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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2001

Commission file number: 0-21213

LCC INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its
Charter)


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|                                                                             
|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 x      No

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

Based upon the closing price of the registrants common
stock as of March 1, 2002, the aggregate market value of the
common stock held by non-affiliates of the registrant is
$29,924,655.*

As of March 1, 2002, the registrant had outstanding
12,514,477 shares of Class A Common Stock, par value $.01
per share, (the Class A Common Stock) and
8,405,595 shares of Class B Common Stock, par value $.01
per share (the Class B Common Stock).

DOCUMENTS INCORPORATED BY REFERENCE

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

(1) Portions of the definitive Proxy Statement for the
Annual Meeting of the Stockholders to be held on May 23,
2002 (the Proxy Statement) are incorporated by
reference into Part III, Items 10  13 of
this Form 10-K.
















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This Annual Report on Form 10-K
(Form 10-K) contains certain forward-looking
statements within the meaning of Section 21E of the
Securities and Exchange Act of 1934, which statements can be
identified by the use of forward looking terminology, such as
may, will, expect,
anticipate, estimate, or
continue or the negative thereof or other variations
thereon or comparable terminology. The Companys actual
results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors,
including those set forth elsewhere in this Form 10-K. See
the Risk Factors section of Item 1
Business for cautionary statements identifying
important factors with respect to such forward-looking
statements, including certain risks and uncertainties that could
cause actual results to differ materially from results referred
to in forward-looking statements.

PART I

Item 1.  Business

Overview

The Company is one of the worlds largest independent
providers of wireless network and infrastructure services,
including the planning, design and deployment, and ongoing
operations and maintenance of wireless networks, to an
increasingly broad range of companies, including wireless
carriers, satellite service providers, telecommunication
equipment vendors, tower companies and Internet content
providers. Since its inception in 1983, the Company has
delivered wireless network solutions to more than 300 customers
in over 50 countries. Customers in the United States include
wireless service providers such as AT&T Wireless Services,
Nextel Communications, Northcoast Communications, Sprint PCS,
Ubiquitel, Verizon and XM Satellite Radio. Internationally-based
customers accounted for approximately 23.3% (41.5% excluding
revenues attributed to XM Satellite) of the Companys
revenues for the year ended December 31, 2001 and include
large international wireless carriers, such as Ben Netherlands,
BT Cellnet, China Unicom, Click Vodafone, Hutchison, Omnitel and
Telfort Mobiel BV. The Company also provides services globally
to large telecommunication equipment vendors such as Ericsson,
Lucent and Nokia. In addition, the Company provides high level
technical consulting services for companies such as G.E.
Capital, E.I. DuPont de Nemours, MDS America and AOL Time Warner.

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

Industry Background

Wireless Telecommunications Networks

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

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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, interference from neighboring or competing
networks or other radio sources. Optimization also involves
tuning the network to enable operators to compete more
effectively in areas where there are multiple system operators.

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

Growth and Evolution of the Wireless
Telecommunication Industry

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

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

Current Challenges Confronting Wireless
Service Providers and Telecommunication Equipment Vendors

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

Equipment vendors are also confronting multiple challenges as
they introduce new generations of equipment with increased
features and functionality. Vendors are required to provide
equipment that is both compatible with a carriers existing
network and can be integrated with equipment offered by other
vendors. As a result of rapid technological changes, the Company
believes that equipment vendors have increasingly focused on
offering competitive product solutions while outsourcing
services such as network design and deployment and operations
and maintenance.

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The Need for Outsourcing

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



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

The LCC Solution

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Speed to Market.The Companys expertise and
	processes enable its customers to meet, or in some
	circumstances, beat, their project deadlines. Members of the
	Companys technical, design and deployment teams often work
	together with the customer at the initial stage of a project in
	order to plan an effective and efficient solution for the
	customers needs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Expertise and Experience with All Major Wireless
	Technologies.The Company has experience in all major
	wireless access technologies, including 2G, 2.5G and 3G analog
	and digital system protocols and their respective migration
	paths; i.e., Global System for Mobile Communications, commonly
	referred to as GSM, Time Division Multiple Access, commonly
	referred to as TDMA, Code Division Multiple Access, commonly
	referred to as CDMA, and Integrated Dispatch Enhanced Network,
	commonly referred to as iDEN; and other wireless technologies
	such as broadbands LMDS, MMDS, UNII/802.11 (a) and
	802.11 (b), Europes equivalent to iDEN referred to as
	Tetra and core network technologies such as MAP, IS-41, ATM and
	SS7. The Company is actively engaged in developing new and
	emerging technologies in the wireless telecommunications
	industry through participation in industry panels, industry
	association forums and through independent research. The
	Companys Wireless Institute is an integral part of its
	technical development activities and has become one of the
	premier training schools for the wireless industry.
|
| |  | Ability to Deliver Turnkey Solutions.The Companys
	ability to provide end-to-end, or turnkey, services enables its
	wireless customers to engage a single responsible party who is
	accountable for delivering and managing its wireless network
	under a single contract. The Company coordinates its use of
	resources for each phase of the project from planning to design
	and deployment to optimization and management of the wireless
	network, enabling it to reduce the time and cost of its
	services. The Company provides its customers with a primary
	point of accountability and reduces the inefficiencies
	associated with coordinating multiple subcontractors to enable
	projects to be transitioned from discipline to discipline in an
	efficient manner.                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Worldwide Depth of Resources.During the past
	18 years, the Company has designed wireless networks in
	North America, Europe, Asia, Latin America, the Middle East and
	Africa employing all major wireless technologies. As of
	December 31, 2001, the Company had approximately 570 highly
	qualified and experienced engineers and system deployment
	professionals. The Companys system                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |  |                                                                                                                                                                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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,
	2001, approximately 60% of the Companys employees were on
	the ground overseas and represented approximately 50 different
	nationalities.

LCC Services

The Company offers to its wireless customers a complete range of
wireless network services, including: (1) high level
technical consulting services (4.1% of 2001 revenues);
(2) design and deployment services (94.3% of 2001
revenues); and (3) ongoing operations and maintenance
services (1.6% of 2001 revenues).

Consulting Services

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

Design and Deployment Services

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

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

In addition, because most wireless calls are ultimately routed
through a wireline network, traffic from wireless networks must
be connected with switching centers within wireline networks.
The Companys fixed network engineers provide the most
effective method to connect call sites to the wireless backbone.
The Company is also expanding its services to cover the entire
core network including interconnect, switching and microwave
engineering for all access technologies and into Local Exchange
Carrier, Competitive Local Exchange Carrier and Incumbent Local
Exchange Carrier communities.

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

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

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

Architecture and engineering.The Company provides a
complete structural analysis of each site to confirm that the
infrastructure has the structural capacity to accommodate the
design of the wireless network. In particular, the Company
implements location, software and capacity changes necessary to
satisfy the customers performance specifications for its
wireless network.

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

Operations and Maintenance Services

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

Customers and Backlog

The Company provides consulting, design and deployment, and
operations and maintenance services to wireless carriers,
telecommunication equipment vendors, satellite service
providers, tower companies and Internet content providers. The
Companys top ten customers, listed below, accounted for
approximately 82.9% of total revenues for the fiscal year ended
December 31, 2001:



| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ben Netherlands 
	 BT Cellnet 
	 Click Vodafone 
	 Hutchison 
	 Nextel 
	 NorthCoast Communications 
	 Sprint PCS 
	 Telfort Mobile 
	 Ubiquitel 
	 XM Satellite

For the year ended December 31, 2001, sales to
XM Satellite comprised 43.9% of the Companys total
revenues.

The Company had a total backlog of $24.7 million as of
December 31, 2001, including renewals and extensions from
existing customers, compared with $134.3 million as of
December 31, 2000. Since significant uncertainty exists
regarding the timing of filling backlog orders, the Company
cannot accurately predict the portion of the backlog that will
be filled during 2002. The Company cannot provide assurances
that the contracts included in the backlog as of
December 31, 2001 will actually generate the revenues
anticipated or that actual revenues will be achieved within any
particular period. The Companys contracts typically
include provisions that permit customers to terminate their
contracts under various circumstances, including for customer
convenience. Approximately, $48.4 million of the reduction
in backlog between 2000 and 2001 can be attributed to a tower
service contract that was not renewed. The balance of the
reductions in contract

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In addition to backlog, the Company derives significant revenue
from master service agreements and similar arrangements. Such
arrangements do not provide a long-term contractual commitment
and therefore are excluded from the Companys backlog
calculations.

Sales, Alliances and Marketing

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

Direct Sales

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

Marketing

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

Strategic Alliances

An element of the Companys sales and marketing strategy is
to develop and expand the scope of its strategic alliances to
further promote the Companys services. In particular, the
Company has entered into a strategic alliance with Mobilocity to
jointly provide strategic consulting and deployment services for
third generation wireless technology and mobile commerce. The
Company has entered into strategic alliances with The Management
Network Group, Inc. and The Dean Group, providers of management
consulting services, to provide comprehensive wireless
solutions. The Company also made a strategic investment in
Plan+Design Netcare AG, a German-based wireless network
deployment company, in support of a joint marketing agreement to
pursue sales opportunities in Germany, Switzerland and Austria.
The Company also maintains agreements with Transmast, Ltd.,
the former parent entity of Transmast Italia
(which was acquired by the Company in 2001), to target
additional sales opportunities in Europe and parts of Asia, and
with Cisco, as a member of the Cisco System Preferred
Services Partner Program in wireless specialization. These
agreements generally provide for the collaborative development
of potential business opportunities, with each party leading
efforts in its respective core competency.

