                                                | Interest expense                                                     |      |         | (13    | ) |      |         | (22    | ) |   |         | (122   | )
|                                                                                | Other                                                                |      |         | 22,113 |   |      |         | (3,767 | ) |   |         | 1,218  |  
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Total other income (expense)                                                    |                                                                      |      | 23,999  |        |   |      | (2,949  | )      |   |   | 1,543   |       
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Income (loss) from operations before income
    taxes                           |                                                                      |      | 28,013  |        |   |      | (37,121 | )      |   |   | (8,006  | )     
|Provision (benefit) for income taxes
    (note 13)                              |                                                                      |      | 11,041  |        |   |      | (8,451  | )      |   |   | (1,483  | )     
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Net income (loss)                                                               |                                                                      | $    | 16,972  |        |   | $    | (28,670 | )      |   | $ | (6,523  | )     
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Net income (loss) per share:                                                    |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|                                                                                | Basic                                                                |      | $       | 0.83   |   |      | $       | (1.37  | ) |   | $       | (0.31  | )
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|                                                                                | Diluted                                                              |      | $       | 0.81   |   |      | $       | (1.37  | ) |   | $       | (0.31  | )
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|Weighted average shares used in calculation of
    net income (loss) per share: |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|                                                                                | Basic                                                                |      |         | 20,571 |   |      |         | 20,902 |   |   |         | 21,292 |  
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       
|                                                                                | Diluted                                                              |      |         | 20,916 |   |      |         | 20,902 |   |   |         | 21,292 |  
|                                                                                |                                                                      |      |         |        |   |      |         |        |   |   |         |       

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

38



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share
data)


|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |         |        |        | 
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------- | ------ | ------ | ------- | ------- | ------ | ------ | 
|                                                                                             |                                                                                                                            |                                                                                                                                     
|                                                                                             |                                                                                                                            | December 31,                                                                                                                        
|                                                                                             |                                                                                                                            |                                                                                                                                     
|                                                                                             |                                                                                                                            | 2002                                                                                                                                 |                            | 2003   
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |        
|ASSETS:                                                                                     
|Current assets:                                                                              |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             | Cash and cash equivalents (note 4)                                                                                         |                                                                                                                                      | $                          | 37,507  |        |        | $       | 28,943  |       
|                                                                                             | Restricted cash                                                                                                            |                                                                                                                                      |                            | 1,308   |        |        |         | 1,568   |       
|                                                                                             | Short-term investments                                                                                                     |                                                                                                                                      |                            | 514     |        |        |         | 520     |       
|                                                                                             | Receivables, net of allowance for doubtful
    accounts of $3,122 and $466 at December 31, 2002 and
    2003, respectively |                                                                                                                                      |                            |         |        |        |         |         |       
|                                                                                             |                                                                                                                            | Trade accounts receivable                                                                                                            |                            |         | 13,165 |        |         |         | 27,456 |       
|                                                                                             |                                                                                                                            | Unbilled receivables                                                                                                                 |                            |         | 12,369 |        |         |         | 35,007 |       
|                                                                                             |                                                                                                                            | Due from related parties and affiliates
    (note 5)                                                                                 |                            |         | 61     |        |         |         | 180    |       
|                                                                                             | Deferred income taxes, net (note 13)                                                                                       |                                                                                                                                      |                            | 3,932   |        |        |         | 3,547   |       
|                                                                                             | Prepaid expenses and other current assets                                                                                  |                                                                                                                                      |                            | 1,835   |        |        |         | 1,726   |       
|                                                                                             | Prepaid tax receivable and prepaid taxes                                                                                   |                                                                                                                                      |                            | 8,285   |        |        |         | 662     |       
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            |                                                                                                                                      | Total current assets       |         |        | 78,976 |         |         |        | 99,609 | 
|Property and equipment, net (note 6)                                                         |                                                                                                                            |                                                                                                                                      | 5,010                      |         |        |        | 3,818   |        
|Investments in affiliates (note 11)                                                          |                                                                                                                            |                                                                                                                                      |                           |         |        |        | 764     |        
|Deferred income taxes, net (note 13)                                                         |                                                                                                                            |                                                                                                                                      | 504                        |         |        |        | 1,407   |        
|Goodwill (note 11)                                                                           |                                                                                                                            |                                                                                                                                      | 9,340                      |         |        |        | 11,115  |        
|Other intangibles (note 11)                                                                  |                                                                                                                            |                                                                                                                                      | 1,933                      |         |        |        | 843     |        
|Other assets                                                                                 |                                                                                                                            |                                                                                                                                      | 960                        |         |        |        | 1,035   |        
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            | $                                                                                                                                    | 96,723                     |         |        | $      | 118,591 |        
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                                   
|Current liabilities:                                                                         |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             | Line of credit                                                                                                             |                                                                                                                                      | $                          |        |        |        | $       | 1,840   |       
|                                                                                             | Accounts payable                                                                                                           |                                                                                                                                      |                            | 7,316   |        |        |         | 11,485  |       
|                                                                                             | Accrued expenses                                                                                                           |                                                                                                                                      |                            | 10,543  |        |        |         | 21,152  |       
|                                                                                             | Accrued employee compensation and benefits                                                                                 |                                                                                                                                      |                            | 6,272   |        |        |         | 5,525   |       
|                                                                                             | Deferred revenue                                                                                                           |                                                                                                                                      |                            | 41      |        |        |         | 471     |       
|                                                                                             | Income taxes payable (note 13)                                                                                             |                                                                                                                                      |                            | 882     |        |        |         | 967     |       
|                                                                                             | Accrued restructuring current                                                                                              |                                                                                                                                      |                            | 3,937   |        |        |         | 2,903   |       
|                                                                                             | Other current liabilities                                                                                                  |                                                                                                                                      |                            | 26      |        |        |         | 286     |       
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            |                                                                                                                                      | Total current liabilities  |         |        | 29,017 |         |         |        | 44,629 | 
|Accrued restructuring noncurrent                                                             |                                                                                                                            |                                                                                                                                      | 5,786                      |         |        |        | 3,432   |        
|Other liabilities                                                                            |                                                                                                                            |                                                                                                                                      | 832                        |         |        |        | 762     |        
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            |                                                                                                                                      | Total liabilities          |         |        | 35,635 |         |         |        | 48,823 | 
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|Commitments and contingencies (notes 1, 12,
    16, and 17)                                  |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|Shareholders equity:                                                                        |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             | Preferred stock:                                                                                                           |                                                                                                                                      |                            |         |        |        |         |         |       
|                                                                                             |                                                                                                                            | 10,000 shares authorized; -0- shares issued and
    outstanding                                                                      |                            |         |       |        |         |         |       |       
|                                                                                             | Class A common stock; $.01 par value:                                                                                      |                                                                                                                                      |                            |         |        |        |         |         |       
|                                                                                             |                                                                                                                            | 70,000 shares authorized; 14,632 shares and
    19,549 shares issued and outstanding at December 31, 2002
    and 2003, respectively |                            |         | 146    |        |         |         | 195    |       
|                                                                                             | Class B common stock; $.01 par value:                                                                                      |                                                                                                                                      |                            |         |        |        |         |         |       
|                                                                                             |                                                                                                                            | 20,000 shares authorized; 6,319 shares and 4,638
    shares issued and outstanding at December 31, 2002 and
    2003, respectively   |                            |         | 63     |        |         |         | 46     |       
|                                                                                             | Paid-in capital                                                                                                            |                                                                                                                                      |                            | 94,132  |        |        |         | 106,262 |       
|                                                                                             | Accumulated deficit                                                                                                        |                                                                                                                                      |                            | (30,079 | )      |        |         | (36,602 | )     
|                                                                                             | Note receivable from shareholder (note 5)                                                                                  |                                                                                                                                      |                            | (1,625  | )      |        |         | (1,557  | )     
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            |                                                                                                                                      | Subtotal                   |         |        | 62,637 |         |         |        | 68,344 | 
|Accumulated other comprehensive income
    (loss)  foreign currency translation adjustments |                                                                                                                            |                                                                                                                                      | (1,549                     | )       |        |        | 1,424   |        
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            |                                                                                                                                      | Total shareholders equity |         |        | 61,088 |         |         |        | 69,768 | 
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        
|                                                                                             |                                                                                                                            | $                                                                                                                                    | 96,723                     |         |        | $      | 118,591 |        
|                                                                                             |                                                                                                                            |                                                                                                                                      |                            |         |        |        |         |        

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

39



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

Years ended December 31, 2001, 2002 and
2003


(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, 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  |  
|Exercise/issuance of stock options                                        |  |           |  |              |  |         | 2   |               |  |             |    |              |  |               | 588     |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 590     |  
|Issuance of common stock                                                  |  |           |  |              |  |         | 47  |               |  |             | (17 | )            |  |               | 11,542  |             |  |       |         |   |  |   |        |   |  |   |       |   |  |   |       |   |  |   | 11,572  |  
|Payment from shareholder                                                  |  |           |  |              |  |         |    |               |  |             |    |              |  |               |        |             |  |       |         |   |  |   |        |   |  |   | 68     |   |  |   |       |   |  |   | 68      |  
|Net loss                                                                  |  |           |  |              |  |         |    |               |  |             |    |              |  |               |        |             |  |       | (6,523  | ) |  |   | (6,523  | ) |  |   |       |   |  |   |       |   |  |   | (6,523  | )
|Other comprehensive income  foreign
    currency translation adjustments |  |           |  |              |  |         |    |               |  |             |    |              |  |               |        |             |  |       | 2,973   |   |  |   |        |   |  |   |       |   |  |   | 2,973  |   |  |   | 2,973   |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |         |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive loss                                                        |  |           |  |              |  |         |    |               |  |             |    |              |  |               |        |             |  | $     | (3,550  | ) |  |   |        |   |  |   |       |   |  |   |       |   |  |   |        |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |         |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  
|Balances at December 31, 2003                                             |  |           |   |              |  | $       | 195 |               |  | $           | 46  |              |  | $             | 106,262 |             |  |       |         |   |  | $ | (36,602 | ) |  | $ | (1,557 | ) |  | $ | 1,424  |   |  | $ | 69,768  |  
|                                                                          |  |           |   |              |  |         |     |               |  |             |     |              |  |               |         |             |  |       |         |   |  |   |         |   |  |   |        |   |  |   |        |   |  |   |         |  

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

40



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

Years ended December 31, 2001, 2002, and
2003


(In thousands)