As of December 31, 2001, the Company employed
25 full-time sales and marketing staff.

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Competition

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



| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | internal staffs of wireless network operators;                                                                                                                                                                                            
|
| |  | telecommunication equipment vendors, which provide design and
	deployment services as part of an equipment sale;                                                                                                                          
|
| |  | independent service companies such as Wireless Facilities, Inc.
	and o2wireless Solutions, Inc., each providing a full range of
	wireless network services, and a large number of other companies
	that provide limited wireless services;
|
| |  | construction and project management companies, such as Bechtel
	Group Inc. and Fluor Daniel Inc. 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 KPMG
	Consulting, Inc., Logica and others, which have developed
	capabilities to deliver network consulting services to wireless
	service providers.                              

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

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

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



| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | the willingness of competitors to finance customers
	projects on favorable terms, particularly among competitors in
	Europe; and
|
| |  | the ability and willingness of customers to rely on their
	internal staffs to perform services themselves.                       

Employees and Culture

Recognizing the critical importance of employee retention for
its business, the Company works closely with its employees to
develop and enhance the technical, professional and management
skills required to be successful in the Company. Senior
management of the Company believes it is critically important to
create and maintain an open culture that encourages learning,
responsibility and collaboration. C. Thomas
Faulders, III, the Companys chief executive officer,
hosts monthly teleconference meetings with all employees to
foster an open working environment. The Company recognizes that
preserving its culture

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The Company invests in all of its professionals to expand their
professional education. In particular, the Company allocates
substantial resources to its Wireless Institute, which provides
training for its engineers covering the latest technologies
developed and employed throughout the world. For example, in
2001, the Companys Wireless Institute conducted 3G
training seminars throughout Europe. In addition, the
Companys engineers receive continuous on-the-job exposure
to the latest wireless technologies.

As of December 31, 2001, the Company had approximately 700
full-time employees worldwide. The Company believes that
relations with its employees are good. None of the
Companys employees are represented by a labor union, and
the Company has not experienced any work stoppages. The Company
believes that its future growth and success will depend upon its
ability to attract and retain skilled and motivated personnel.

Recent Developments

In January 2002, the Company acquired 100% of the assets of
Smith Woolley Telecom, a privately held company that provides
deployment services to the wireless industry throughout the
United Kingdom. The purchase price for the acquisition was
£6,000,000 or approximately $8,464,006, including the
issuance of 215,000 shares of LCC Class A Common Stock, par
value $.01 per share. The value of the Company shares was
£1,000,000 (approximately $1,410,000) and was based on a
price of $6.556 per share, which represented the average closing
price of the Class A Common Stock for the 10 days
prior to closing the transaction. Based in Cambridge, England,
the 74 Smith Woolley employees provide and support site
acquisition, project management, site construction and
construction management services to customers such as One2One,
Vodafone, Orange and Hutchison. This acquisition, along with the
Companys acquisition of Transmast Italia in Italy in
December 2001, strengthens the Companys ability to provide
end to end services to customers in Europe.

In January 2002, the Company entered into a settlement agreement
with Pinnacle. The Company had entered into a Tower Service
Agreement with Pinnacle in February 2000, under which Pinnacle
was obligated to provide a minimum amount of contract work to
the Company for project management and audit services.
Concurrent with its tower sale to Pinnacle, the Company entered
into a Master Antenna Site Lease pursuant under which the
Company agreed to lease certain unoccupied space on the
telecommunications towers sold to Pinnacle. Pursuant to the
settlement agreement, the Company received $2.0 million, to
satisfy Pinnacles obligations under the Tower Service
Agreement, and the Company paid $2.0 million, to satisfy
all remaining obligations to Pinnacle under the Master Antenna
Site Lease. The Company has not determined the timing of
recognition of the gain related to payment under the Tower
Services Agreement and will not do so until the ultimate
resolution of uncertainties.

International Operations

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

Risk Factors

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

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The Company has derived, and believes that it will continue to
derive, a significant portion of its revenues in any given year
from a limited number of large projects. As these projects wind
down to completion, the Company faces the task of replacing such
revenue with a new project for the customer or with projects
from new customers. The Companys inability to replace such
revenues would cause a significant decrease in the
Companys revenue and negatively affect its operating
results. For the year ended December 31, 2001, the Company
derived approximately 82.9% of its total revenues from its ten
largest customers, including approximately 43.9% of its total
revenues from XM Satellite. The Companys initial
deployment of a terrestrial network of repeater sites for XM
Satellite was substantially completed during the fourth quarter
of 2001. Completion of this phase of the project requires the
Company to generate significant additional revenues from other
existing and new customers in order to avoid a significant
decline in revenues and operating results in fiscal year 2002,
as compared with fiscal year 2001. The Companys inability
to generate significant revenues from other projects will also
have a negative impact on the Companys backlog. For
example, the Companys backlog, including renewals and
extensions from existing customers, was $24.7 million at
December 31, 2001, compared with $134.3 million at
December 31, 2000.

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

Due to recent downturns in the financial markets in general, and
specifically within the telecommunications industry, many of the
Companys customers or potential customers are having
trouble obtaining financing. The current volatility of the
financial markets and slow down in the U.S. economy has also
intensified the uncertainty experienced the Companys
customers, who are increasingly finding it difficult to predict
demand for their products and services. As a result, many of the
Companys customers have and continue to slow and postpone
deployment of new networks and development of new products,
which reduces the demand for the Companys services.

The Company may experience significant
fluctuations in its quarterly results in 2002 as a result of
uncertainties relating to its ability to generate additional
revenues, manage its expenditures and other factors, certain of
which are outside of the Companys control.

The Companys quarterly and annual operating results have
varied considerably in the past and are likely to vary
considerably in 2002 and the future due to a number of
additional factors, many of which are outside of the
Companys control. The factors outside the Companys
control include, among others:



| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | the timing of receipt of new licenses or financing by potential
	customers;                 
|
| |  | the length of the Companys sales cycles;                                                   
|
| |  | changes in pricing policy by the Companys competitors;                                     
|
| |  | the timing and size of contracts;                                                           
|
| |  | customer budget changes;                                                                    
|
| |  | customer readiness to receive services and desired pace to build
	their network;            
|
| |  | services and equipment furnished by other providers;                                        
|
| |  | the availability of capital for wireless carriers to fund
	build-outs;                      
|
| |  | the timing of the adoption and deployment of new technologies
	such as 3G and broadband; and
|
| |  | telecommunications market conditions and economic conditions
	generally.                    

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



| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Companys ability to generate significant additional
	revenues to replace revenues associated with projects that are
	nearing, or at project completion;
|
| |  | the timing and expansion into new international markets, through
	acquisitions or otherwise; and                                                            

10



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##### 





| |   |                                                          
| | - | ---------------------------------------------------------
| |  | changes in the prices of services offered by the Company.

Due to the factors above, quarterly revenues, expenses and
results of operations could vary significantly in 2002 and
beyond. As a result, the Companys results may not meet the
expectations of securities analysts and investors, which could
cause the price of the Companys common stock to decline
significantly.

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

An increasing percentage of the Companys revenue is
derived from fixed price contracts. The portion of the
Companys revenue from fixed price contracts was 44.5% in
2001. Fixed price contracts are typically paid on a milestone
basis. Current trends, particularly in Europe, could reduce the
number of milestone payments under a contract that in turn
requires the Company to finance an increased amount of unbilled
receivables.

In addition, the Company recognizes revenue on fixed price
contracts using the percentage-of-completion method of
accounting, which requires considerable judgment since this
technique relies upon estimates or budgets. With the
percentage-of-completion method, in each period the Company
recognizes expenses as they are incurred and recognizes revenue
based on the ratio of the current costs incurred for the project
to the then estimated total costs of the project. Accordingly,
the revenue that the Company recognizes in a given quarter
depends on, among other things, costs it has incurred for
individual projects and its then current estimate of the total
remaining costs to complete individual projects. If in any
period the Company significantly increases its estimate of the
total costs to complete a project, it may recognize very little
or no additional revenue with respect to that project. For
example, in 2001, the Companys gross profits were
decreased $3.3 million because of increased costs to
complete a contract performed in the Middle East. As a result of
these challenges associated with fixed price contracts, the
Companys gross profit in future periods may be
significantly reduced or eliminated. If the total contract cost
estimates indicate that there is a loss, such loss is recognized
in the period such determination is made. To the extent that the
Companys cost estimates fluctuate over time or differ from
actual requirements, the Companys operating results may be
materially affected.

The Company anticipates that its reliance upon fixed price
contracts will continue to grow in connection with its Smith
Woolley Telecom and Transmast Italia acquisitions and expansion
of its European and international operations. These newly
acquired international operations provide more support for
network deployment and construction management, where use of
fixed price contracts is more typical. The Companys
inability to obtain favorable payment terms or accurately
predict its costs and related estimates in this fixed price
environment could cause fluctuations in quarterly results and
adversely affect the Companys operating results.

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

The Company frequently performs services for development stage
customers that carry a higher degree of financial risk for the
Company. The Companys customers, established and
development stage, are also vulnerable to, and have been, and
may continue to be, impacted by the current tightening of
available credit and general economic slowdown. As a result of
these conditions, the Companys customers may be unable to
pay, or may delay payment, for services performed by the
Company. If the Company is not able to collect such amounts, it
may be required to write-off significant accounts receivable and
recognize bad debt expense. The Company recorded a provision for
doubtful accounts of $2.1 million in fiscal 2001 compared
to its recording of a recovery of $0.3 million in fiscal 2000.
This increase in doubtful accounts reflects increased losses
from customers declaring bankruptcy or having other financial
difficulties during 2001.

11



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##### 



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

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

Further delays in the adoption and deployment of
new technologies such as 3G would negatively affect the
Companys opportunity to generate revenues in 2002 and
beyond.

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

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

Approximately 23.3% (41.5% excluding revenue from XM Satellite)
of the Companys revenues for the year ended
December 31, 2001 were generated outside of the United
States, primarily in Europe, the Middle East and Africa. The
Company currently expects international revenues to increase as
a percentage of total revenues in 2002 and the future, driven by
international acquisitions and anticipated growth in 3G work in
Europe. In 2001, the Company completed its acquisition of
Transmast Italia, a Milan based deployment firm. In January
2002, the Company also completed the acquisition of Smith
Woolley Telecom, a U.K. based deployment firm. As a result, the
Companys exposure to the risks and costs associated with
international business transactions is likely to increase. Such
risks include:



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

12



---



##### 



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

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

Providing services outside the United States carries the
additional risk of currency fluctuations and foreign exchange
controls imposed by certain countries since many of the
Companys non-U.S. customers will not agree to payment in
U.S. dollars. The Company does not currently engage in currency
hedging activities to limit the risk of exchange rate
fluctuations. Therefore, fluctuations in the currency exchange
rate could have a negative impact on the profitability of the
Companys operations. See Item 7,
Managements Discussion of Analysis of Financial
Condition and Results of Operation  Foreign
Currency.

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

The Company faces intense competition in the United States and
internationally in the market for wireless network design and
system deployment services. Many other companies offer these
services and the number of other independent firms providing
these services to wireless network operators throughout the
world is increasing. Wireless operators themselves and system
equipment vendors have and continue to develop capabilities
competitive with those provided by the Company.

Many competitors, including equipment vendors, system
integrators and tower companies, have substantially greater
financial and other resources than the Company. The ability of
such competitors to leverage their greater resources to more
effectively deliver a full turnkey solution, i.e. by providing
equipment as part of their solution or quickly deploying a large
number of personnel for a project, poses a competitive threat to
the Companys business. Although the equipment vendors or
system integrators may subcontract a portion of the services to
the Company in some cases, the Company often experiences lower
margins for such services as a subcontractor. In addition, as a
result of intense competition, the Company has increasingly
encountered and may be required to agree to less favorable
contract terms, including provisions such as liquidated damages,
performance guarantees and deferred payment terms.

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

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

13



---



##### 



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

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

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

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

The Companys sales force is new and
their inability to effectively sell the Companys services
would seriously harm its revenues and business.

In fiscal year 2001 the Company modified the structure of its
sales organization in favor of regional sales forces and
implemented new sales initiatives, including the addition of
several new sales executives. In addition, through the
acquisitions of Smith Woolley Telecom and Transmast Italia, the
Company has expanded the size and geographic reach of its sales
force. As a result of these changes, the Company sales force is,
in large part, new and unproven. If the Companys new sales
personnel are unable to become effective in a timely manner, the
Companys revenue and business would be harmed.

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

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

14



---



##### 



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

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

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

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

The Company may not be able to
successfully integrate the business of its recent acquisitions
and it may not achieve the expected benefits of such
acquisitions.

The Companys acquisitions of Smith Woolley Telecom in
January 2002 and Transmast Italia in December 2001 will require
integrating their businesses and operations into the Company. To
integrate its acquired businesses, the Company must implement
its management information systems and operating systems and
assimilate and manage the personnel of the acquired operations.
The difficulties of these integrations may be further
complicated by geographic distances. Integration of these
acquired businesses may result in increased costs and the
Company may ultimately be unable to achieve the anticipated
synergies and benefits of such acquisitions. Difficulties
associated with these integrations could result in disruption to
other parts of the Companys business and the diversion of
management and financial resources from its business operations.

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

The Company may make future acquisitions or investments in other
companies or technologies. Any future acquisitions may require
additional debt or equity financing, or the issuance of shares,
which could be dilutive to the Companys existing
shareholders. In addition, the Companys operating results
may suffer as a

15



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##### 







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

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

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

RF Investors owns all of the outstanding shares of the
Companys Class B Common Stock, which represents 81.1%
of the combined voting power of both classes of common stock.
These shares may be sold without your participation in the sale.
Accordingly, RF Investors, its parent company Telcom Ventures
and its equity holders are able, without your approval, to
control the Companys management and operations and the
outcome of virtually all matters submitted for a stockholder
vote.

RF Investors may also, by converting its shares of Class B
Common Stock into shares of Class A Common Stock, obtain a
sufficient number of shares of Class A Common Stock (40.2%
of the total outstanding shares of Class A Common Stock on
March 1, 2002) to influence the outcome of any vote on
which the holders of Class A Common Stock are entitled to
vote together as a class.

Dr. Rajendra and Neera Singh, who with certain Singh family
trusts indirectly own 75% of Telcom Ventures, are directors or
executive officers. Dr. Singh is also a director of XM
Satellite, the Companys largest customer in 2001, which
accounted for approximately 43.9% of total revenues. Telcom
Ventures is principally engaged in making investments in
wireless system operators and emerging wireless and Internet
technologies. If the Company desires to pursue a transaction
requiring stockholder approval that may conflict with the
interests of Telecom Ventures, RF Investors may elect to vote
its shares to block such transaction.

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

If the Companys stockholders sell significant amounts of
their common stock, including shares issuable upon conversion of
Class B common stock, or upon exercise of outstanding
options, or if the market perceives that such sales may occur,
the market price of the Companys common stock may decline.
Ownership of a significant portion of the Companys common
stock is concentrated in the hands of a few shareholders, RF
Investors (owning approximately 30.2% of outstanding common
shares), Worldcom, Inc. (owning approximately 13.6% of
outstanding common shares), and the Carlyle Investors (owning
approximately 10.1% of outstanding common shares). In March
2002, the Carlyle Investors (which consist of five
separate legal entities, four of which have the same general
partner) exercised a contractual right to receive a distribution
from RF Investors of approximately 2.1 million shares of
Class B common stock, which were automatically converted
into an equal number of shares of Class A common stock,
comprising all the Carlyle Investors interest in the
Companys common stock held by RF Investors. The shares
held by these shareholders are deemed to be restricted
securities under applicable securities laws but may be
eligible for sale in compliance with Rule 144 under the
Securities Act. Rule 144 generally provides that a person
holding restricted securities that have been outstanding for a
period of one year after the later of the issuance by the
Company or sale by an affiliate of the Company, may sell in
brokerage transactions an amount equal to the greater of 1% of
the Companys outstanding common stock and the
Companys average weekly trading volume for the prior four
weeks, every three months. A person who is a
non-affiliate, and who has not been an affiliate
within 90 days,

16



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##### 





The Companys relationship with
Telcom Ventures may result in potential conflicts of
interest.

Telcom Ventures, RF Investors parent company, is
principally engaged in making investments in wireless system
operators and emerging wireless and Internet technologies.
Directors of Telcom Ventures and its subsidiaries who are also
the Companys directors or officers have certain fiduciary
obligations to each organization. Telcom Ventures and directors
of Telcom Ventures and its subsidiaries who are also the
Companys directors and officers may be subject to
conflicts of interest in transactions concerning the Company.
For example, the Company may have an interest in pursuing
acquisitions, divestitures, financings or other transactions
that, in the Companys judgment, could be beneficial to the
Company, even though such transactions might conflict with the
interests of Telcom Ventures. If such conflicts do occur,
directors of Telcom Ventures and its subsidiaries who are also
the Companys directors and officers may exercise their
influence in the best interests of Telcom Ventures instead of
the best interests of the Company. In addition, Dr. Singh
is also a director of XM Satellite, the Companys largest
customer in 2001, which accounted for approximately 43.9% of
total revenues.

The Company has entered, and will enter, into arrangements with
Telcom Ventures and certain of Telcom Ventures
subsidiaries which provide for transactions and relationships
between the parties or which otherwise affect the Company. The
Company, RF Investors, Telcom Ventures and the Telcom Ventures
owners (the Singh family, including companies they own, and the
Carlyle Investors) have entered into an intercompany agreement,
by which, among other things, (i) the Singh Family group is
limited in its ability to compete with the Company in its
traditional lines of business and (ii) Telcom Ventures is
limited in its ability to invest in entities whose primary
business is to compete with the Company in its traditional lines
of business, in each case until the earlier of (i) the date
on which those owners no longer possess 51% or more of the
outstanding voting power of the Company or (ii) the
occurrence of certain termination events specified in the
intercompany agreement.

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

The Company is free to pursue investment opportunities on its
own, but it is obligated to refer to Telcom Ventures investment
opportunities prior to offering the opportunities to any other
third party. If Telcom Ventures does not elect to pursue the
investment opportunity within five days, the Company will then
be free to offer the opportunity to third parties. The
intercompany agreement may not eliminate or reduce conflicts of
interest or inconsistent fiduciary obligations.