|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |        |         |  
|---------------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------------------- | ------ | ------- | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------- | -
|                                                                                         |                                                 | 2001                                    |        | 2002    |        | 2003
|                                                                                         |                                                 |                                         |        |         |        |     
|Cash flows from operating
    activities:                                                |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Net income (loss)                                                                        |                                                 | $                                       | 16,972 |         |        | $    | (28,670 | )      |        | $ | (6,523  | )     
|Adjustments to reconcile net income
    (loss) to net cash used in operating activities: |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|                                                                                         | Depreciation and amortization                   |                                         |        | 3,012   |        |      |         | 2,884  |        |   |         | 3,860  |        
|                                                                                         | Provision (recovery) for doubtful accounts      |                                         |        | 2,123   |        |      |         | 4,317  |        |   |         | (2,419 | )      
|                                                                                         | Realized gain on sale of investments and assets |                                         |        | (22,395 | )      |      |         |       |        |   |         |       |        
|                                                                                         | Loss from investments in joint ventures, net    |                                         |        |        |        |      |         |       |        |   |         | 126    |        
|                                                                                         | Impairment of assets                            |                                         |        |        |        |      |         | 5,140  |        |   |         |       |        
|                                                                                         | Restructuring charge                            |                                         |        |        |        |      |         | 13,522 |        |   |         | (2     | )      
|                                                                                         | Gain on sale of tower portfolio                 |                                         |        | (2,998  | )      |      |         | (2,000 | )      |   |         |       |        
|                                                                                         | Changes in operating assets and liabilities:    |                                         |        |         |        |      |         |        |        |   |         |        |        
|                                                                                         |                                                 | Trade, unbilled, and other receivables  |        |         | 9,358  |      |         |        | 10,963 |   |         |        | (34,732 | )
|                                                                                         |                                                 | Accounts payable and accrued expenses   |        |         | (8,835 | )    |         |        | 902    |   |         |        | 13,666  |  
|                                                                                         |                                                 | Other current assets and liabilities    |        |         | (5,227 | )    |         |        | (8,560 | ) |         |        | 7,129   |  
|                                                                                         |                                                 | Other noncurrent assets and liabilities |        |         | 324    |      |         |        | (1,328 | ) |         |        | (689    | )
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Net cash used in operating activities                                                    |                                                 |                                         | (7,666 | )       |        |      | (2,830  | )      |        |   | (19,584 | )     
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Cash flows from investing
    activities:                                                |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|                                                                                         | Proceeds from sales of short-term investments   |                                         |        | 42,069  |        |      |         |       |        |   |         |       |        
|                                                                                         | Purchases of short-term investments             |                                         |        | (22,489 | )      |      |         | (30    | )      |   |         | (20    | )      
|                                                                                         | Purchases of property and equipment             |                                         |        | (3,377  | )      |      |         | (2,854 | )      |   |         | (1,812 | )      
|                                                                                         | Proceeds from sale of property and equipment    |                                         |        | 29      |        |      |         | 34     |        |   |         | 69     |        
|                                                                                         | Investments in affiliates                       |                                         |        | (1,755  | )      |      |         |       |        |   |         |       |        
|                                                                                         | Proceeds from sale of investments and assets    |                                         |        | 22,624  |        |      |         |       |        |   |         |       |        
|                                                                                         | Business acquisitions and investments           |                                         |        |        |        |      |         | (9,021 | )      |   |         | (1,027 | )      
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Net cash provided by (used in) investing
    activities                                  |                                                 |                                         | 37,101 |         |        |      | (11,871 | )      |        |   | (2,790  | )     
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Cash flows from financing
    activities:                                                |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|                                                                                         | Proceeds from issuance of common stock, net     |                                         |        | 518     |        |      |         | 49     |        |   |         | 11,572 |        
|                                                                                         | Proceeds from exercise of options               |                                         |        | 434     |        |      |         | 109    |        |   |         | 590    |        
|                                                                                         | Increase in restricted cash                     |                                         |        |        |        |      |         | (1,308 | )      |   |         | (260   | )      
|                                                                                         | Proceeds from line of credit                    |                                         |        |        |        |      |         |       |        |   |         | 10,831 |        
|                                                                                         | Payments on line of credit                      |                                         |        |        |        |      |         |       |        |   |         | (8,991 | )      
|                                                                                         | Repayment of loan to shareholder                |                                         |        |        |        |      |         | 700    |        |   |         | 68     |        
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Net cash provided by (used in) financing
    activities                                  |                                                 |                                         | 952    |         |        |      | (450    | )      |        |   | 13,810  |       
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Net increase (decrease) in cash and cash
    equivalents                                 |                                                 |                                         | 30,387 |         |        |      | (15,151 | )      |        |   | (8,564  | )     
|Cash and cash equivalents at beginning of period                                         |                                                 |                                         | 22,271 |         |        |      | 52,658  |        |        |   | 37,507  |       
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Cash and cash equivalents at end of period                                               |                                                 | $                                       | 52,658 |         |        | $    | 37,507  |        |        | $ | 28,943  |       
|                                                                                         |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|Supplemental disclosures of cash flow information:                                       |                                                 |                                         |        |         |        |      |         |        |        |   |         |       
|                                                                                         | Cash paid during the year for:                  |                                         |        |         |        |      |         |        |        |   |         |        |        
|                                                                                         |                                                 | Interest                                |        | $       | 13     |      |         | $      | 22     |   |         | $      | 47      |  
|                                                                                         |                                                 | Income taxes                            |        |         | 14,103 |      |         |        | 1,545  |   |         |        | 288     |  

Supplemental disclosures of non-cash investing
and financing activities:

In January 2002, we 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 our
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.

In May 2003, in satisfaction of the purchase
agreement between Westminster Capital, B.V.
(Westminster) and our company, we paid Westminster
approximately $0.3 million in cash and assigned an
intercompany note receivable due from Detron to Westminster in
the amount of approximately $0.2 million. As a result of
the note assignment, goodwill and other intangible assets
increased, offset by an increase in due to related parties,
which is included in accounts payable on the consolidated
balance sheet.

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

41



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Years ended December 31, 2001, 2002 and
2003


(1)     Description
of Operations

LCC International Inc. a Delaware Corporation
(LCCI), was formed in 1983. Unless the context
indicates otherwise, the terms the Company,
we, us, and our refer herein
to LCCI.

We provide integrated end-to-end solutions for
wireless voice and data communication networks with service
offerings ranging from high level technical consulting, to
system design and deployment, to ongoing operations and
maintenance services. We operate in a highly competitive
environment subject to rapid technological change and emergence
of new technologies. Historically, the key drivers of changes in
our 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 we believe that
our services are transferable to emerging technologies, rapid
changes in technology and deployment could have an adverse
financial impact on us.

In November 2003, we completed an underwritten
public offering of 8,050,000 shares of class A common stock, of
which 5,000,000 shares were sold by certain of our stockholders.
We received net proceeds for $11.5 million from the
offering.

(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

During 2002, short-term investments consisted
primarily of federally sponsored short-term notes with maturity
dates of more than three months from the date of acquisition.
During 2003, short-term investments consist of a certificate of
deposit with a maturity of six months from the date of
acquisition. The portfolio held by us has been classified based
on managements intentions as to future investment
activity. We carry 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 us
to concentration of credit risk consist primarily of trade
receivables. We sell our services globally. Generally, we do not
require collateral or other security to support customer
receivables. We perform ongoing credit evaluations of our
customers financial condition and maintain a provision for
doubtful accounts related to potential credit losses. We had the
following significant

42



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

concentrations of trade receivables from
customers located outside the United States at December 31, 2002
and 2003:

|                    |  |                |       |      |  |  |        | 
|------------------- |  | -------------- | ----- | ---- |  |  | ------ | 
|                    |  | 2002           |       | 2003
|                    |  |                |       |     
|                    |  |               
|                    |  | (In thousands)
|Europe              |  |                | 9,724 |      |  |  | 10,922 | 
|Middle East/ Africa |  |                | 1,308 |      |  |  | 8,186  | 
|Asia-Pacific        |  |                | 1,175 |      |  |  |       | 

Our existing and potential customer base is
diverse and includes start-up companies and foreign enterprises.
We derived approximately 82.9%, 60.3% and 72.9% of our revenues
from our ten largest customers for the years ended
December 31, 2001, 2002 and 2003, respectively. These ten
largest customers constituted 66.4% and 81.2% of our net
receivable balance as of December 31, 2002 and 2003,
respectively. Although we believe that the diversity of our
customer base has historically minimized the risk of incurring
material losses due to concentrations of credit risk, we may be
exposed to a declining customer base in periods of market
downturns, severe competition, exchange rate fluctuations or
other international developments.

In 2003, revenues from one customer were
approximately $16.5 million or 15.2% of total revenues,
revenues from another customer were approximately
$13.0 million or 12.0% of total revenues and revenues from
a third customer were approximately $11.5 million or 10.6%
of total revenues. In 2002, revenues from one customer were
approximately $7.8 million or 11.7% of 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 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, 2002 and 2003 because of the relatively short
duration of these instruments. The carrying value of the note
receivable from shareholder and the line of credit approximated
the fair value as the instrument 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

Our policy is to review our long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable in
accordance with SFAS No. 144, Accounting for Impairment
or Disposal of Long-Lived Assets. We recognize 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.

43



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Goodwill and
Other Intangible Assets

Goodwill represents the excess of costs over fair
value of assets of businesses acquired. We 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.

Investments
in Affiliates

We use the equity method to account for those
investments in which we have an ownership interest equal to or
greater than 20% or exercise significant influence. For equity
method investments, we record our proportionate share of the
investees net income or loss. Generally, we use the cost
method of accounting for our investments in which we have an
ownership interest of less than 20% or do 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

Our principal sources of revenues are design
services and system deployment services. We recognize revenues
from long-term fixed-price contracts using the
percentage-of-completion method. With the
percentage-of-completion method, we recognize 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. We also recognize revenues on time
and materials contracts as the services are performed. Revenues
earned but not yet billed are reflected as unbilled receivables
in the accompanying consolidated balance sheets. We expect
substantially all unbilled and billed receivables to be
collected within one year.

Income
Taxes

Income taxes are determined in accordance with
SFAS No. 109, Accounting for Income
Taxes. 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 our international operations are
subject to local income taxation. Currently, we are 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 we have subsidiaries, have established
branch offices or have performed significant services that
constitute a permanent establishment for tax
reporting purposes. The foreign taxes paid or accrued by us may
represent a potential credit for us against our U.S. federal
income taxes.

Foreign
Currency Translation

Gains and losses on translation of the accounts
of our 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.

44



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 accounts,
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

We account 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 including FASB Interpretation
No. 44, and comply with the disclosure provisions of 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 our stock and the exercise price.

Had compensation cost for our 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 SFAS No. 123, our net income
(loss) and net income (loss) per share would have been
reduced (increased) to the pro forma amounts indicated below:

|                                                                                                    |                             |                                       |        |        |      |      |         |         |       |   |        |        |       |  
|--------------------------------------------------------------------------------------------------- | --------------------------- | ------------------------------------- | ------ | ------ | ---- | ---- | ------- | ------- | ----- | - | ------ | ------ | ----- | -
|                                                                                                    |                             | 2001                                  |        | 2002   |      | 2003
|                                                                                                    |                             |                                       |        |        |      |     
|                                                                                                    |                             |                                      
|                                                                                                    |                             | (In thousands, except per share data)
|Net income (loss) as reported                                                                       |                             | $                                     | 16,972 |        |      | $    | (28,670 | )       |       | $ | (6,523 | )     
|Deduct total stock-based employee compensation
    expense determined under fair value based method |                             |                                       | (2,656 | )      |      |      | (2,562  | )       |       |   | (2,399 | )     
|                                                                                                    |                             |                                       |        |        |      |      |         |         |       |   |        |       
|                                                                                                    | Pro forma net income (loss) |                                       | $      | 14,316 |      |      | $       | (31,232 | )     |   | $      | (8,922 | )    
|                                                                                                    |                             |                                       |        |        |      |      |         |         |       |   |        |       
|Net income (loss) share                                                                             |                             |                                       |        |        |      |      |         |         |       |   |        |       
|                                                                                                    | As reported:                |                                       |        |        |      |      |         |         |       |   |        |        |      
|                                                                                                    |                             | Basic                                 |        | $      | 0.83 |      |         | $       | (1.37 | ) |        | $      | (0.31 | )
|                                                                                                    |                             | Diluted                               |        | $      | 0.81 |      |         | $       | (1.37 | ) |        | $      | (0.31 | )
|                                                                                                    | Pro forma:                  |                                       |        |        |      |      |         |         |       |   |        |        |      
|                                                                                                    |                             | Basic                                 |        | $      | 0.70 |      |         | $       | (1.49 | ) |        | $      | (0.42 | )
|                                                                                                    |                             | Diluted                               |        | $      | 0.68 |      |         | $       | (1.49 | ) |        | $      | (0.42 | )

Other
Comprehensive Income (Loss)

Comprehensive income (loss) 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

45



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

income (loss) consists solely of foreign
currency translation adjustments in 2001, 2002 and 2003. Changes
in components of other comprehensive income (loss) are
reported net of income tax, as follows (in thousands):

|                                         |  |        |        |          |  |        |      |        |  |          |      |        |  |        |       |          |  |        |     |  |  |   |       |  |  |   |       |  |  |   |     |  |  |   |       | 
|---------------------------------------- |  | ------ | ------ | -------- |  | ------ | ---- | ------ |  | -------- | ---- | ------ |  | ------ | ----- | -------- |  | ------ | --- |  |  | - | ----- |  |  | - | ----- |  |  | - | --- |  |  | - | ----- | 
|                                         |  |        |        |          |  |       
|                                         |  | 2001   |        | 2002     |  | 2003  
|                                         |  |        |        |          |  |       
|                                         |  |        |        | 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 |  | $      | (1,002 | )        |  | $      | (395 | )      |  | $        | (607 | )      |  | $      | 2,003 |          |  | $      | 455 |  |  | $ | 1,548 |  |  | $ | 3,649 |  |  | $ | 676 |  |  | $ | 2,973 | 
|                                         |  |        |        |          |  |        |      |        |  |          |      |        |  |        |       |          |  |        |     |  |  |   |       |  |  |   |       |  |  |   |     |  |  |   |       | 

Recent
Accounting Pronouncements

In May 2003, the FASB issued Statement of
Financial Accounting No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity( SFAS No. 150). This statement
establishes standards for how an issuer classifies and measures
certain financial instruments with both liability and equity
characteristics. It requires that an issuer classify a
freestanding financial instrument that is within its scope as a
liability (or as an asset in some circumstances). Many of these
freestanding financial instruments were previously classified as
equity. SFAS No. 150 became effective for financial
instruments entered into or modified after May 31, 2003. We
have evaluated the impact of SFAS No. 150 on our
consolidated financial statements with respect to our right to
buy out the minority interests in several of our subsidiaries.
The adoption of SFAS No. 150 did not have a material impact
on our consolidated financial statements.