Item 2.  Properties

The Company leases approximately 155,000 square feet of office
space in McLean, Virginia, under a ten-year lease expiring in
2007. The Company occupies approximately 93,000 square feet of
the leased space and subleases the remaining 62,000 square feet
to other tenants. The Company also leases an additional 29,500
square feet of office space in McLean, Virginia, under a lease
expiring in May 2002. This lease is renewable for additional
five-year terms, and the Company subleases portions of this
space to other tenants. In addition, the Company leases a total
of ten local and regional offices in North and South America,
including New York, New York and leases five local and regional
offices in Europe, including London, England.

17



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##### 



Item 3.  Legal Proceedings

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

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

None.

18



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##### 



PART II

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

Since completion of the Companys initial public offering
in September 1996, its Class A Common Stock has been quoted
on the Nasdaq National Market under the trading symbol
LCCI. As of March 1, 2002, there were 101
stockholders of record of the Class A Common Stock and, in
excess of 5,220 beneficial holders thereof, and two stockholders
of record of the Class B Common Stock. The following table
summarizes the high and low sales prices of the Class A
Common Stock by fiscal quarter for 2000 and 2001 as reported on
the Nasdaq National Market:

|               |  |      |          |  |  |   |       | 
|-------------- |  | ---- | -------- |  |  | - | ----- | 
|               |  |     
|Quarter Ended: |  | 2000
|               |  |     
|               |  |      |          | 
|              
|              
|              
|              
|March 31       |  | $    | 14.13 to |  |  | $ | 45.44 | 
|              
|              
|              
|              
|June 30        |  | $    | 12.00 to |  |  | $ | 38.50 | 
|              
|              
|              
|              
|September 30   |  | $    | 13.13 to |  |  | $ | 29.50 | 
|              
|              
|              
|              
|December 31    |  | $    | 6.50 to  |  |  | $ | 16.88 | 

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

The Company has never paid any cash dividends on Common Stock
and the Company does not anticipate paying dividends on the
Common Stock, cash or otherwise, in the foreseeable future.
Future dividends, if any, will be at the discretion of the Board
of Directors and will depend upon, among other things, the
Companys operations, capital requirements and surplus,
general financial condition, contractual restrictions and such
other factors as the Board of Directors may deem relevant.

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, 2001, which have been derived from the
Companys audited consolidated financial statements. The
selected consolidated financial data set forth below should be
read in conjunction with Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operationsand the

19



---



##### 





|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |         |         | 
|-------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------------- | ------ | ------- | ------ | ------- | ------- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                                                           |                                                          |                                      
|                                                                           |                                                          | Years Ended December 31,             
|                                                                           |                                                          |                                      
|                                                                           |                                                          | 1997(1)                               |        | 1998(1) |        | 1999(1) |         | 2000   |        | 2001
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |     
|                                                                           |                                                          |                                      
|                                                                           |                                                          | (in thousands, except per share data)
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Revenues:                                                                  |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Service                                                  |                                       | $      | 91,289  |        |         | $       | 86,328 |        |      | $      | 73,289 |        |   | $      | 149,385 |         |   | $      | 130,609 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Tower ownership and management                           |                                       |        |        |        |         |         | 860    |        |      |        | 2,504  |        |   |        | 1,008   |         |   |        |        |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           |                                                          | Total revenues                        |        |         | 91,289 |         |         |        | 87,188 |      |        |        | 75,793 |   |        |         | 150,393 |   |        |         | 130,609 | 
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Cost of revenues:                                                          |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Service                                                  |                                       |        | 62,263  |        |         |         | 66,238 |        |      |        | 53,080 |        |   |        | 109,952 |         |   |        | 103,535 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Tower ownership and management                           |                                       |        |        |        |         |         | 521    |        |      |        | 1,176  |        |   |        | 333     |         |   |        |        |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           |                                                          | Total cost of revenues                |        |         | 62,263 |         |         |        | 66,759 |      |        |        | 54,256 |   |        |         | 110,285 |   |        |         | 103,535 | 
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Gross profit                                                               |                                                          |                                       | 29,026 |         |        |         | 20,429  |        |        |      | 21,537 |        |        |   | 40,108 |         |         |   | 27,074 |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Operating expenses:                                                        |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Sales and marketing                                      |                                       |        | 2,466   |        |         |         | 3,843  |        |      |        | 5,464  |        |   |        | 7,833   |         |   |        | 7,068   |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | General and administrative                               |                                       |        | 18,314  |        |         |         | 22,063 |        |      |        | 18,128 |        |   |        | 19,673  |         |   |        | 15,978  |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Special charge (credit)                                  |                                       |        | (3,894  | )      |         |         |       |        |      |        |       |        |   |        |        |         |   |        |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Restructuring charge                                     |                                       |        |        |        |         |         | 1,256  |        |      |        |       |        |   |        | (108    | )       |   |        |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Non-cash compensation                                    |                                       |        | 514     |        |         |         | 362    |        |      |        | (12    | )      |   |        |        |         |   |        |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Gain on sale of tower portfolio and
	administration, Net |                                       |        |        |        |         |         |       |        |      |        |       |        |   |        | (26,437 | )       |   |        | (2,998  | )      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Depreciation and amortization                            |                                       |        | 3,410   |        |         |         | 2,409  |        |      |        | 3,628  |        |   |        | 2,899   |         |   |        | 3,012   |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           |                                                          | Total operating expenses              |        |         | 20,810 |         |         |        | 29,933 |      |        |        | 27,208 |   |        |         | 3,860   |   |        |         | 23,060  | 
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Operating income (loss)                                                    |                                                          |                                       | 8,216  |         |        |         | (9,504  | )      |        |      | (5,671 | )      |        |   | 36,248 |         |         |   | 4,014  |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Other income (expense)                                                     |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Interest, net                                            |                                       |        | (2,553  | )      |         |         | (1,397 | )      |      |        | (1,827 | )      |   |        | 1,688   |         |   |        | 1,886   |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Other                                                    |                                       |        | 1,275   |        |         |         | (618   | )      |      |        | (1,391 | )      |   |        | (787    | )       |   |        | 22,113  |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           |                                                          | Total other income (expense)          |        |         | (1,278 | )       |         |        | (2,015 | )    |        |        | (3,218 | ) |        |         | 901     |   |        |         | 23,999  | 
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Income (loss)from continuing operations before
	income Taxes               |                                                          |                                       | 6,938  |         |        |         | (11,519 | )      |        |      | (8,889 | )      |        |   | 37,149 |         |         |   | 28,013 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Provision (benefit) for income taxes                                       |                                                          |                                       | 1,548  |         |        |         | (4,561  | )      |        |      | (2,677 | )      |        |   | 16,531 |         |         |   | 11,041 |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Income (loss) from continuing operations                                   |                                                          |                                       | 5,390  |         |        |         | (6,958  | )      |        |      | (6,212 | )      |        |   | 20,618 |         |         |   | 16,972 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Income (loss) from discontinued operations
	net of tax provision (benefit) |                                                          |                                       | 2,185  |         |        |         | (17,785 | )      |        |      |       |        |        |   |       |         |         |   |       |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Gain on disposal of discontinued operations net
	of tax provision          |                                                          |                                       |       |         |        |         |        |        |        |      | 803    |        |        |   |       |         |         |   |       |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Net income (loss)                                                          |                                                          | $                                     | 7,575  |         |        | $       | (24,743 | )      |        | $    | (5,409 | )      |        | $ | 20,618 |         |         | $ | 16,972 |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Income (loss) per share:                                                   |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Continuing operations:                                                     |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Basic                                                    |                                       | $      | 0.37    |        |         | $       | (0.45  | )      |      | $      | (0.36  | )      |   | $      | 1.01    |         |   | $      | 0.83    |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           | Diluted                                                  |                                       | $      | 0.34    |        |         | $       | (0.45  | )      |      | $      | (0.36  | )      |   | $      | 0.93    |         |   | $      | 0.81    |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Discontinued operations:                                                   |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Basic                                                    |                                       | $      | 0.15    |        |         | $       | (1.15  | )      |      | $      | 0.05   |        |   |        |        |         |   |        |        |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           | Diluted                                                  |                                       | $      | 0.14    |        |         | $       | (1.15  | )      |      | $      | 0.05   |        |   |        |        |         |   |        |        |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Net income (loss) per share:                                               |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Basic                                                    |                                       | $      | 0.51    |        |         | $       | (1.60  | )      |      | $      | (0.31  | )      |   | $      | 1.01    |         |   | $      | 0.83    |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                           | Diluted                                                  |                                       | $      | 0.47    |        |         | $       | (1.60  | )      |      | $      | (0.31  | )      |   | $      | 0.93    |         |   | $      | 0.81    |        
|                                                                           |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|Consolidated Balance Sheet Data (at year-end):                             |                                                          |                                       |        |         |        |         |         |        |        |      |        |        |        |   |        |         |         |   |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Working capital                                          |                                       | $      | 59,155  |        |         | $       | 14,471 |        |      | $      | (8,039 | )      |   | $      | 59,460  |         |   | $      | 72,134  |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Intangibles, net                                         |                                       |        | 368     |        |         |         | 572    |        |      |        | 430    |        |   |        | 57      |         |   |        | 637     |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Total assets                                             |                                       |        | 95,420  |        |         |         | 84,204 |        |      |        | 82,868 |        |   |        | 110,045 |         |   |        | 109,599 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Long term liabilities                                    |                                       |        | 50,210  |        |         |         | 50,115 |        |      |        | 1,006  |        |   |        | 5,944   |         |   |        | 849     |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Shareholders equity                                     |                                       |        | 20,202  |        |         |         | 229    |        |      |        | 42,426 |        |   |        | 68,416  |         |   |        | 85,804  |        




|    |                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In March 1999, the Companys Board of
	Directors adopted a plan to dispose of the operations comprising
	its hardware and software products segments (see note 3 to the
	Consolidated Financial Statements) which were sold to Ericsson
	Radio Systems AB in October 1999. Prior year balances have been
	restated to reflect these segments as discontinued operations.

20



---



##### 



Item 7.  Managements Discussion and
Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in
conjunction with the Companys consolidated financial
statements and the notes thereto and the other financial data
appearing elsewhere in this Form 10-K.

Overview

The Company provides integrated end-to-end solutions for
wireless voice and data communication networks with service
offerings that include high level technical consulting, system
design and deployment and ongoing operations and maintenance
services. Since its inception in 1983, the Company has delivered
wireless network solutions to more than 300 customers in
over 50 countries. Internationally based customers
accounted for approximately 23.3% (41.5% excluding revenue from
XM Satellite) of the Companys revenues for the year ended
December 31, 2001.

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

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

The Companys primary sources of revenues are from
engineering design and system deployment services. Prior to the
sale of its tower business in March 2000, tower lease revenues
provided an additional source of revenues (see note 4 to the
Consolidated Financial Statements). Revenues from services are
derived from fixed price and time and materials contracts. The
Company recognizes revenues from fixed price service contracts
using the percentage-of-completion method. Fixed price revenues
as a percentage of total revenues were 34.9%, 63.4%, and 44.5%
in 1999, 2000, and 2001, respectively. With fixed price
contracts the Company recognizes revenue based on the ratio of
individual contract costs incurred to date on a project compared
with total estimated costs. Anticipated contract losses are
recognized as they become known and estimable. The Company
recognizes revenues on time and materials contracts as the
services are performed. Lease revenues from the tower business
in 2000 and preceding periods are recognized over the term of
the related lease.

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

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

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

The Company has continued to see tightened capital markets,
which, among other things have contributed to a slowdown in
wireless telecommunications infrastructure spending. The
Companys success depends upon continued growth in the
design and deployment and optimization of wireless networks.
Many wireless carriers are reliant upon the capital markets to
obtain funds to finance building and improving their wireless
networks. Most vulnerable are the customers that are new
licensees and operator/carriers who have limited sources of
funds from operations or have business plans that are dependent
on funding from the capital markets. The slowdown in wireless
telecommunications infrastructure spending during 2001 caused
some of the Companys customers or potential customers to
slow, postpone or reduce the scope of the deployment of

21



---



##### 



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


The Company has seen renewed activity lately to upgrade or
enhance existing systems. Despite this renewed activity, it
remains uncertain the impact, if any, and the related timing of
any such impact, upon the Companys future revenue growth
opportunities.

In Europe, the increased availability of 3G equipment and
the need for European carriers to meet building obligations
associated with their 3G licenses, which represent a significant
investment for the carriers, cause the Company to be optimistic
about European growth opportunities, which the Company
anticipates may contribute to revenue growth in the later half
of 2002. While revenue from 3G networks only constituted 4.7% of
the Companys revenues for the twelve months ended
December 31, 2001, it is expected to be an area of business
growth in 2002 and in the future. In anticipation of this
growth, the Company has recently acquired additional deployment
capability in Europe. In December 2001, the Company acquired
Transmast Italia, a wireless infrastructure, deployment, civil
engineering and project management firm located in Milan, Italy
(see note 11 to the Consolidated Financial Statements). In
addition, in January 2002, the Company acquired the assets of
Smith Woolley Telecom, a telecommunications consultancy company
that specializes in the provision of search, acquisition,
design, build, management and maintenance services to the
wireless industry in the United Kingdom (see discussion in
Recent Developmentsof Item 1 of this
Form 10-K). The Company also anticipates that its reliance
upon fixed price contracts will continue to grow in connection
with these recent acquisitions. These newly acquired
international operations provide more support for network
deployment and construction management, where use of fixed price
contracts is more typical.

Results of Operations

Continuing Operations

The following table sets forth certain items as a percentage of
revenues from the Companys audited consolidated statements
of operations for the years ended December 31, 1999, 2000,
and 2001. The table and discussion which follow provide
information which management believes is relevant to an
assessment and understanding of the Companys consolidated
results of operations and financial condition. The discussion

22



---



##### 





|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |       |       | 
|------------------------------------------------------------- | -------------------------------------------- | ---------------------------- | ----- | ---- | ----- | ---- | ---- | ----- | ----- |  | ---- | ----- | ----- | 
|                                                              |                                              |                             
|                                                              |                                              | Years Ended December 31,    
|                                                              |                                              |                             
|                                                              |                                              | 1999                         |       | 2000 |       | 2001
|                                                              |                                              |                              |       |      |       |     
|Revenues:                                                     |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Service                                      |                              |       | 96.7 | %     |      |      | 99.3  | %     |  |      | 100.0 | %    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Tower ownership and management               |                              |       | 3.3  |       |      |      | 0.7   |       |  |      | 0.0   |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                              |                                              | Total revenues               |       |      | 100.0 |      |      |       | 100.0 |  |      |       | 100.0 | 
|                                                             
|                                                             
|                                                             
|                                                             
|Cost of revenues:                                             |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Service                                      |                              |       | 70.0 |       |      |      | 73.1  |       |  |      | 79.3  |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Tower ownership and management               |                              |       | 1.6  |       |      |      | 0.2   |       |  |      | 0.0   |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                              |                                              | Total cost of revenues       |       |      | 71.6  |      |      |       | 73.3  |  |      |       | 79.3  | 
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|Gross profit:                                                 |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Service                                      |                              |       | 26.7 |       |      |      | 26.2  |       |  |      | 20.7  |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Tower ownership and management               |                              |       | 1.7  |       |      |      | 0.5   |       |  |      | 0.0   |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|Gross profit                                                  |                                              |                              | 28.4  |      |       |      | 26.7 |       |       |  | 20.7 |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|Operating expenses:                                           |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Sales and marketing                          |                              |       | 7.2  |       |      |      | 5.2   |       |  |      | 5.4   |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | General and administrative                   |                              |       | 23.9 |       |      |      | 13.1  |       |  |      | 12.2  |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Restructuring charge                         |                              |       |     |       |      |      | (0.1  | )     |  |      |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Tower portfolio sale and administration, net |                              |       |     |       |      |      | (17.5 | )     |  |      | (2.3  | )    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Depreciation and amortization                |                              |       | 4.8  |       |      |      | 1.9   |       |  |      | 2.3   |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                              |                                              | Total operating expenses     |       |      | 35.9  |      |      |       | 2.6   |  |      |       | 17.6  | 
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|Operating income (loss)                                       |                                              |                              | (7.5  | )    |       |      | 24.1 |       |       |  | 3.1  |      
|                                                             
|                                                             
|                                                             
|                                                             
|Other income (expense):                                       |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Interest income                              |                              |       | 0.4  |       |      |      | 1.3   |       |  |      | 1.5   |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Interest expense                             |                              |       | (2.8 | )     |      |      | (0.2  | )     |  |      | 0.0   |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Other                                        |                              |       | (1.8 | )     |      |      | (0.5  | )     |  |      | 16.9  |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|                                                              |                                              | Total other income (expense) |       |      | (4.2  | )    |      |       | 0.6   |  |      |       | 18.4  | 
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|Income (loss) from continuing operations
	before income taxes |                                              |                              | (11.7 | )    |       |      | 24.7 |       |       |  | 21.5 |      
|                                                             
|                                                             
|                                                             
|                                                             
|Provision (benefit) for income taxes                          |                                              |                              | (3.5  | )    |       |      | 11.0 |       |       |  | 8.5  |      
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      
|Income (loss) from continuing operations                      |                                              |                              | (8.2  | )%   |       |      | 13.7 | %     |       |  | 13.0 | %    
|                                                              |                                              |                              |       |      |       |      |      |       |       |  |      |      

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

Revenues

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

Cost of Revenues

Cost of revenues for the twelve months ended December 31,
2001 was $103.5 million compared to $110.3 million for
the prior year, a decrease of $6.8 million. As a percentage
of total revenues, cost of revenues was 79.3% and 73.3% for 2001
and 2000, respectively. Cost of revenues in 2001 was a higher
percentage of revenue than in the previous year due to an
increase in costs to complete a large fixed price contract in the

23



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Gross Profit

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

Sales and Marketing

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

General and
Administrative

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

Gain on Sale of Tower
Portfolio and Administration, Net

During February 2000, the Company entered into an agreement for
the sale of telecommunications towers that it owned. As part of
the sale agreement, the Company agreed to lease unoccupied space
on the towers, effectively guaranteeing a minimum rent level of
$5.2 million on the towers sold. The gain from the tower
portfolio sale deferred an amount corresponding to this rent
commitment, until the space was leased to another tenant. In
2001, the Company recognized $3.2 million of this
previously deferred revenue, which was offset by a
$0.2 million in related operating expenses.