(3)     Tower
Portfolio Sale and Administration

During 2000, Microcell Management, Inc.
(Microcell), our subsidiary, 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, we had recognized a
gain of $26.4 million on the sale of the tower portfolio
and deferred $5.2 million of the gain. During 2001, we
recognized $3.2 million of the deferred gain, which was
offset by $0.2 million in related operating expenses.
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 million for the contemplated services.

On January 25, 2002, we entered into a
settlement agreement with Pinnacle. Pursuant to the agreement,
we 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, we paid Pinnacle $2.0 million
to satisfy all remaining obligations under the Master Antenna
Site Lease.

46



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(4)     Cash and Cash
Equivalents

At December 31, 2002 and 2003, cash and cash
equivalents consisted of the following (in thousands):

|               |  |      |        |      |  |   |        | 
|-------------- |  | ---- | ------ | ---- |  | - | ------ | 
|               |  | 2002 |        | 2003
|               |  |      |        |     
|Cash in banks  |  | $    | 10,023 |      |  | $ | 25,443 | 
|Treasury bills |  |      | 27,484 |      |  |   | 3,500  | 
|               |  |      |        |      |  |   |        | 
|               |  | $    | 37,507 |      |  | $ | 28,943 | 
|               |  |      |        |      |  |   |        | 

(5)     Related Party
Transactions

RF Investors, a subsidiary of Telcom Ventures,
indirectly 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 70% voting control.

Prior to our initial public offering, both our
employees and the employees of Telcom Ventures were eligible to
participate in our life, medical, dental and 401(k) plans. In
connection with the initial public offering in 1996, we agreed
pursuant to an Overhead and Administrative Services Agreement to
allow the employees of Telcom Ventures to continue to
participate in our employee benefit plans in exchange for full
reimbursement of the cash costs and expenses. We billed Telcom
Ventures $141,000 and $71,000 during 2002 and 2003,
respectively, for payments made by us pursuant to this
agreement. We received reimbursements from Telcom Ventures of
$324,000 during 2002 (which included payments for prior periods)
and $65,000 during 2003. At December 31, 2002 and 2003,
outstanding amounts associated with payments made by us under
this agreement were $9,000 and $6,000, respectively, and are
included as due from related parties and affiliates within the
consolidated balance sheets in the accompanying financial
statements.

We also had an understanding with Telcom Ventures
pursuant to which from July 1, 2000 to December 31,
2000 we retained five employees who had worked in the business
development group of our tower subsidiary, Microcell, before the
assets of that subsidiary were sold in March 2000. During the
six-month period, these employees pursued international
telecommunications tower business opportunities on Telcom
Ventures behalf. In return, we would be Telcom
Ventures exclusive provider of project management, radio
frequency engineering and deployment services for any
tower-related projects secured by these employees during this
six-month period. In addition, Telcom Ventures is required to
reimburse us for all costs incurred in employing these persons
(including payroll and benefit costs). This arrangement has been
terminated. We received reimbursements from Telcom Ventures of
$140,000 during 2002 for outstanding amounts associated with
this arrangement. At December 31, 2002, outstanding amounts
associated with payments made by us under this arrangement were
$100,000 in expense reimbursements and other payments for 2001
that were initially disputed by Telcom Ventures. This matter was
fully resolved in April 2003 with Telcom Ventures payment of the
full $100,000 in dispute. At December 31, 2003, no amounts were
outstanding under this arrangement. The amounts outstanding as
of December 31, 2002, less reserves, are included as due
from related parties and affiliates within the consolidated
balance sheets in the accompanying financial statements

In September 1996, we lent $3.5 million to
Telcom Ventures to assist in the payment of taxes due in
connection with the assumption by us 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%. We received the final payment of principal and
accrued interest of approximately $700,000 during 2002 in
satisfaction of the note.

During 2001 and 2002, we provided services to XM
Satellite Radio. Telcom Ventures has a minority investment in XM
Satellite Radio, and Dr. Rajendra Singh, a director of
Telcom Ventures, is a member of our board of directors.
Dr. Singh is also a former member of XM Satellite
Radios board of directors. Revenues

47



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

earned during 2001 and 2002 for services provided
to XM Satellite Radio were $57.3 million, and
$3.4 million, respectively.

In December 1999, we issued approximately 108,000
shares of Class A Common Stock in exchange for a
$1.6 million note receivable from our President and Chief
Executive Officer. The note is payable on the earlier of
December 2004 or the date he is no longer our 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, we entered into a
$0.6 million promissory note with Plan + Design Netcare AG.
Under the terms of the note, the entire principal amount, plus
accrued interest was due to us 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, we acquired 51% of the outstanding
shares of Detron, a newly formed corporation in The Netherlands.
We acquired the shares from Westminster, which transferred the
shares to Detron Corporation B.V. in January 2003. 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 to December 31, 2002 and $0.1 million for
the year ended December 31, 2003. During 2002 and 2003,
Detron seconded various idle employees to Detron Telematics,
Westminsters wholly-owned subsidiary and recorded revenue
of approximately $0.2 million for 2002 and
$0.3 million for 2003.

(6)     Property and
Equipment

At December 31, 2002 and 2003, property and
equipment consisted of the following:

|                                               |  |                |         |      |  |   |         |  
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                               |  | 2002           |         | 2003
|                                               |  |                |         |     
|                                               |  |               
|                                               |  | (In thousands)
|Computer equipment                             |  | $              | 14,221  |      |  | $ | 15,195  |  
|Software                                       |  |                | 2,920   |      |  |   | 3,075   |  
|Furniture and office equipment                 |  |                | 9,416   |      |  |   | 10,075  |  
|Leasehold improvements                         |  |                | 1,547   |      |  |   | 1,632   |  
|Vehicles                                       |  |                | 216     |      |  |   | 198     |  
|                                               |  |                |         |      |  |   |         |  
|                                               |  |                | 28,320  |      |  |   | 30,175  |  
|Less accumulated depreciation and amortization |  |                | (23,310 | )    |  |   | (26,357 | )
|                                               |  |                |         |      |  |   |         |  
|                                               |  | $              | 5,010   |      |  | $ | 3,818   |  
|                                               |  |                |         |      |  |   |         |  

(7)     Restructuring
Charge

During the second quarter of 2002, we adopted a
restructuring plan and recorded a restructuring charge of
$10.0 million. During the fourth quarter of 2002, we
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, we 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 was
approximately $12.5 million, which included

48



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$1.5 million in written-off leasehold
improvements and other assets related to the excess space. The
facility charge equals 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. As of
December 31, 2003, the restructuring charge calculation
assumes we will receive $10.7 million in sublease income,
of which $5.1 million is committed.

During the first quarter of 2003, we reversed
excess severance payable of approximately $0.2 million.
During the third quarter of 2003, we reoccupied a portion of our
office space in McLean, Virginia and reversed $0.4 million
of the payable and recorded an increase in the restructuring
payable of $0.5 million related to an estimated increase in the
time period expected to sublease space in our London office.

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:                     |                                                              |                |       |            |   |       |        |        |   |   |        |       
|                                                   | Payments for excess office space, net of sublease
    income |                |       |           |   |       |        | (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     |  
|                                                   |                                                              |                |       |            |   |       |        |        |   |   |        |       
|Restructuring payable as of December 31,
    2002. |                                                              | $              | 152   |            |   | $     | 9,571  |        |   | $ | 9,723  |       
|                                                   |                                                              |                |       |            |   |       |        |        |   |   |        |       
|Reversal of excess severance                       |                                                              |                | (152  | )          |   |       |       |        |   |   | (152   | )     
|Reversal for reoccupied space                      |                                                              |                |      |            |   |       | (385   | )      |   |   | (385   | )     
|Additional charge for reduction of sublease income |                                                              |                |      |            |   |       | 535    |        |   |   | 535    |       
|                                                   |                                                              |                |       |            |   |       |        |        |   |   |        |       
|                                                   | Restructuring charge                                         |                |       | (152       | ) |       |        | 150    |   |   |        | (2     | )
|Charges against the provision:                     |                                                              |                |       |            |   |       |        |        |   |   |        |       
|                                                   | Payments for excess office space, net of sublease
    income |                |       |           |   |       |        | (2,971 | ) |   |        | (2,971 | )
|                                                   | Leasehold improvements and other assets
    written-off      |                |       |           |   |       |        | (564   | ) |   |        | (564   | )
|                                                   | Other                                                        |                |       |           |   |       |        | 149    |   |   |        | 149    |  
|                                                   |                                                              |                |       |            |   |       |        |        |   |   |        |       
|Restructuring payable as of December 31, 2003      |                                                              | $              |      |            |   | $     | 6,335  |        |   | $ | 6,335  |       
|                                                   |                                                              |                |       |            |   |       |        |        |   |   |        |       

At December 31, 2002 and 2003, the
restructuring payable was classified as follows:

|                                 |  |             |       |             |  |   |       | 
|-------------------------------- |  | ----------- | ----- | ----------- |  | - | ----- | 
|                                 |  | December 31 |       | December 31
|                                 |  | 2002        |       | 2003       
|                                 |  |             |       |            
|Accrued restructuring current    |  | $           | 3,937 |             |  | $ | 2,903 | 
|Accrued restructuring noncurrent |  |             | 5,786 |             |  |   | 3,432 | 
|                                 |  |             |       |             |  |   |       | 
|Accrued restructuring total      |  | $           | 9,723 |             |  | $ | 6,335 | 
|                                 |  |             |       |             |  |   |       | 

(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 our claim against
DCR would be allowed in the amount of $5.0 million. We
received payment of $5.0 million on

49



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

April 11, 2001 which has been recognized as
a recovery of a bad debt during 2001 and was recorded as a
reduction in general and administrative expense. The Plan also
provided that our general unsecured claim against Pocket would
be allowed. We received $1.6 million on May 23, 2002
as final settlement for the Pocket claim and was recognized as a
recovery of bad debt and as a reduction in general and
administrative expense during 2002. Both receivables had been
written off in prior years.

During 1997, we recorded a charge for receivables
due from a Malaysian corporation. On March 15, 2001, we
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 2001 and was recorded as a reduction in
general and administrative expense.

During 2003, we received $2.1 million from a
customer in Algeria that had been previously reserved during
2002. The amount was recorded as a recovery of bad debt and as a
reduction in general and administrative expense.

(9)     Impairment of
Investments and Business Disposals

In June 2000, we acquired 18.2% of Mobilocity,
Inc. (Mobilocity), which was subsequently diluted to
less than 3% as Mobilocity continued to raise additional
capital. During 2002, we evaluated our investment in Mobilocity
to determine if an impairment loss had occurred. Mobilocity had
implemented a voluntary liquidation plan, leading us to
determine the investment was likely not recoverable and recorded
a $0.5 million impairment charge in other income and
expense.

We invested a total of $4.6 million
($2.9 million in August 2000 and $1.7 million in
February 2001) in Plan + Design Netcare AG (PDN) for
a 15.0% interest. PDN, and its operating subsidiary, filed for
insolvency protection in 2002. During 2002, we evaluated this
investment and determined that the investment was likely not
recoverable and recorded a $4.6 million impairment charge
in other income and expense.

On October 23, 2002 we entered into a sale
agreement to convey 82.0% of our ownership interest in our
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 we 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,
we recorded a recovery for provisions that were no longer needed
for operations in Egypt of $1.1 million. This recovery was
recorded in other income and expense in the accompanying 2002
consolidated statement of operations.

(10)     Investments

In September 1999, we 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. We applied the equity method to account for
our investment in Tecnosistemi until September 2000, when our
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. We
recorded our $0.8 million pro-rata share of these losses in
other income (expense). Subsequent to September 2000, when our
ownership interest was diluted, the investment was accounted for
using the cost method. In July 2001, we sold all of our 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.

50



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

We held 1,666,666 shares of Class B Common
Stock of NextWave Telecom, Inc. (NextWave Telecom)
which is the parent corporation of NextWave Personal
Communications Inc. . We 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
NextWave Telecom and us under an agreement dated March 12,
1996 (the March Agreement). We 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 us 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
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. We did not carry any assets or
liabilities on our books relating to our equity investment in
NextWave, any pre-petition debts due us, or the March Agreement;
these balances were written off in previous years.

The total amount of pre-petition debt owed to us
by NextWave Telecom and certain of its subsidiaries
(collectively, NextWave) was approximately $14.3
million, plus post-petition interest thereon. This amount
included our interest, amounting to approximately
$0.7 million plus post-petition interest thereon, in a
general unsecured claim against NextWave that was acquired by us
in connection with our acquisition of Koll Telecommunications
LLC in 1997 (the Koll Claim).