Depreciation and
Amortization

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

Interest Income

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

Other Income
(Expense)

Other income was $22.1 million for the twelve months ended
December 31, 2001 compared to an expense of
$0.8 million for the prior year. Other income in 2001 is
largely attributable to the sale of all of the Companys
NextWave Class B common stock and substantially all of its
current debt claims against NextWave resulting in a gain of
$21.4 million. The Company also sold its investment in
Tecnosistemi, an

24



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Provision for Income
Taxes

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

Net Income

Net income was $17.0 million for the twelve months ended
December 31, 2001 compared to $20.6 million in the
prior year. Net income in both 2001 and 2000 were bolstered by
gains related to gains from the sale of the Companys
telecommunication towers of $26.4 million and
$3.0 million in 2000 and 2001, respectively. Net income for
2001 also contained an unusual gain related to the sale of
Company assets included in other income of $22.4 million.
Excluding these unusual gains from the sale of the
Companys assets, the Company earned net income of
$1.6 million and $5.9 million in 2001 and 2000,
respectively. The decreased earnings in 2001 are largely related
to decreased gross profit, as discussed above.

Year Ended December 31, 2000 Compared to Year Ended
December 31, 1999

Revenues

Revenues for the twelve months ended December 31, 2000 were
$150.4 million compared to $75.8 million for the prior
year, an increase of $74.6 million or 98%. Increased
revenue in North America of $68.1 million was the largest
contributor to the growth, with the XM Satellite contract
providing 71% of the North American increase. Other North
American growth of $20 million was derived from radio
frequency design ($6.3 million) and deployment
($13.7 million) services. Also contributing to the
increased service revenue, was growth in the Middle East, Asia,
and Europe ($12.4 million), offset by declines in Central
and Latin America ($4.0 million).

Cost of Revenues

Cost of revenues for the twelve months ended December 31,
2000 was $110.3 million compared to $54.3 million for
the prior year, an increase of $56.0 million or 103%.
During 2000, the Company evaluated certain employment related
tax accruals recorded in prior years. This evaluation included
the effect of systems and procedures implemented by the Company,
as well as, assumed reductions in exposure due to changed
circumstances and the passage of time. As a result, the Company
reduced contract costs by $2.4 million during 2000. As a
percentage of total revenues, cost of revenues was 73.3% and
71.6% for December 31, 2000 and 1999, respectively.

Gross Profit

Gross profit for the twelve months ended December 31, 2000
was $40.1 million compared to $21.5 million for the
prior year, an increase of $18.6 million or 86.5%. The
gross profit increase is largely attributable to the increase in
revenues. As a percentage of total revenues, gross profit was
26.7% and 28.4% for December 31, 2000 and 1999,
respectively. The largest single factor contributing to the
decline in gross profit margin is the reduction in tower rental
revenue, which accounts for 70% of the gross profit margin
decline. Tower ownership and management revenues generate larger
gross profits, but higher depreciation and administrative costs
than revenues derived from services. The balance of the margin
decrease is attributable to large fixed price contracts,
including a cost of revenue increase of $0.8 million to
reflect an increase in contract cost estimates in the fourth
quarter of 2000. The contract cost increases in 2000 were offset
by the reduction in employment related tax accruals discussed in
cost of revenues.

25



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Sales and Marketing

Sales and marketing expenses were $7.8 million for the
twelve months ended December 31, 2000 compared to
$5.5 million for the prior year, an increase of
$2.3 million. As a percentage of total revenues, sales and
marketing was 5.2% and 7.2% for 2000 and 1999, respectively.
Increased revenue from large, end-to-end service contracts in
2000 enabled sales and marketing costs to increase at a lower
rate than revenue growth.

General and
Administrative

General and administrative expenses were $19.7 million for
the twelve months ended December 31, 2000 compared to
$18.1 million for the prior year, an increase of
$1.6 million. As a percentage of total revenues general and
administrative cost was 13.1% and 23.9% for 2000 and 1999,
respectively. General and administrative expenditures as a
percent of revenue were unusually high due to large legal
expenditures in 1999 relative to litigation with minority
shareholders of Microcell and support relative to the sale of
discontinued operations. Additionally, the increased revenue
from large, end-to-end service contracts enabled general and
administrative costs to increase at a lower rate than revenue
growth.

Gain on Sale of Tower
Portfolio and Administration, Net

During February 2000, the Company entered into an agreement for
the sale of telecommunication towers that it owned. Through the
end of December 2000, 177 tower sites were successfully
conveyed resulting in a net gain of $26.4 million. As part
of the sale agreement the Company agreed to lease unoccupied
space on the towers, effectively guaranteeing a minimum rent
level of $5.2 million on the towers sold. The gain from the
tower portfolio sale deferred an amount corresponding to this
rent commitment, until the space was leased to another tenant.

Depreciation and
Amortization

Depreciation and amortization expense was $2.9 million for
the twelve months ended December 31, 2000 compared to
$3.6 million for the prior year. The decrease in 2000 is a
result of a reduction in assets due to the Companys tower
portfolio sale.

Interest Income/
Expense

Interest income, net of interest expense, was $1.7 million
for the twelve months ended December 31, 2000 compared to
an expense of $1.8 million for the prior year. The interest
expense in 1999 was largely attributed to borrowings under the
Companys credit facility to finance the construction of
towers. The proceeds from the sale of the towers in 2000
provided sufficient proceeds to repay the Companys credit
facility and provide cash balances that generated interest
income.

Other Expense

Other expense was $0.8 million for the twelve months ended
December 31, 2000 compared to an expense of
$1.4 million for the prior year. The other expense in 2000
is attributable to losses using the equity method of accounting
for the Companys investment in Tecnosistemi of
$0.8 million and to foreign currency losses of
$0.3 million, offset by a one-time gain of
$0.3 million. The loss in 1999 was largely driven by
foreign currency transaction losses of approximately
$1.4 million relative to the Companys Latin America
operations.

Provision (Benefit) for
Income Taxes

The provision for income taxes was $16.5 million for the
twelve months ended December 31, 2000 compared to a benefit
of $2.7 million for the prior year. The provision for
income taxes was recorded for the twelve months ended
December 31, 2000, using an effective income tax rate of
44.5%. The effective income tax rate in excess of the statutory
rate reflects the effect of non-deductible expenses resulting
from the tower portfolio sale. The benefit for income taxes was
recorded in 1999 based on an effective income tax rate of 30.1%.
The change in effective income tax rates is due both to the
impact of the sale of the telecommunication tower portfolio and
to the conversion of the MCI note during the third quarter of
1999.

26



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Net Income (Loss)

Net income was $20.6 million for the twelve months ended
December 31, 2000 compared to a net loss of
$5.4 million for the prior year. The increase in net income
was due to income generated from the sale of the
telecommunications towers conveyed during the year and
additional gross profit generated by increased revenues.

Discontinued Operations

In March 1999, the Companys Board of Directors adopted a
plan to discontinue the operations comprising its hardware and
software products businesses. Included in the assets of
discontinued operations was a loss of $8.9 million on 1999
discontinued operations revenue of $19.5 million. On
October 22, 1999, the Company closed on the sale of its
hardware and software products businesses for
$22.3 million. The gain on disposal in 1999 was
$0.8 million, which was net of the loss from discontinued
operations. (see note 3 to the Consolidated Financial
Statements).

Liquidity and Capital Resources

Cash combined with short-term investments at December 31,
2001 provides total liquid assets of $53.1 million compared
to $42.3 million at December 31, 2000, an increase of
$10.8 million. This increase in liquidity largely relates
to the gains included in other income related to the sale of the
NextWave assets ($21.4 million) and the sale of
Tecnosistemi ($1.0 million), net of estimated tax payments
associated with the gains.

Cash used by operations was $7.7 million for the twelve
months ended December 31, 2001, compared to
$16.1 million in the prior year. The cash used from
operations in 2001 was driven by taxes paid, largely related to
the gain from investment and assets sold of $22.4 million
which is excluded from operating income. Cash flows from
operations would have been $1.1 million in 2001, by
excluding the $8.8 million in taxes paid, using the 2001
effective tax rate, that are related to the gain from the
investment and assets sold. The cash used from operating
activities in 2000 was a result of increased receivables from a
large fixed price contract executed during the year.

Cash provided by investing activities totaled $37.1 million
for the twelve months ended December 31, 2001. The largest
source of the cash provided by investing activities was
$22.6 million in proceeds related to the sale of
investments and assets and $19.6 million in net proceeds
from the sale of short-term investments. This was offset by the
use of cash to make investments in affiliates of
$1.8 million and purchase property and equipment of
$3.4 million. Investing activities for the twelve months
ended December 31, 2000 provided $38.0 million. Cash
provided from investing activities in 2000 was driven by
proceeds from the tower portfolio sale of $72.2 million.
Offsetting the tower portfolio proceeds in 2000 was the net
purchase of short-term investments of $20.0 million,
purchase of minority shareholder interests of $7.2 million,
purchases of property and equipment of $4.0 million, and
investments in affiliates of $3.4 million.

Cash from financing activities provided $1.0 million and
used $1.5 million for the twelve months ended
December 31, 2001 and 2000, respectively. The largest
source of financing activities in 2000 was from the
Companys line of credit until the credit line was repaid
with the tower portfolio sale proceeds during the same year. The
Companys cash position negated the need for any
significant financing activity during the twelve months ended
December 31, 2001.

Working capital was $72.1 million at December 31, 2001
compared to $59.5 million at December 31, 2000, an
increase of $12.6 million. The increase in working capital
in 2001 was due to the gains included in other income related to
the sale of the NextWave assets ($21.4 million) and the
sale of Tecnosistemi ($1.0 million) included in other
income, net of estimated tax payments associated with the gains.
The Companys primary requirement for working capital is to
fund receivables relative to services performed. With the
substantial completion of the XM Satellite contract, the
Company expects the first half of 2002 to generate an operating
loss, which will also require working capital. The Company has
no material cash commitments other than obligations under its
operating leases. Future capital requirements will depend upon

27



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The Company had no debt and did not maintain a line of credit as
of December 31, 2001, since it had cash and short-term
investments that it considered sufficient to meet liquidity
requirements. The Company has not engaged in any off-balance
sheet financing as of December 31, 2001. The Company
believes it has sufficient assets and relationships with
financial institutions to obtain a loan commitment should the
business need arise.

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

Quantitative and Qualitative Disclosures about Market Risk

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

Approximately 23.3% of the Companys revenues were
generated outside the United States for the
twelve months ended December 31, 2001
(41.5% excluding XM Satellite), the majority of which
were in Europe. In connection with the Companys recent
acquisitions and the increased availability of 3G equipment
in Europe, the Company anticipates continued growth of its
international operations, particularly in Europe, the
Middle East and Africa, in 2002 and beyond. As a result,
fluctuations in the value of foreign currencies against the
U.S. dollar may have a significant impact on the reported
results of the Company. Revenues and expenses denominated in
foreign currencies are translated monthly into
United States dollars at the weighted average exchange
rate. Consequently, as the value of the dollar strengthens
relative to other currencies in the Companys major markets
the resulting translated revenues, expenses and operating
profits are lower.

Fluctuations in currency exchange rates also can impact the
U.S. dollar amount of shareholders equity of the
Company. The assets and liabilities of the Companys
non-U.S. subsidiaries are translated into United States
dollars at the exchange rate in effect at December 31,
2001. The resulting translation adjustments are recorded in
shareholders equity as accumulated other comprehensive
loss. The dollar was stronger relative to many of the foreign
currencies at December 31, 2001 compared to
December 31, 2000. Consequently, the accumulated other
comprehensive loss component of shareholders equity
increased $0.6 million during the twelve months ended
December 31, 2001. As of December 31, 2001, the total
amount of long-term intercompany receivable/payables in non-U.S.
subsidiaries subject to this equity adjustment, using the
exchange rate as of the same date, was approximately
$6.2 million.

The Company is exposed to the impact of foreign currency
fluctuations due to the operations of and short-term
intercompany transactions with its consolidated foreign
subsidiaries. While these intercompany balances are eliminated
in consolidation, exchange rate changes do affect consolidated
earnings. Foreign subsidiaries with amounts owed to
U.S. operations (denominated in U.S. dollars) are
Great Britain and Brazil at December 31, 2001 in the
amount of $2.6 million and $0.3 million, respectively.
The potential foreign currency translation losses from a
hypothetical 10% adverse change relative to these intercompany
balances would be $0.3 million. In addition, a hypothetical
10% adverse change would result in a $0.5 million decline
relative to operating losses generated outside the
United States. This was estimated using a 10% deterioration
factor to the average monthly exchange rates applied to net
income or loss for each of the subsidiaries in the respective
period. Foreign exchange gains and losses recognized on any
transactions are included in the Consolidated Statements of
Operations.

Although currency fluctuations can impact the Companys
reported results and shareholders equity, such
fluctuations generally do not affect the Companys cash
flow or result in actual economic gains or losses. The Company
currently does not hedge any of these risks in its foreign
subsidiaries because: (i) the Companys Brazilian and
Egyptian subsidiaries derive revenues and incur expenses within
a single country and

28



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Critical Accounting Policies

The Companys critical accounting policies are as follows:



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

Revenue recognition
policy

The Companys principal source of revenues consists of
design and system deployment services. The Company provides
design services on a contract basis, usually in a customized
plan for each client and generally charges for engineering
services on a time and materials or fixed price basis. The
Company generally offers its deployment services on a
fixed-price, time-certain basis. The portion of the
Companys revenue from fixed price contracts was 44.5% in
2001. The Company recognizes revenue on fixed price contracts
using the percentage-of-completion method. With the
percentage-of-completion method, expenses on each project are
recognized as incurred, and revenues are recognized based on the
ratio of the current costs incurred for the project to the then
estimated total costs of the project. Accordingly, revenue
recognized in a given period depends on, among other things, the
costs incurred on each individual project and its then current
estimate of the total remaining costs to complete individual
projects. Considerable judgment on the part of the
Companys management may be required in determining
estimates to complete a project including the scope of the work
to be completed, and reliance on the customer or other vendors
to fulfill some task(s). If in any period the Company
significantly increases its estimate of the total costs to
complete a project, it may recognize very little or no
additional revenue with respect to that project. For example, in
2001, the Companys gross profits were decreased by
$3.3 million because of increased costs to complete a
project performed in the Middle East. If total contract
cost estimates increase, gross profit for any single project may
be significantly reduced or eliminated. If the total contract
cost estimates indicate that there is a loss, the loss is
recognized in the period the determination is made.

Allowance for doubtful
accounts and accrual of expatriate taxes

The preparation of financial statements requires the
Companys management to make estimates and assumptions that
affect the reported amount of assets, liabilities, contingent
assets and liabilities and the reported amounts of revenues and
expenses during the reported period. Specifically, the
Companys management must make estimates on the
uncollectability of its accounts receivables. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in its customer payment terms when evaluating
the adequacy of the valuation allowance for doubtful accounts.
For the year ended December 31, 2001, the Company derived
82.9% of its total revenues from its ten largest customers,
indicating significant customer concentration risk with the
Companys receivables. These ten largest customers
constituted 83.3% of the Companys net receivable balance
as of December 31, 2001. In addition, fixed-price contracts
with unfavorable milestone payments can cause unbilled
receivables to grow prior to achieving the applicable milestone
that permits billing. Lastly, the Company frequently performs
services for development stage customers, which carry a higher
degree of risk, particularly as to the collection of accounts
receivable. These customers may be particularly vulnerable to
current tightening of available credit and general economic
slowdown. For example, XM Satellite has billed receivable
balances outstanding at December 31, 2001 of
$13.1 million and unbilled receivables of $3.9 million.

29



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##### 



The Company estimates liabilities associated with taxes relative
to employees sent to assignments in foreign countries. These
expatriate employees are reimbursed for additional personal
income tax burden that was derived as a result of the
assignment. Calculation of these obligations takes considerable
knowledge of payroll, social, and other taxes in multiple
countries, and the employees personal tax situation. In
addition, it requires interpretation of tax laws, an assessment
of potential audit risk from tax authorities, and often the
resolution of the tax liabilities may not occur for several
years. For example, in 2001, the Companys gross profits
were decreased by $1.3 million because of an additional
provision for expatriate employees reimbursed taxes. The Company
has $3.5 million accrued for expatriate tax obligations as
of December 31, 2001.

Accounting for income taxes

As part of the process of preparing the Companys
consolidated financial statements an estimate for income taxes
is required for each of the jurisdictions in which the Company
operates. This process requires estimating the Companys
actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items, such as
deferred revenue, for tax accounting purposes. These differences
result in deferred tax assets and liabilities, which are
included in the consolidated balance sheet. The Company must
then assess the likelihood that its deferred tax assets will be
recovered from future taxable income and to the extent the
Company believes that recovery is not likely, it must establish
a valuation allowance. To the extent the Company establishes a
valuation allowance or increases this allowance in a period, it
must include an expense within the tax provision in the
statement of operations.

Significant management judgment is required in determining the
Companys provision for income taxes, its deferred tax
assets and liabilities and any valuation allowance recorded
against its net deferred tax assets. The Company has recorded a
valuation allowance of $5.9 million as of December 31,
2001, due to uncertainties related to its ability to utilize
some of its deferred tax assets, primarily consisting of foreign
net operating losses carried forward and foreign tax credits,
before they expire. The valuation allowance is based on the
Companys estimates of taxable income by jurisdiction in
which it operates and the period over which its deferred tax
assets will be recoverable. In the event the actual results
differ from these estimates the Company may need to increase or
decrease its valuation allowance which could materially impact
its financial position and results of operations. The net
deferred tax assets, as of December 31, 2001 were
$4.8 million, net of a valuation allowance of
$5.9 million.

Impairment of investments in
affiliates

The Company maintains investments in affiliates of
$5.2 million as of December 31, 2001. These
investments are accounted for at cost. Factors considered to
determine whether these investments in affiliates are impaired
include the unaudited financial results of the affiliated
companies and availability of equity transactions with
independent third parties in these affiliates.

Related Party Transactions

The Company provided services to Telcom Ventures and various
other companies that are majority owned, or controlled by,
Telcom Ventures or its members. The Companys relationship
with Telcom Ventures may result in potential conflicts of
interest (see Risk Factors  The
Companys relationship with Telcom Ventures may result in
potential conflicts of interest.). Revenues from
Telcom Ventures are not material, providing 2.1%, 1.3% and 0.1%
of 1999, 2000 and 2001 revenues, respectively.