In September 2001, we sold all of our 1,666,666
shares of Class B common stock and our 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, we sold our
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, we acquired Transmast
Italia S.R.L. (which we renamed LCC Italia S.R.L. (LCC
Italia)) for approximately $0.8 million in cash. LCC
Italia 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, we acquired all of the
assets of Smith Woolley Telecom (which we renamed LCC Deployment
Services UK, Limited (LCC Deployment Services)). LCC
Deployment Services 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. LCC Deployment Services
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, LCC Deployment
Services results have been included in the consolidated
financial statements since the date of acquisition.

We finalized the allocation of the purchase price
to the assets acquired and liabilities assumed for this
acquisition with the assistance of an outside valuation firm.
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

51



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

relationships, and the Smith Woolley trade name,
are amortized over two to five years depending on the estimated
remaining useful lives. In 2003, we wrote off the
$0.5 million unamortized balance of intangible cost for the
Smith Woolley trade name acquired in the acquisition because we
ceased to use the name.

On July 9, 2002, we acquired 51% of the
outstanding shares of 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. We
acquired the shares from 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. Having determined that these objectives were achieved,
we agreed upon the payment of the second purchase price by way
of (a) assignment of an intercompany note receivable from
Detron to the sellers in the amount of approximately $0.2
million and (b) the payment in cash of approximately
$0.3 million. The payment in cash to Westminster was made
in May 2003 in accordance with the deed of the assignment
agreement.

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 $2.5 million. Other intangible
assets acquired amounted to $0.5 million. Other intangible
assets, 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 December 31, 2002 and 2003
for possible impairment under the provisions of SFAS
No. 142. We concluded that no adjustment was necessary at
year-end and will continue to evaluate for possible impairment
annually.

We recognized $0.6 million and
$1.2 million, respectively, in amortization expense for the
intangible assets with definite useful lives from the date of
acquisition through 2002 and for the year ended
December 31, 2003. We expect amortization expense on the
acquired intangible assets to be as follows (in thousands):

|     |  |                      |     | 
|---- |  | -------------------- | --- | 
|     |  | Amortization Expense
|     |  |                     
|2004 |  | $                    | 320 | 
|2005 |  |                      | 240 | 
|2006 |  |                      | 240 | 
|2007 |  |                      | 43  | 
|     |  |                      |     | 
|     |  | $                    | 843 | 
|     |  |                      |     | 

At December 31, 2002 and 2003, goodwill and
other intangibles consisted of the following:

|                   |                          |                   |       |      |       |   |        |        |     | 
|------------------ | ------------------------ | ----------------- | ----- | ---- | ----- | - | ------ | ------ | --- | 
|                   |                          | 2002              |       | 2003
|                   |                          |                   |       |     
|Goodwill           |                          | $                 | 9,340 |      |       | $ | 11,115 |       
|                   |                          |                   |       |      |       |   |        |       
|Other intangibles: |                          |                   |       |      |       |   |        |       
|                   | Backlog                  |                   | $     | 837  |       |   | $      | 940    |    
|                   | Customer relationships   |                   |       | 889  |       |   |        | 998    |    
|                   | Trade names              |                   |       | 850  |       |   |        | 190    |    
|                   | Accumulated amortization |                   |       | (643 | )     |   |        | (1,285 | )  
|                   |                          |                   |       |      |       |   |        |       
|                   |                          | Other intangibles |       | $    | 1,933 |   |        | $      | 843 | 
|                   |                          |                   |       |      |       |   |        |       

The following unaudited pro forma financial
information for the year ended December 31, 2002 assumes
the business combination of LCC Deployment Services was effected
on January 1, 2002 (in thousands, except

52



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

per share data). Detron operations were not
material to our consolidated operating results for the period
prior to acquisition.

|                                         |  |      |         |  
|---------------------------------------- |  | ---- | ------- | -
|                                         |  | 2002
|                                         |  |     
|Revenues                                 |  | $    | 68,146  |  
|Loss from operations before income taxes |  |      | (36,845 | )
|Net loss                                 |  |      | (28,393 | )
|Net loss per share:                      |  |      |         |  
|Basic                                    |  | $    | (1.36   | )
|Diluted                                  |  | $    | (1.36   | )

On August 4, 2003, through our wholly owned
subsidiary LCC China Services, L.L.C., we closed an investment
in a newly created entity based in China, Beijing LCC Bright
Oceans Communication Consulting Co. Ltd. (LCC/
BOCO). We contributed approximately $1.1 million for
a 49.0% share of LCC/ BOCOs registered capital. Bright
Oceans Inter-Telecom Corporation, a Chinese publicly traded
network management and systems integrator (BOCO),
contributed approximately $1.1 million to hold the
remaining 51.0% of LCC/ BOCOs registered capital. Our
capital contribution was to be paid in three equal installments
of approximately $357,000 each and the first installment was
made on the date of closing. The second installment was made in
October 2003. The third installment was made in January 2004.
LCC/ BOCO offers design, deployment and maintenance services to
wireless carriers in China. We account for our investment in
LCC/ BOCO using the equity method of accounting. We recorded an
equity loss of $0.1 million to reflect its proportionate
share of LCC/ BOCOs losses through December 31, 2003.

(12)     Line of
Credit

In 2003, Detron established a line of credit with
NMB-Heller N.V. (NMB). The line of credit
provides that NMB will provide credit to Detron in the form of
advance payments collateralized by Detrons outstanding
receivables. The agreement provides for NMB to advance up to 75%
of the receivable balance. There is no maximum on the amount of
receivables Detron can assign to NMB. Detron must repay the
advances from NMB within 90 days or upon customer payment
whichever occurs first. Interest on the advance payments will be
calculated at a rate equal to NMBs overdraft base rate
plus 2% subject to a minimum of 5.75% per year. The agreement
has an initial term of two years and can be extended. As of
December 31, 2003 Detron had $1.8 million at an
interest rate of 5.75% outstanding under the credit facility.

53



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(13)     Income
Taxes

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

|          |                 |                |       |        |        |      |        |        |        |   |        |        |        |  
|--------- | --------------- | -------------- | ----- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|          |                 | 2001           |       | 2002   |        | 2003
|          |                 |                |       |        |        |     
|          |                 |               
|          |                 | (In thousands)
|Current:  |                 |                |       |        |        |      |        |        |        |   |        |       
|          | Federal         |                | $     | 10,647 |        |      | $      | (8,885 | )      |   | $      | 633    |       
|          | State and local |                |       | 1,241  |        |      |        | (560   | )      |   |        |       |       
|          | Foreign         |                |       | (3,002 | )      |      |        | 590    |        |   |        | (499   | )     
|          |                 |                |       |        |        |      |        |        |        |   |        |       
|          |                 |                | 8,886 |        |        |      | (8,855 | )      |        |   | 134    |       
|          |                 |                |       |        |        |      |        |        |        |   |        |       
|Deferred: |                 |                |       |        |        |      |        |        |        |   |        |       
|          | Federal         |                |       | 1,900  |        |      |        | 433    |        |   |        | (1,441 | )     
|          | State and local |                |       | 255    |        |      |        | (29    | )      |   |        | (176   | )     
|          | Foreign         |                |       |       |        |      |        |       |        |   |        |       |       
|          |                 |                |       |        |        |      |        |        |        |   |        |       
|          |                 |                | 2,155 |        |        |      | 404    |        |        |   | (1,617 | )     
|          |                 |                |       |        |        |      |        |        |        |   |        |       
|          |                 | Total          |       | $      | 11,041 |      |        | $      | (8,451 | ) |        | $      | (1,483 | )
|          |                 |                |       |        |        |      |        |        |        |   |        |       

The 2001, 2002, and 2003 income tax provision
(benefit) related to operations do not include tax benefits
of $0.1 million, $25,000, and $0.1 million,
respectively, related to exercising stock options which was
recorded directly to paid-in capital.

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

|         |       |                |        |        |  |      |         |         |   |   |        |        |  
|-------- | ----- | -------------- | ------ | ------ |  | ---- | ------- | ------- | - | - | ------ | ------ | -
|         |       | 2001           |        | 2002   |  | 2003
|         |       |                |        |        |  |     
|         |       |               
|         |       | (In thousands)
|Domestic |       | $              | 33,550 |        |  | $    | (30,613 | )       |   | $ | (5,509 | )     
|Foreign  |       |                | (5,537 | )      |  |      | (6,508  | )       |   |   | (2,497 | )     
|         |       |                |        |        |  |      |         |         |   |   |        |       
|         | Total |                | $      | 28,013 |  |      | $       | (37,121 | ) |   | $      | (8,006 | )
|         |       |                |        |        |  |      |         |         |   |   |        |       

A reconciliation of the statutory federal income
tax rate and the effective income tax rate for the years ended
December 31, 2001, 2002 and 2003 follows:

|                                  |                                                              |      |      |      |   |      |      |       |   |  |      |       |  
|--------------------------------- | ------------------------------------------------------------ | ---- | ---- | ---- | - | ---- | ---- | ----- | - |  | ---- | ----- | -
|                                  |                                                              | 2001 |      | 2002 |   | 2003
|                                  |                                                              |      |      |      |   |     
|Statutory federal income tax rate |                                                              |      | 35.0 | %    |   |      | 35.0 | %     |   |  | 35.0 | %    
|Effect of:                        |                                                              |      |      |      |   |      |      |       |   |  |      |      
|                                  | State and local income taxes, net of federal tax
    benefit |      |      | 3.5  |   |      |      | 1.3   |   |  |      | 1.4   |  
|                                  | Foreign and tax credits                                      |      |      | (6.3 | ) |      |      | (11.8 | ) |  |      | 9.4   |  
|                                  | Non deductible expenses and permanent items                  |      |      | 0.5  |   |      |      | (1.0  | ) |  |      | (2.2  | )
|                                  | Other                                                        |      |      | 3.2  |   |      |      |      |   |  |      | 1.2   |  
|                                  | Valuation allowance of deferred tax assets                   |      |      | 3.5  |   |      |      | (0.7  | ) |  |      | (26.3 | )
|                                  |                                                              |      |      |      |   |      |      |       |   |  |      |      
|Effective income tax rate         |                                                              |      | 39.4 | %    |   |      | 22.8 | %     |   |  | 18.5 | %    
|                                  |                                                              |      |      |      |   |      |      |       |   |  |      |      

54



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##### 



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, 2002 and 2003 are presented below:

|                                               |                                           |                                  |        |       |        |   |        |       |        |  
|---------------------------------------------- | ----------------------------------------- | -------------------------------- | ------ | ----- | ------ | - | ------ | ----- | ------ | -
|                                               |                                           | 2002                             |        | 2003 
|                                               |                                           |                                  |        |      
|                                               |                                           |                                 
|                                               |                                           | (In thousands)                  
|Deferred tax assets:                           |                                           |                                  |        |       |        |   |        |      
|                                               | Non-cash compensation                     |                                  | $      | 1,340 |        |   | $      | 1,340 |       
|                                               | Accrued expenses                          |                                  |        | 4,229 |        |   |        | 3,936 |       
|                                               | Foreign tax credit carry-forward          |                                  |        | 3,049 |        |   |        | 3,049 |       
|                                               | Foreign net operating loss carry-forwards |                                  |        | 2,305 |        |   |        | 3,932 |       
|                                               | Research tax credit carryover             |                                  |        | 340   |        |   |        | 340   |       
|                                               | Alternative minimum tax credit            |                                  |        |      |        |   |        | 519   |       
|                                               | Net operating loss carry forward          |                                  |        |      |        |   |        | 1,459 |       
|                                               | Other                                     |                                  |        | 379   |        |   |        | 176   |       
|                                               |                                           |                                  |        |       |        |   |        |      
|                                               |                                           | Total gross deferred tax assets  |        |       | 11,642 |   |        |       | 14,751 |  
|Less valuation allowance                       |                                           |                                  | (6,213 | )     |        |   | (8,321 | )    
|                                               |                                           |                                  |        |       |        |   |        |      
|Deferred tax assets net of valuation allowance |                                           |                                  | 5,429  |       |        |   | 6,430  |      
|                                               |                                           |                                  |        |       |        |   |        |      
|Deferred tax liabilities:                      |                                           |                                  |        |       |        |   |        |      
|                                               | Property and equipment                    |                                  |        | (281  | )      |   |        | (585  | )     
|                                               | Deferred revenue                          |                                  |        | (140  | )      |   |        | (147  | )     
|                                               | Other                                     |                                  |        | (572  | )      |   |        | (744  | )     
|                                               |                                           |                                  |        |       |        |   |        |      
|                                               |                                           | Total gross deferred liabilities |        |       | (993   | ) |        |       | (1,476 | )
|                                               |                                           |                                  |        |       |        |   |        |      
|Net deferred tax assets                        |                                           | $                                | 4,436  |       |        | $ | 4,954  |      
|                                               |                                           |                                  |        |       |        |   |        |      

The components giving rise to the net deferred
tax assets described above have been included in the
accompanying balance sheet as of December 31, 2002 and 2003
as follows (in thousands):

|                 |  |      |       |      |  |   |       | 
|---------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                 |  | 2002 |       | 2003
|                 |  |      |       |     
|Current asset    |  | $    | 3,932 |      |  | $ | 3,547 | 
|Noncurrent asset |  |      | 504   |      |  |   | 1,407 | 
|                 |  |      |       |      |  |   |       | 
|                 |  | $    | 4,436 |      |  | $ | 4,954 | 
|                 |  |      |       |      |  |   |       | 

At December 31, 2003, we had foreign tax
credits for U.S. tax purposes of $3.0 million, which expire
between 2003 and 2005, a research and development credit of
$0.3 million and an alternative minimum tax credit of
$0.5 million. We had U.S. operating loss carry-forwards of
$3.9 million, which expire in 2024. We also had
$13.1 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 we have subsidiaries or
have established branch offices or have 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 consisting of foreign net
operating losses carried forward, foreign tax credits (before
they expire) and non-cash compensation expense that may not
become deductible for tax purposes.

55



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(14)     Health and
Retirement Plans

We have 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 60.0%
of compensation for substantially all employees. We make a
matching contribution of 50.0% of an employees
contribution up to 6.0% of each employees compensation.
Company contributions and other expenses associated with the
plan were approximately $0.7 million, $0.5 million,
and $0.4 million for the years ended December 31,
2001, 2002 and 2003, respectively.

Our 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% of an
employees base salary. It is available to all full-time
employees who have completed their three-month probation period.
We contribute 5.0% of an employees base salary and match
the employees contribution up to 5.0%. LCC UK Ltd.,
contributions and other expenses related to the plan were
approximately $0.2 million, $0.2 million, and
$0.1 million for the years ended December 31, 2001,
2002 and 2003, respectively.

LCC Italia has two statutory defined contribution
pension plans and one voluntary plan for directors of LCC
Italia. The contributions are in accordance with the National
Contract Agreement. LCC Italia contributions and related
expenses to the plans were approximately $0.4 million and
$0.9 million for the years ended December 31, 2002 and
2003.

We are self-insured for group health benefits and
claims up to $0.1 million in stop loss coverage.

(15)     Incentive
Plans

At December 31, 2001, 2002, and 2003, we 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 our 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 value method of SFAS 123 is described in
Note 2. The per share weighted-average fair value of stock
options granted during 2001, 2002 and 2003 was $7.93, $1.91, and
$1.53 respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average
assumptions:

|                        |  |      |           |      |  |      |           |  |  |  |            | 
|----------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  |  | ---------- | 
|                        |  | 2001 |           | 2002 |  | 2003
|                        |  |      |           |      |  |     
|Expected dividend yield |  |      | 0%        |      |  |      | 0%        |  |  |  | 0%         | 
|Risk-free interest rate |  |      | 5.0%      |      |  |      | 4.0%      |  |  |  | 3.254.05% | 
|Expected life           |  |      | 38 years |      |  |      | 27 years |  |  |  | 37 years  | 
|Volatility              |  |      | 75125%   |      |  |      | 55115%   |  |  |  | 4085%     | 

We established our Employee Stock Purchase Plan
in 1997, which authorizes the issuance of up to 860,000 shares
of class A common stock pursuant to the plan. The Employee
Stock Purchase Plan permits eligible employees to elect to have
a portion of their pay deducted by our company in order to
purchase shares of class A common stock. 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 our 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, we issued
102,530 shares in 2001, 34,565 shares in 2002, and 31,779 shares
in 2003 to employees upon the exercise of options held by such
employees. Compensation cost of approximately $127,000, $11,000,
and $15,000, respectively, would have been recognized under SFAS
No. 123 for the fair value of the employees purchase
rights and is included in the pro forma net income
(loss) calculation

56



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

described in Note 2. Compensation cost was
estimated using the Black Scholes model with the following
assumptions:

|                        |  |      |         |      |  |      |         |  |  |  |            | 
|----------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ---------- | 
|                        |  | 2001 |         | 2002 |  | 2003
|                        |  |      |         |      |  |     
|Expected dividend yield |  |      | 0%      |      |  |      | 0%      |  |  |  | 0%         | 
|Risk-free interest rate |  |      | 2.0%    |      |  |      | 1.1%    |  |  |  | 0.951.00% | 
|Expected life           |  |      | 1 month |      |  |      | 1 month |  |  |  | 1 month    | 
|Volatility              |  |      | 75125% |      |  |      | 55115% |  |  |  | 4080%     | 

The weighted average fair value of the purchase
rights granted in 2001, 2002, and 2003 was $1.23, $0.32, and
$0.50, respectively.

In connection with our initial public offering,
we established the 1996 Employee Stock Option Plan, which
currently authorizes the issuance of up to 8,825,000 shares of
class A common stock pursuant to options granted under the
plan.

Also in connection with our initial public
offering, we established the 1996 Directors Stock Option Plan
(Directors Plan). The Directors Plan currently
authorizes the issuance of up to 250,000 shares of class A
common stock. The Directors Plan 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 Directors Plan also provides for annual
grants of options to purchase up to 250,000 shares of
class B common stock to directors who are eligible to hold
such shares. However, pursuant to the terms of the Directors
Plan, the final annual grant of such options occurred in 2000.
Options granted to directors eligible to hold class B
common stock expire no later than the fifth anniversary of the
date of grant and options granted to directors who are not
eligible to hold class B common stock expire no later than
the tenth anniversary of the date of grant. Our directors are
also entitled to receive option grants under the 1996 Employee
Stock Option Plan in an amount determined at the discretion of
the board of directors.

On October 17, 2001, we 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 we 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 other than our Chief Executive Officer. We
granted an option to purchase one share of our 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. Our 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, we granted 592,619 new options on May 21,
2002 with an exercise price of $2.96, which is equal to the
closing price of our class A common stock on the business
day immediately preceding the date we granted the new options.

57



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Changes in stock options outstanding were as
follows:

|                             |  |                |        |                |  |                |       |                |  |                |        |                |  |   |      |  |  |  |        |   |  |   |      | 
|---------------------------- |  | -------------- | ------ | -------------- |  | -------------- | ----- | -------------- |  | -------------- | ------ | -------------- |  | - | ---- |  |  |  | ------ | - |  | - | ---- | 
|                             |  |                |        |                |  |               
|                             |  | 2001           |        | 2002           |  | 2003          
|                             |  |                |        |                |  |               
|                             |  |                |        | 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 |  |                | 4,461  |                |  | $              | 12.11 |                |  |                | 3,596  |                |  | $ | 9.83 |  |  |  | 4,376  |   |  | $ | 7.18 | 
|Granted                      |  |                | 2,182  |                |  |                | 11.05 |                |  |                | 2,097  |                |  |   | 3.14 |  |  |  | 1,269  |   |  |   | 2.56 | 
|Exercised                    |  |                | (83    | )              |  |                | 5.21  |                |  |                | (22    | )              |  |   | 4.84 |  |  |  | (155   | ) |  |   | 3.14 | 
|Cancelled                    |  |                | (2,964 | )              |  |                | 14.28 |                |  |                | (1,295 | )              |  |   | 8.05 |  |  |  | (1,069 | ) |  |   | 7.03 | 
|                             |  |                |        |                |  |                |       |                |  |                |        |                |  |   |      |  |  |  |        |   |  |   |      | 
|Balance at end of year       |  |                | 3,596  |                |  |                | 9.83  |                |  |                | 4,376  |                |  |   | 7.18 |  |  |  | 4,421  |   |  |   | 6.03 | 
|                             |  |                |        |                |  |                |       |                |  |                |        |                |  |   |      |  |  |  |        |   |  |   |      | 

The following table summarizes information about
options at December 31, 2003:

|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 
|--------------- |  | ------------------- | ----- | ------------------- |  | ------------- | ---- | ----------------- |  | ------------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|                |  |                     |       |                    
|                |  | Options Outstanding |       | Options Exercisable
|                |  |                     |       |                    
|                |  |                     |       | Weighted Avg.       |  | Weighted Avg. |      |                   |  | Weighted Avg.
|Range of        |  | Number at           |       | Remaining           |  | Exercise      |      | Number at         |  | Exercise     
|Exercise Prices |  | December 31, 2003   |       | Contractual Life    |  | Price         |      | December 31, 2003 |  | Price        
|                |  |                     |       |                     |  |               |      |                   |  |              
|                |  | (in thousands)      |       | (In years)          |  |               |      | (in thousands)    |  |              
|$ 1.67   2.12  |  |                     | 651   |                     |  |               | 8.53 |                   |  | $             | 2.07  |  |  |  | 160   |  |  | $ | 2.09  | 
|$ 2.20   2.96  |  |                     | 1,245 |                     |  |               | 8.46 |                   |  |               | 2.57  |  |  |  | 301   |  |  |   | 2.95  | 
|$ 3.05   5.00  |  |                     | 909   |                     |  |               | 5.55 |                   |  |               | 4.65  |  |  |  | 684   |  |  |   | 4.82  | 
|$ 5.09   8.25  |  |                     | 535   |                     |  |               | 6.76 |                   |  |               | 6.00  |  |  |  | 371   |  |  |   | 5.94  | 
|$10.69  12.25  |  |                     | 396   |                     |  |               | 6.80 |                   |  |               | 12.20 |  |  |  | 275   |  |  |   | 12.20 | 
|$12.38  13.56  |  |                     | 504   |                     |  |               | 5.97 |                   |  |               | 13.55 |  |  |  | 504   |  |  |   | 13.55 | 
|$16.00  20.13  |  |                     | 181   |                     |  |               | 4.42 |                   |  |               | 16.56 |  |  |  | 179   |  |  |   | 16.56 | 
|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 
|                |  |                     | 4,421 |                     |  |               | 7.07 |                   |  |               | 6.03  |  |  |  | 2,474 |  |  |   | 8.03  | 
|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 

(16)     Lease
Commitments

We lease office facilities and certain equipment,
principally in the United States, under operating leases
expiring on various dates over the next twelve years. The lease
agreements include renewal options and provisions for rental
escalations based on the Consumer Price Index and require us to
pay for executory costs such as taxes and insurance. The lease
agreements also allow us 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.

58



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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)
|2004       |  | $              | 5,035  |                    |  | $ | 263   | 
|2005       |  |                | 4,765  |                    |  |   | 1,070 | 
|2006       |  |                | 4,720  |                    |  |   | 1,233 | 
|2007       |  |                | 2,763  |                    |  |   | 722   | 
|2008       |  |                | 696    |                    |  |   | 241   | 
|Thereafter |  |                | 3,417  |                    |  |   | 1,526 | 
|           |  |                |        |                    |  |   |       | 
|           |  | $              | 21,396 |                    |  | $ | 5,055 | 
|           |  |                |        |                    |  |   |       | 

Rent expense under operating leases was
approximately, $8.6 million, $4.1 million, and
$2.2 million for the years ended December 31, 2001,
2002, and 2003, respectively.

(17)     Commitments
and Contingencies

We are party to various legal proceedings and
claims incidental to our business. Management does not believe
that these matters will have a material adverse effect on our
consolidated results of operations or financial condition.

(18)     Income
(Loss) Per Share

Income (loss) per share is presented on both
a basic and diluted basis in accordance with the provisions of
FASB 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 our earnings. The
reconciliations of the basic and diluted earnings per share
computations for the years ended December 31, 2001, 2002
and 2003 are as follows:

|                                                   |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |       |  
|-------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------- | ------ | ------ |  | --------- | ------ | -------- |  | --------- | ---- | ------ |  | ---- | ------- | --------- | - | ------ | ------ | ------ |  | - | ----- | ----- | - | - | ------ | ------ | - |  | ------ | ------ |  | - | ----- | ----- | -
|                                                   |                                                                                |                                       |        |        |  |          
|                                                   |                                                                                | 2001                                  |        | 2002   |  | 2003     
|                                                   |                                                                                |                                       |        |        |  |          
|                                                   |                                                                                | Net                                   |        |        |  | Per Share |        |          |  | Per Share |      | Net    |  |      |         | Per Share
|                                                   |                                                                                | Income                                |        | Shares |  | Amount    |        | Net Loss |  | Shares    |      | Amount |  | Loss |         | Shares    |   | Amount
|                                                   |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |       
|                                                   |                                                                                |                                      
|                                                   |                                                                                | (in thousands, except per share data)
|Basic EPS                                          |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |      
|Net income (loss) available to common shareholders |                                                                                | $                                     | 16,972 |        |  |           | 20,571 |          |  | $         | 0.83 |        |  | $    | (28,670 | )         |   |        | 20,902 |        |  | $ | (1.37 | )     |   | $ | (6,523 | )      |   |  | 21,292 |        |  | $ | (0.31 | )    
|                                                   |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |      
|Effect of Dilutive Securities                      |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |      
|                                                   | Stock option plans                                                             |                                       |        |        |  |           |        | 345      |  |           |      |        |  |      |         |           |   |        |        |       |  |   |       |       |   |   |        |        |   |  |        |       |  |   |       |       |  
|                                                   |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |      
|Dilutive EPS                                       |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |      
|                                                   | Net income (loss) available to common
    shareholders and assumed conversions |                                       | $      | 16,972 |  |           |        | 20,916   |  |           | $    | 0.81   |  |      | $       | (28,670   | ) |        |        | 20,902 |  |   | $     | (1.37 | ) |   | $      | (6,523 | ) |  |        | 21,292 |  |   | $     | (0.31 | )
|                                                   |                                                                                |                                       |        |        |  |           |        |          |  |           |      |        |  |      |         |           |   |        |        |        |  |   |       |       |   |   |        |        |   |  |        |        |  |   |       |      

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 3.8 million, 4.4 million and
4.4 million shares of Class A Common Stock outstanding
during the years ended December 31, 2001, 2002 and 2003,
respectively, were not included in the computation of diluted
earnings per share because the effect would have had an
anti-dilutive effect.

59



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(19)     Segment
Reporting

SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Informationestablished
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.
Our chief operating decision-making group is the Executive
Committee, which comprises the Chief Executive Officer and our
senior vice presidents.

Our operating segments are defined geographically
by region, the Americas region and the EMEA region. Both regions
provide design and deployment services, operations and
maintenance services and technical consulting services.

The accounting policies of the operating segments
are the same as those described in the summary of significant
accounting policies. We evaluate 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 at current market
prices. Interdivisional transactions are eliminated in
consolidation. Revenues are attributed to geographic areas based
on the location of the assignment.

60



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##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segments:

(In thousands)


|     |                                     |                |   |         |         |       |   |        |        |  |   |         |         | 
|---- | ----------------------------------- | -------------- | - | ------- | ------- | ----- | - | ------ | ------ |  | - | ------- | ------- | 
|     |                                     | Americas       |   | EMEA    |         | Total
|     |                                     |                |   |         |         |      
|2001 |                                     |                |   |         |         |       |   |        |        |  |   |        
|     | Net revenue from external customers |                | $ | 101,780 |         |       | $ | 23,385 |        |  | $ | 125,165 |        
|     | Intersegment revenues               |                |   |        |         |       |   |       |        |  |   |        |        
|     |                                     |                |   |         |         |       |   |        |        |  |   |        
|     |                                     | Total revenues |   | $       | 101,780 |       |   | $      | 23,385 |  |   | $       | 125,165 | 
|     |                                     |                |   |         |         |       |   |        |        |  |   |        
|     | Depreciation and amortization       |                |   | 1,088   |         |       |   | 721    |        |  |   | 1,809   |        
|     | Interest income                     |                |   | 194     |         |       |   | 124    |        |  |   | 318     |        
|     | Interest expense                    |                |   | 12      |         |       |   |       |        |  |   | 12      |        
|     | Income (loss) before taxes          |                |   | 10,462  |         |       |   | (6,974 | )      |  |   | 3,488   |        
|     | Segment assets                      |                |   | 29,612  |         |       |   | 15,069 |        |  |   | 44,681  |        
|     | Expenditures for property           |                |   | 767     |         |       |   | 1,212  |        |  |   | 1,979   |        
|2002 |                                     |                |   |         |         |       |   |        |        |  |   |        
|     | Net revenue from external customers |                | $ | 29,706  |         |       | $ | 34,755 |        |  | $ | 64,461  |        
|     | Intersegment revenues               |                |   |        |         |       |   |       |        |  |   |        |        
|     |                                     |                |   |         |         |       |   |        |        |  |   |        
|     |                                     | Total revenues |   | $       | 29,706  |       |   | $      | 34,755 |  |   | $       | 64,461  | 
|     |                                     |                |   |         |         |       |   |        |        |  |   |        
|     | Depreciation and amortization       |                |   | 717     |         |       |   | 1,372  |        |  |   | 2,089   |        
|     | Interest income                     |                |   | 62      |         |       |   | 41     |        |  |   | 103     |        
|     | Interest expense                    |                |   | 15      |         |       |   |       |        |  |   | 15      |        
|     | Income (loss) before taxes          |                |   | (7,707  | )       |       |   | (5,038 | )      |  |   | (12,745 | )      
|     | Segment assets                      |                |   | 8,010   |         |       |   | 37,942 |        |  |   | 45,952  |        
|     | Expenditures for property           |                |   | 50      |         |       |   | 2,242  |        |  |   | 2,292   |        
|2003 |                                     |                |   |         |         |       |   |        |        |  |   |        
|     | Net revenue from external customers |                | $ | 53,086  |         |       | $ | 53,296 |        |  | $ | 106,382 |        
|     | Intersegment revenues               |                |   |        |         |       |   |       |        |  |   |        |        
|     |                                     |                |   |         |         |       |   |        |        |  |   |        
|     |                                     | Total revenues |   | $       | 53,086  |       |   | $      | 53,296 |  |   | $       | 106,382 | 
|     |                                     |                |   |         |         |       |   |        |        |  |   |        
|     | Depreciation and amortization       |                |   | 401     |         |       |   | 2,873  |        |  |   | 3,274   |        
|     | Interest income                     |                |   | 23      |         |       |   | 143    |        |  |   | 166     |        
|     | Interest expense                    |                |   | 6       |         |       |   | 116    |        |  |   | 122     |        
|     | Income (loss) before taxes          |                |   | (1,930  | )       |       |   | 573    |        |  |   | (1,357  | )      
|     | Segment assets                      |                |   | 33,043  |         |       |   | 51,368 |        |  |   | 84,411  |        
|     | Expenditures for property           |                |   | 707     |         |       |   | 1,040  |        |  |   | 1,747   |        

61



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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):

|                          |                                                 |                                 |         |         |        |      |        |        |        |   |         |         |        | 
|------------------------- | ----------------------------------------------- | ------------------------------- | ------- | ------- | ------ | ---- | ------ | ------ | ------ | - | ------- | ------- | ------ | 
|                          |                                                 | 2001                            |         | 2002    |        | 2003
|                          |                                                 |                                 |         |         |        |     
|Revenues                  |                                                 |                                 |         |         |        |      |        |        |        |   |         |        
|                          | Revenues for reportable segments                |                                 | $       | 125,165 |        |      | $      | 64,461 |        |   | $       | 106,382 |       
|                          | Revenues for non-reportable segments            |                                 |         | 5,444   |        |      |        | 2,608  |        |   |         | 2,057   |       
|                          | Eliminations                                    |                                 |         |        |        |      |        |       |        |   |         |        |       
|                          |                                                 |                                 |         |         |        |      |        |        |        |   |         |        
|                          | Total consolidated revenues                     |                                 | $       | 130,609 |        |      | $      | 67,069 |        |   | $       | 108,439 |       
|                          |                                                 |                                 |         |         |        |      |        |        |        |   |         |        
|Assets                    |                                                 |                                 |         |         |        |      |        |        |        |   |         |        
|                          | Total assets for reportable segments            |                                 | $       | 44,681  |        |      | $      | 45,095 |        |   | $       | 84,411  |       
|                          | Assets not attributable to reportable segments: |                                 |         |         |        |      |        |        |        |   |         |         |       
|                          |                                                 | Cash and cash equivalents       |         |         | 49,124 |      |        |        | 34,405 |   |         |         | 25,225 | 
|                          |                                                 | Short-term investments          |         |         | 484    |      |        |        | 514    |   |         |         | 520    | 
|                          |                                                 | Deferred and prepaid tax assets |         |         | 7,394  |      |        |        | 12,720 |   |         |         | 5,616  | 
|                          |                                                 | Property and equipment          |         |         | 2,988  |      |        |        | 1,612  |   |         |         | 1,048  | 
|                          |                                                 | Receivables                     |         |         | 445    |      |        |        | 624    |   |         |         | 333    | 
|                          |                                                 | Prepaids                        |         |         | 684    |      |        |        | 1,480  |   |         |         | 550    | 
|                          |                                                 | Investments                     |         |         | 5,139  |      |        |        |       |   |         |         | 764    | 
|                          |                                                 | Related parties                 |         |         | 984    |      |        |        | 10     |   |         |         | 45     | 
|                          |                                                 | Other                           |         |         | 308    |      |        |        | 263    |   |         |         | 79     | 
|                          |                                                 |                                 |         |         |        |      |        |        |        |   |         |        
|Total consolidated assets |                                                 | $                               | 112,231 |         |        | $    | 96,723 |        |        | $ | 118,591 |        
|                          |                                                 |                                 |         |         |        |      |        |        |        |   |         |        

|                                                              |                                                             |      |        |        |   |      |         |         |   |   |        |        |  
|------------------------------------------------------------- | ----------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------- | ------- | - | - | ------ | ------ | -
|                                                              |                                                             | 2001 |        | 2002   |   | 2003
|                                                              |                                                             |      |        |        |   |     
|Income (loss) before income taxes for
    reportable segments |                                                             | $    | 3,488  |        |   | $    | (12,745 | )       |   | $ | (1,357 | )     
|                                                              | Gain on sale of tower portfolio and
    administration, net |      |        | 2,998  |   |      |         | 2,000   |   |   |        |       |  
|                                                              | Sale of investments and assets                              |      |        | 22,395 |   |      |         |        |   |   |        |       |  
|                                                              | Restructuring charge                                        |      |        |       |   |      |         | (13,522 | ) |   |        | 2      |  
|                                                              | Impairment of investments                                   |      |        |       |   |      |         | (5,139  | ) |   |        |       |  
|                                                              | Bankruptcy recoveries                                       |      |        | 7,492  |   |      |         | 1,589   |   |   |        |       |  
|                                                              | General corporate expenses                                  |      |        | (8,360 | ) |      |         | (9,304  | ) |   |        | (6,651 | )
|                                                              |                                                             |      |        |        |   |      |         |         |   |   |        |       
|Income (loss) from operations before
    income taxes         |                                                             | $    | 28,013 |        |   | $    | (37,121 | )       |   | $ | (8,006 | )     
|                                                              |                                                             |      |        |        |   |      |         |         |   |   |        |       

|                        |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |       | 
|----------------------- | ----------------------------- | ------- | - | ------------ |  | ------------ | - | ------------ |  |  | - | - |  |  | - | ----- | 
|                        |                               | Segment |   | Unallocated  |  |              |   | Consolidated
|Other Significant Items |                               | Total   |   | Expenditures |  | Eliminations |   | Total       
|                        |                               |         |   |              |  |              |   |             
|2001                    |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |      
|                        | Depreciation and amortization |         | $ | 1,809        |  |              | $ | 1,203        |  |  | $ |  |  |  | $ | 3,012 | 
|                        | Interest income               |         |   | 318          |  |              |   | 1,581        |  |  |   |  |  |  |   | 1,899 | 
|                        | Interest expense              |         |   | 12           |  |              |   | 1            |  |  |   |  |  |  |   | 13    | 
|                        | Expenditures for property     |         |   | 1,979        |  |              |   | 1,398        |  |  |   |  |  |  |   | 3,377 | 
|2002                    |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |      
|                        | Depreciation and amortization |         | $ | 2,089        |  |              | $ | 795          |  |  | $ |  |  |  | $ | 2,884 | 
|                        | Interest income               |         |   | 103          |  |              |   | 737          |  |  |   |  |  |  |   | 840   | 
|                        | Interest expense              |         |   | 15           |  |              |   | 7            |  |  |   |  |  |  |   | 22    | 
|                        | Expenditures for property     |         |   | 2,292        |  |              |   | 562          |  |  |   |  |  |  |   | 2,854 | 
|2003                    |                               |         |   |              |  |              |   |              |  |  |   |   |  |  |   |      
|                        | Depreciation and amortization |         | $ | 3,274        |  |              | $ | 586          |  |  | $ |  |  |  | $ | 3,860 | 
|                        | Interest income               |         |   | 166          |  |              |   | 281          |  |  |   |  |  |  |   | 447   | 
|                        | Interest expense              |         |   | 122          |  |              |   |             |  |  |   |  |  |  |   | 122   | 
|                        | Expenditures for property     |         |   | 1,747        |  |              |   | 66           |  |  |   |  |  |  |   | 1,813 | 

62



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                           |  |      |         |      |  |      |        |  |  |   |         | 
|-------------------------- |  | ---- | ------- | ---- |  | ---- | ------ |  |  | - | ------- | 
|                           |  | 2001 |         | 2002 |  | 2003
|                           |  |      |         |      |  |     
|Design                     |  | $    | 60,865  |      |  | $    | 27,202 |  |  | $ | 32,584  | 
|Deployment                 |  |      | 62,345  |      |  |      | 36,493 |  |  |   | 64,212  | 
|Operations and maintenance |  |      | 2,056   |      |  |      | 1,089  |  |  |   | 3,135   | 
|Consulting                 |  |      | 5,343   |      |  |      | 2,285  |  |  |   | 8,508   | 
|                           |  |      |         |      |  |      |        |  |  |   |         | 
|Total revenues             |  | $    | 130,609 |      |  | $    | 67,069 |  |  | $ | 108,439 | 
|                           |  |      |         |      |  |      |        |  |  |   |         | 

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

|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |       |       | 
|------------------------------- | ------------------------ | ------------------------------------ | ------- | -------- | ------- | -------- | ----- | -------- | ----- | -------- | ------ | -------- | ------ | - | ----- | ----- | ----- | - | ------- | ------ | ------ | - | ----- | ----- | ----- | 
|                                |                          |                                      |         |          |         |         
|                                |                          | 2001                                 |         | 2002     |         | 2003    
|                                |                          |                                      |         |          |         |         
|                                |                          |                                      |         | Net      |         |          |       | Net      |       |          |        | Net     
|                                |                          | Revenues                             |         | Property |         | Revenues |       | Property |       | Revenues |        | Property
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |         
|Americas:                       |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|                                | United States of America |                                      | $       | 100,168  |         |          | $     | 3,609    |       |          | $      | 28,812   |        |   | $     | 1,978 |       |   | $       | 53,137 |        |   | $     | 1,400 |      
|                                | Other                    |                                      |         | 3,172    |         |          |       | 340      |       |          |        | 1,807    |        |   |       | 95    |       |   |         | 1,017  |        |   |       | 81    |      
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|                                |                          | Total Americas                       |         |          | 103,340 |          |       |          | 3,949 |          |        |          | 30,619 |   |       |       | 2,073 |   |         |        | 54,154 |   |       |       | 1,481 | 
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|Europe, Middle East and Africa: |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|                                | United Kingdom           |                                      |         | 7,477    |         |          |       | 1,473    |       |          |        | 14,864   |        |   |       | 1,430 |       |   |         | 14,594 |        |   |       | 909   |      
|                                | Netherlands              |                                      |         | 9,516    |         |          |       |         |       |          |        | 10,425   |        |   |       | 230   |       |   |         | 12,977 |        |   |       | 317   |      
|                                | Italy                    |                                      |         | 937      |         |          |       | 103      |       |          |        | 5,686    |        |   |       | 1,215 |       |   |         | 12,484 |        |   |       | 1,023 |      
|                                | Algeria                  |                                      |         |         |         |          |       |         |       |          |        | 2,582    |        |   |       | 18    |       |   |         | 12,467 |        |   |       | 87    |      
|                                | Other                    |                                      |         | 5,631    |         |          |       | 205      |       |          |        | 1,474    |        |   |       |      |       |   |         | 822    |        |   |       |      |      
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|                                |                          | Total Europe, Middle East and Africa |         |          | 23,561  |          |       |          | 1,781 |          |        |          | 35,031 |   |       |       | 2,893 |   |         |        | 53,344 |   |       |       | 2,336 | 
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|Asia-Pacific and other          |                          |                                      | 3,708   |          |         |          |      |          |       |          | 1,419  |          |        |   | 44    |       |       |   | 941     |        |        |   | 1     |      
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      
|Total revenues                  |                          | $                                    | 130,609 |          |         | $        | 5,730 |          |       | $        | 67,069 |          |        | $ | 5,010 |       |       | $ | 108,439 |        |        | $ | 3,818 |      
|                                |                          |                                      |         |          |         |          |       |          |       |          |        |          |        |   |       |       |       |   |         |        |        |   |       |      



|     |                           
|---- | --------------------------
|(20) | Quarterly Data (Unaudited)

|                         |         |                                          |        |         |   |         |         |         |   |   |        |       |   |   |        |       |  
|------------------------ | ------- | ---------------------------------------- | ------ | ------- | - | ------- | ------- | ------- | - | - | ------ | ----- | - | - | ------ | ----- | -
|                         |         |                                         
|                         |         | 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 | )
|                         |         |                                          |        |         |   |         |         |         |   |   |        |       |   |   |        |      

63



---



##### 



LCC INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                  |         |                                          |        |         |   |         |        |         |   |   |        |       |   |   |        |      | 
|--------------------------------- | ------- | ---------------------------------------- | ------ | ------- | - | ------- | ------ | ------- | - | - | ------ | ----- | - | - | ------ | ---- | 
|                                  |         |                                         
|                                  |         | 2003                                    
|                                  |         |                                         
|                                  |         | 1st                                      |        | 2nd     |   | 3rd     |        | 4th    
|                                  |         | Quarter                                  |        | Quarter |   | Quarter |        | Quarter
|                                  |         |                                          |        |         |   |         |        |        
|                                  |         |                                         
|                                  |         | (In thousands, except per share amounts)
|Revenues                          |         | $                                        | 17,140 |         |   | $       | 18,187 |         |   | $ | 29,350 |       |   | $ | 43,762 |     
|Operating income (loss)           |         |                                          | (4,797 | )       |   |         | (3,695 | )       |   |   | (1,314 | )     |   |   | 257    |     
|Income (loss) before income taxes |         |                                          | (3,460 | )       |   |         | (3,515 | )       |   |   | (1,451 | )     |   |   | 420    |     
|Net income (loss)                 |         |                                          | (2,162 | )       |   |         | (3,975 | )       |   |   | (1,025 | )     |   |   | 639    |     
|Net income (loss) per share:      |         |                                          |        |         |   |         |        |         |   |   |        |       |   |   |        |     
|                                  | Basic   |                                          | $      | (0.10   | ) |         | $      | (0.19   | ) |   | $      | (0.05 | ) |   | $      | 0.03 | 
|                                  |         |                                          |        |         |   |         |        |         |   |   |        |       |   |   |        |     
|                                  | Diluted |                                          | $      | (0.10   | ) |         | $      | (0.19   | ) |   | $      | (0.05 | ) |   | $      | 0.03 | 
|                                  |         |                                          |        |         |   |         |        |         |   |   |        |       |   |   |        |     

During the second quarter of 2002, we took an
impairment charge for $5.1 million for our investments in
Mobilocity and PDN (see note 9). We 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 of 2002, we took a bad
debt charge of $3.1 million related to two large contracts.

During the fourth quarter of 2002, we increased
our restructuring charge by $3.5 million to provide for
additional excess facility costs (see note 7). We recorded
a gain on disposal of the operations in Egypt of
$1.1 million (see note 9).

During the first quarter of 2003, we sold our
interest in NextWave pre-petition interest for $1.0 million
(see note 10). We received a recovery of $0.6 million
related to a customer in Algeria (see note 8).

During the second quarter of 2003, we received a
recovery of $0.4 million related to a customer in Algeria
(see note 8).

During the third quarter of 2003, we wrote off
the $0.5 million unamortized balance of the Smith Woolley
trade name that was acquired in the acquisition due to us
ceasing to use the name (see note 11). We received a
recovery of $0.8 million related to a customer in Algeria
(see note 8).

During the fourth quarter of 2003, we received a
recovery $0.3 million related to a customer in Algeria (see
note 8).

64



---



##### 





|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.



|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

(a) Evaluation of disclosure controls and
procedures

Our Chief Executive Officer and Chief Financial
Officer carried out an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934) as of December 31, 2003. Based on that
evaluation, these officers have concluded that as of
December 31, 2003, our disclosure controls and procedures
were adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made
known to them by others within those entities.

(b) Changes in internal controls

There were no significant changes in our internal
controls or other factors that could significantly affect our
disclosure controls and procedures subsequent to
December 31, 2003.

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 our 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 our 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 our 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 captions 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 our fiscal year, which information is incorporated
herein by reference.



|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

Reference is made to the information set forth
under the caption Principal Accountant Fees and
Services appearing in the Proxy Statement to be filed
within 120 days after the end of our fiscal year, which
information is incorporated herein by reference.

65



---



##### 



PART IV

Item 15.     Exhibits,
Financial Statement Schedules, and Reports on
Form 8-K



| |        |                                                                                                                                                                          
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)(1) | The following consolidated financial statements
    of LCC International, Inc. and its subsidiaries and report of
    independent auditors are included in Item 8 hereof.

Report of Independent Auditors.

Consolidated Statements of
Operations  Years Ended December 31, 2001, 2002,
and 2003.

Consolidated Balance Sheets as of
December 31, 2002 and 2003.

Consolidated Statements of Shareholders
Equity  Years Ended December 31, 2001, 2002, and
2003.

Consolidated Statements of Cash
Flows  Years Ended December 31, 2001, 2002, and
2003.

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 of LCC International,
    Inc. 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 Form 10-K or are incorporated herein by reference:

|        |    |             |  |                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 3  | .1          |  | Restated Certificate of Incorporation of the LCC
    International, Inc. (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 with the SEC 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 with the
    SEC 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 with the SEC on September 20,
    1996).                               
|        | 10 | .1          |  | 1996 Directors Stock Option Plan of the Company
    (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 with the
    SEC on September 20, 1996).                                       
|        | 10 | .2          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated April 22, 1997 (incorporated by
    reference to Exhibit 4.6 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 30,
    1999).                                                                 
|        | 10 | .3          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated April 16, 1998 (incorporated by
    reference to Exhibit 4.7 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 30,
    1999).                                                                 
|        | 10 | .4          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated February 1, 2000 (incorporated by
    reference to the Companys definitive proxy statement on
    Schedule 14A filed with the SEC on April 24, 2000).                                                                  
|        | 10 | .5          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated January 30, 2001 (incorporated by
    reference to Exhibit 4.5 to the Companys Annual
    Report on Form 10-K filed with the SEC on April 2,
    2001).                                                                

66



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .6          |  | Amended and Restated 1996 Employee Stock Option
    Plan of the Company, dated February 1, 2000 (incorporated
    by reference to Exhibit 4.6 to the Companys Annual
    Report on Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                  
|        | 10 | .7          |  | 1996 Employee Stock Purchase Plan of the Company,
    as amended May 25, 1999 (incorporated by reference to
    Exhibit 4.7 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                                    
|        | 10 | .8          |  | Form of the Companys 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 with the SEC on
    September 20, 1996).
|        | 10 | .9          |  | Form of the Companys 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 with the SEC on September
    20, 1996).                                                               
|        | 10 | .10         |  | Form of the Companys Directors Stock Option
    Plan stock option agreement for directors who 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 with the SEC on September 20, 1996).                                
|        | 10 | .11         |  | Form of the Companys 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 with the SEC on September 20,
    1996).                                                                 
|        | 10 | .12         |  | Form of the Companys 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 with the SEC on
    September 20, 1996).                                                             
|        | 10 | .13         |  | Form of the Companys 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 with the SEC on April 2, 2001).                          
|        | 10 | .14         |  | Form of Stock Option Agreement between the
    Company 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 with the SEC on
    September 20, 1996).                                                                    
|        | 10 | .15         |  | Letter Agreement dated February 22, 1999,
    between the Company and Terri Feely (incorporated by reference
    to Exhibit 10.9 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                               
|        | 10 | .16         |  | Letter Agreement dated May 26, 1999, between
    the Company and David Walker (incorporated by reference to
    Exhibit 10.10 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                                  
|        | 10 | .17         |  | Letter Agreement dated February 14, 2000
    between the Company and Michael McNelly (incorporated by
    reference to Exhibit 10.11 to the Companys Annual
    Report on Form 10-K filed with the SEC on April 2,
    2001).                                                                                                                                       
|        | 10 | .18         |  | Employee Agreement on Ideas, Inventions and
    Confidential Information between Michael S. McNelly and the
    Company 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 with the SEC on
    December 20, 2001).                                                         
|        | 10 | .19         |  | Acknowledgement Letter dated October 6, 2003
    between the Company and Michael S. McNelly (incorporated by
    reference to Exhibit 10.18.1 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-108575, filed with the SEC on
    November 5, 2003).                                                              

67



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .20         |  | Letter Agreement, dated December 12, 2002,
    between the Company and Graham Perkins (incorporated by
    reference to Exhibit 10.19 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 28,
    2003).                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .21         |  | Letter Agreement, dated February 13, 2002,
    between the Company and Vincent Gwiazdowski (incorporated by
    reference to Exhibit 10.20 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 28, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .22         |  | Employment Agreement, dated May 24, 1999,
    between the Company and C. Thomas Faulders, III (incorporated by
    reference to Exhibit 10 to the Companys Current
    Report on Form 8-K filed with the SEC on May 27, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .23         |  | Loan Agreement between C. Thomas Faulders, III,
    and the Company 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 with the
    SEC on December 20, 2001).                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .24         |  | 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 with the SEC on March 28,
    2002).                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .25         |  | Letter dated June 16, 2003, from the Company
    to Julie A. Dobson (incorporated by reference to
    Exhibit 10.24 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration No.
    333-108575, filed with the SEC on November 5, 2003).                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .26         |  | Letter dated January 11, 2001, from the
    Company to Susan Mayer (incorporated by reference to
    Exhibit 10.14 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 10 | .27         |  | Letter dated June 19, 2001, from the Company
    to Susan Ness (incorporated by reference to Exhibit 10.24
    to the Companys Annual Report on Form 10-K filed with
    the SEC on March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .28         |  | Form of Indemnity Agreement between the Company
    and the current and former officers and directors of the Company
    (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 with the
    SEC on September 20, 1996).                                                                                                                                                                                                                                                                                                                        
|        | 10 | .29         |  | Intercompany Agreement dated as of
    September 20, 1996 among Telcom Ventures, RF Investors,
    L.L.C., LCC, L.L.C., the Company, 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 with the SEC on September 20,
    1996).
|        | 10 | .30         |  | Registration Rights Agreement dated July 25,
    1996 among the Company, 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 with the SEC on August 16, 1996).                                                                                                                                                                                                                                                                                                           
|        | 10 | .31         |  | Overhead and Administrative Services Agreement
    dated August 27, 1996 between the Company 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 with the SEC on September 20,
    1996).                                                                                                                                                                                                                                                                                                                
|        | 10 | .32         |  | Agreement of Merger dated September 15, 1996
    between LCC, L.L.C. and the Company (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 with the SEC on
    September 20, 1996).                                                                                                                                                                                                                                                                                                                                                        

68



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .33         |  | Form of Promissory Note by Telcom Ventures,
    L.L.C. to the Company (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 with the SEC on September 20, 1996).                                                                                                       
|        | 10 | .34         |  | First Amendment to Promissory Note by Telcom
    Ventures, L.L.C. to the Company (incorporated by reference to
    Exhibit 10.32 to the Companys annual report on
    Form 10-K, filed with the SEC on March 28, 2002).                                                                                                                                                          
|        | 10 | .35         |  | 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 with the
    SEC 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 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 with the
    SEC on August 16, 1996).
|        | 10 | .37         |  | 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 with the SEC on November 8, 1999).                                                                                                                                                               
|        | 10 | .38         |  | Letter, dated October 22, 1999, among the
    Company, 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 with the
    SEC on November 8, 1999).                                                                                                                                     
|        | 10 | .39         |  | 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 with the
    SEC on March 20, 2000).                                                                                                                       
|        | 10 | .40         |  | Settlement and Repurchase Agreement between the
    Company 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 with the SEC on
    December 20, 2001).                                                                 
|        | 21 |             |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                             
|        | 23 |             |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                              
|        | 31 | .1          |  | Certification of Chief Executive Officer pursuant
    to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                        
|        | 31 | .2          |  | Certification of Chief Financial Officer pursuant
    to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                        
|        | 32 | .1          |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        
|        | 32 | .2          |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        



| |     |                     
| | --- | --------------------
| | (b) | Reports on Form 8-K.

On October 24, 2003, we filed a Current
Report on Form 8-K, which reported that on October 23,
2003, we issued a press release announcing our financial results
for the third quarter of 2003.



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

(d) None.

69



---



##### 



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 26, 2004                

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 on March 26, 2004.

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

70



---



##### 



SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)


|                             |                                 |           |  |            |  |            |  |               |   |            |  |     |  |  |  |       |  |  |  |       | 
|---------------------------- | ------------------------------- | --------- |  | ---------- |  | ---------- |  | ------------- | - | ---------- |  | --- |  |  |  | ----- |  |  |  | ----- | 
|                             |                                 | Column    |  |            |  |            |  |              
|Column A                     |                                 | B         |  | Column C   |  | Column D   |  | Column E     
|                             |                                 |           |  |            |  |            |  |              
|                             |                                 |           |  |            |  |            |  |              
|                             |                                 |           |  | Additions  |  |            |  |              
|                             |                                 | Balance   |  |            |  |            |  |              
|                             |                                 | at        |  | Charged to |  | Charges to |  |               |   | Balance at
|                             |                                 | Beginning |  | costs and  |  | other      |  |               |   | end of    
|Description                  |                                 | of period |  | expenses   |  | accounts   |  | Deductions(1) |   | period    
|                             |                                 |           |  |            |  |            |  |               |   |           
|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 | 
|Year ended December 31, 2003 |                                 |           |  |            |  |            |  |               |   |            |  |     |  |  |  |       |  |  |  |      
|                             | Allowance for doubtful accounts |           |  | 3,122      |  |            |  | (2,419        | ) |            |  | 253 |  |  |  | 490   |  |  |  | 466   | 



---

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



---



##### 



EXHIBIT INDEX

|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | 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 with the SEC 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 with the
    SEC 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 with the SEC on September 20,
    1996).                                                                                                    
|        | 10 | .1          |  | 1996 Directors Stock Option Plan of the Company
    (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 with the
    SEC on September 20, 1996).                                                                                                            
|        | 10 | .2          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated April 22, 1997 (incorporated by
    reference to Exhibit 4.6 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 30,
    1999).                                                                                                                                      
|        | 10 | .3          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated April 16, 1998 (incorporated by
    reference to Exhibit 4.7 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 30,
    1999).                                                                                                                                      
|        | 10 | .4          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated February 1, 2000 (incorporated by
    reference to the Companys definitive proxy statement on
    Schedule 14A filed with the SEC on April 24, 2000).                                                                                                                                       
|        | 10 | .5          |  | Amendment to 1996 Directors Stock Option Plan of
    the Company, dated January 30, 2001 (incorporated by
    reference to Exhibit 4.5 to the Companys Annual
    Report on Form 10-K filed with the SEC on April 2,
    2001).                                                                                                                                     
|        | 10 | .6          |  | Amended and Restated 1996 Employee Stock Option
    Plan of the Company, dated February 1, 2000 (incorporated
    by reference to Exhibit 4.6 to the Companys Annual
    Report on Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                  
|        | 10 | .7          |  | 1996 Employee Stock Purchase Plan of the Company,
    as amended May 25, 1999 (incorporated by reference to
    Exhibit 4.7 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                                    
|        | 10 | .8          |  | Form of the Companys 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 with the SEC on
    September 20, 1996).
|        | 10 | .9          |  | Form of the Companys 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 with the SEC on September
    20, 1996).                                                               
|        | 10 | .10         |  | Form of the Companys Directors Stock Option
    Plan stock option agreement for directors who 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 with the SEC on September 20, 1996).                                



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .11         |  | Form of the Companys 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 with the SEC on September 20,
    1996).                                       
|        | 10 | .12         |  | Form of the Companys 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 with the SEC on
    September 20, 1996).                                   
|        | 10 | .13         |  | Form of the Companys 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 with the SEC on April 2, 2001).
|        | 10 | .14         |  | Form of Stock Option Agreement between the
    Company 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 with the SEC on
    September 20, 1996).                                          
|        | 10 | .15         |  | Letter Agreement dated February 22, 1999,
    between the Company and Terri Feely (incorporated by reference
    to Exhibit 10.9 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                     
|        | 10 | .16         |  | Letter Agreement dated May 26, 1999, between
    the Company and David Walker (incorporated by reference to
    Exhibit 10.10 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                        
|        | 10 | .17         |  | Letter Agreement dated February 14, 2000
    between the Company and Michael McNelly (incorporated by
    reference to Exhibit 10.11 to the Companys Annual
    Report on Form 10-K filed with the SEC on April 2,
    2001).                                                                                                             
|        | 10 | .18         |  | Employee Agreement on Ideas, Inventions and
    Confidential Information between Michael S. McNelly and the
    Company 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 with the SEC on
    December 20, 2001).                               
|        | 10 | .19         |  | Acknowledgement Letter dated October 6, 2003
    between the Company and Michael S. McNelly (incorporated by
    reference to Exhibit 10.18.1 to Amendment No. 2 to the
    Companys Registration Statement on Form S-1,
    Registration No. 333-108575, filed with the SEC on
    November 5, 2003).                                    
|        | 10 | .20         |  | Letter Agreement, dated December 12, 2002,
    between the Company and Graham Perkins (incorporated by
    reference to Exhibit 10.19 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 28,
    2003).                                                                                                           
|        | 10 | .21         |  | Letter Agreement, dated February 13, 2002,
    between the Company and Vincent Gwiazdowski (incorporated by
    reference to Exhibit 10.20 to the Companys Annual
    Report on Form 10-K filed with the SEC on March 28, 2003).                                                                                                          
|        | 10 | .22         |  | Employment Agreement, dated May 24, 1999,
    between the Company and C. Thomas Faulders, III (incorporated by
    reference to Exhibit 10 to the Companys Current
    Report on Form 8-K filed with the SEC on May 27, 1999).                                                                                                            
|        | 10 | .23         |  | Loan Agreement between C. Thomas Faulders, III,
    and the Company 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 with the
    SEC on December 20, 2001).                                                                               



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .24         |  | 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 with the SEC on March 28,
    2002).                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .25         |  | Letter dated June 16, 2003, from the Company
    to Julie A. Dobson (incorporated by reference to
    Exhibit 10.24 to Amendment No. 2 to the Companys
    Registration Statement on Form S-1, Registration No.
    333-108575, filed with the SEC on November 5, 2003).                                                                                                                                                                                                                                                                                                                                                                         
|        | 10 | .26         |  | Letter dated January 11, 2001, from the
    Company to Susan Mayer (incorporated by reference to
    Exhibit 10.14 to the Companys Annual Report on
    Form 10-K filed with the SEC on April 2, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .27         |  | Letter dated June 19, 2001, from the Company
    to Susan Ness (incorporated by reference to Exhibit 10.24
    to the Companys Annual Report on Form 10-K filed with
    the SEC on March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .28         |  | Form of Indemnity Agreement between the Company
    and the current and former officers and directors of the Company
    (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 with the
    SEC on September 20, 1996).                                                                                                                                                                                                                                                                                                                    
|        | 10 | .29         |  | Intercompany Agreement dated as of
    September 20, 1996 among Telcom Ventures, RF Investors,
    L.L.C., LCC, L.L.C., the Company, 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 with the SEC on
    September 20, 1996).
|        | 10 | .30         |  | Registration Rights Agreement dated July 25,
    1996 among the Company, 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 with the SEC on August 16, 1996).                                                                                                                                                                                                                                                                                                       
|        | 10 | .31         |  | Overhead and Administrative Services Agreement
    dated August 27, 1996 between the Company 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 with the SEC on September 20,
    1996).                                                                                                                                                                                                                                                                                                            
|        | 10 | .32         |  | Agreement of Merger dated September 15, 1996
    between LCC, L.L.C. and the Company (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 with the SEC on
    September 20, 1996).                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .33         |  | Form of Promissory Note by Telcom Ventures,
    L.L.C. to the Company (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 with the SEC on September 20, 1996).                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .34         |  | First Amendment to Promissory Note by Telcom
    Ventures, L.L.C. to the Company (incorporated by reference to
    Exhibit 10.32 to the Companys annual report on
    Form 10-K, filed with the SEC on March 28, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .35         |  | 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 with the
    SEC on August 16, 1996).                                                                                                                                                                                                                                                                



---



##### 



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .36         |  | 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 with the
    SEC on August 16, 1996).
|        | 10 | .37         |  | 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 with the SEC on November 8, 1999).                                                                                                                                                               
|        | 10 | .38         |  | Letter, dated October 22, 1999, among the
    Company, 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 with the
    SEC on November 8, 1999).                                                                                                                                     
|        | 10 | .39         |  | 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 with the
    SEC on March 20, 2000).                                                                                                                       
|        | 10 | .40         |  | Settlement and Repurchase Agreement between the
    Company 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 with the SEC on
    December 20, 2001).                                                                 
|        | 21 |             |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                             
|        | 23 |             |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                              
|        | 31 | .1          |  | Certification of Chief Executive Officer pursuant
    to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                        
|        | 31 | .2          |  | Certification of Chief Financial Officer pursuant
    to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                        
|        | 32 | .1          |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        
|        | 32 | .2          |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.