During 1999, 2000 and 2001, the Company provided services to
XM Satellite. Telcom Ventures has a minority investment in
XM Satellite, and Dr. Rajendra Singh, a director of
Telcom Ventures, is a member of the board of directors for both
XM Satellite and the Company. Revenues earned during 1999,
2000 and 2001 for services provided to XM Satellite were
$10.3 million, $58.4 million and $57.3 million,
respectively. Receivables from XM Satellite were
$18.5 million and $17.0 million at December 31,
200 and 2001, respectively. See note 6 to the Companys
consolidated financial statements for a further discussion of
related party transactions.

30



---



##### 



Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business
combinations initiated after June 30, 2001.
SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but
instead be 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 estimated useful
lives to their residual values, and be reviewed for impairment
in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. The adoption of SFAS No. 141
and 142 will not have a significant impact on the
Companys financial condition and results of operations.

Effective December 2001, the Company adopted FASB
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assetswhich supersedes FASB
SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
of, and APB Opinion No. 30, Reporting the Results of
Operations-Reporting Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual, and Infrequently Occurring
Events and Transactions. The statement addresses the
accounting and reporting of a disposal of a segment and resolves
significant implementation issued related to
SFAS No. 121. The adoption of SFAS No. 144
did not have a significant impact on the Companys
financial condition and results of operations.

31



---



##### 



Item 8.  Financial Statements and
Supplementary Data

INDEPENDENT AUDITORS REPORT

The Board of Directors



We have audited the accompanying consolidated balance sheets of
LCC International, Inc. and Subsidiaries (the
Company) as of December 31, 2000 and 2001, 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, 2001. In
connection with our audits of the consolidated financial
statements, we have also audited the related financial statement
schedule. These consolidated financial statements and financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of LCC International, Inc. and Subsidiaries as of
December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2001, 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



32



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 1999, 2000, 2001


(In thousands, except per share data)


|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |         |  
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                                              |                                                                                                                                           | 1999 |        | 2000   |   | 2001
|                                                              |                                                                                                                                           |      |        |        |   |     
|Revenues (note 6):                                            |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Service                                                                                                                                   |      | $      | 73,289 |   |      | $       | 149,385 |   |   | $       | 130,609 |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Tower ownership and management                                                                                                            |      |        | 2,504  |   |      |         | 1,008   |   |   |         |        |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Total revenues                                                |                                                                                                                                           |      | 75,793 |        |   |      | 150,393 |         |   |   | 130,609 |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Cost of revenues:                                             |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Service                                                                                                                                   |      |        | 53,080 |   |      |         | 109,952 |   |   |         | 103,535 |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Tower ownership and management                                                                                                            |      |        | 1,176  |   |      |         | 333     |   |   |         |        |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Total cost of revenues                                        |                                                                                                                                           |      | 54,256 |        |   |      | 110,285 |         |   |   | 103,535 |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Gross profit                                                  |                                                                                                                                           |      | 21,537 |        |   |      | 40,108  |         |   |   | 27,074  |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Operating expenses:                                           |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Sales and marketing                                                                                                                       |      |        | 5,464  |   |      |         | 7,833   |   |   |         | 7,068   |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | General and administrative                                                                                                                |      |        | 18,116 |   |      |         | 19,673  |   |   |         | 15,978  |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Restructuring charge (note 8)                                                                                                             |      |        |       |   |      |         | (108    | ) |   |         |        |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Gain on sale of tower portfolio and
	administration, net (note 4)                                                                         |      |        |       |   |      |         | (26,437 | ) |   |         | (2,998  | )
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Depreciation and amortization                                                                                                             |      |        | 3,628  |   |      |         | 2,899   |   |   |         | 3,012   |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Total operating expenses                                      |                                                                                                                                           |      | 27,208 |        |   |      | 3,860   |         |   |   | 23,060  |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Operating income (loss)                                       |                                                                                                                                           |      | (5,671 | )      |   |      | 36,248  |         |   |   | 4,014   |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Other income (expense):                                       |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Interest income                                                                                                                           |      |        | 327    |   |      |         | 1,951   |   |   |         | 1,899   |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Interest expense                                                                                                                          |      |        | (2,154 | ) |      |         | (263    | ) |   |         | (13     | )
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Other (note 10)                                                                                                                           |      |        | (1,391 | ) |      |         | (787    | ) |   |         | 22,113  |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Total other income (expense)                                  |                                                                                                                                           |      | (3,218 | )      |   |      | 901     |         |   |   | 23,999  |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Income (loss) from continuing operations
	before income taxes |                                                                                                                                           |      | (8,889 | )      |   |      | 37,149  |         |   |   | 28,013  |        
|                                                             
|                                                             
|                                                             
|                                                             
|Provision (benefit) for income taxes (note
	12)               |                                                                                                                                           |      | (2,677 | )      |   |      | 16,531  |         |   |   | 11,041  |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Income (loss) from continuing operations                      |                                                                                                                                           |      | (6,212 | )      |   |      | 20,618  |         |   |   | 16,972  |        
|                                                             
|                                                             
|                                                             
|                                                             
|Discontinued operations (note 3):                             |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Gain on disposal of discontinued operations,
	including operating losses during phase out period of $8,866
	(net of tax benefits of $346) |      |        | 803    |   |      |         |        |   |   |         |        |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Net income (loss)                                             |                                                                                                                                           | $    | (5,409 | )      |   | $    | 20,618  |         |   | $ | 16,972  |        
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Net income (loss) per share:                                  |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Continuing operations                                         |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Basic                                                                                                                                     |      | $      | (0.36  | ) |      | $       | 1.01    |   |   | $       | 0.83    |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                              | Diluted                                                                                                                                   |      | $      | (0.36  | ) |      | $       | 0.93    |   |   | $       | 0.81    |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Discontinued operations                                       |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Basic                                                                                                                                     |      | $      | 0.05   |   |      |         |        |   |   |         |        |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                              | Diluted                                                                                                                                   |      | $      | 0.05   |   |      |         |        |   |   |         |        |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|Net income (loss) per share:                                  |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Basic                                                                                                                                     |      | $      | (0.31  | ) |      | $       | 1.01    |   |   | $       | 0.83    |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        
|                                                              | Diluted                                                                                                                                   |      | $      | (0.31  | ) |      | $       | 0.93    |   |   | $       | 0.81    |  
|                                                              |                                                                                                                                           |      |        |        |   |      |         |         |   |   |         |        

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

33



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |        |        |        | 
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------- | ------ | ------ | ------- | ------ | ------ | ------ | 
|                                                                                 |                                                                                                                                                  |                                                                                                                               
|                                                                                 |                                                                                                                                                  | December 31,                                                                                                                  
|                                                                                 |                                                                                                                                                  |                                                                                                                               
|                                                                                 |                                                                                                                                                  | 2000                                                                                                                           |                            | 2001   
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |        
|ASSETS:                                                                          |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Current assets:                                                                  |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cash and cash equivalents (note 5)                                                                                                               |                                                                                                                                | $                          | 22,271  |        |        | $       | 52,658 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Short-term investments                                                                                                                           |                                                                                                                                |                            | 20,064  |        |        |         | 484    |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Receivables, net of allowance for doubtful
	accounts of $1,829 and $2,048 at December 31, 2000 and
	2001, respectively Trade accounts receivable |                                                                                                                                |                            | 31,306  |        |        |         | 26,294 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                                                                  | Due from related parties and affiliates (note 6)                                                                               |                            |         | 746    |        |         |        | 1,073  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                                                                  | Unbilled receivables                                                                                                           |                            |         | 17,050 |        |         |        | 10,240 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Deferred income taxes, net (note 12)                                                                                                             |                                                                                                                                |                            | 1,850   |        |        |         | 2,724  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Prepaid expenses and other current assets                                                                                                        |                                                                                                                                |                            | 1,858   |        |        |         | 1,607  |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                | Total current assets       |         |        | 95,145 |         |        |        | 95,080 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Property and equipment, net (note 7)                                             |                                                                                                                                                  |                                                                                                                                | 5,638                      |         |        |        | 5,730   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Investments in affiliates (note 10)                                              |                                                                                                                                                  |                                                                                                                                | 3,650                      |         |        |        | 5,162   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Deferred income taxes, net (note 12)                                             |                                                                                                                                                  |                                                                                                                                | 5,066                      |         |        |        | 2,038   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Other assets                                                                     |                                                                                                                                                  |                                                                                                                                | 546                        |         |        |        | 1,589   |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  | $                                                                                                                              | 110,045                    |         |        | $      | 109,599 |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|LIABILITIES AND SHAREHOLDERS
	EQUITY:                                           |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Current liabilities:                                                             |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accounts payable                                                                                                                                 |                                                                                                                                | $                          | 5,926   |        |        | $       | 3,840  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accrued expenses                                                                                                                                 |                                                                                                                                |                            | 10,465  |        |        |         | 5,791  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accrued employee compensation and benefits                                                                                                       |                                                                                                                                |                            | 12,420  |        |        |         | 10,323 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Deferred revenue                                                                                                                                 |                                                                                                                                |                            | 332     |        |        |         | 640    |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Income taxes payable (note 12)                                                                                                                   |                                                                                                                                |                            | 5,725   |        |        |         | 156    |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other current liabilities                                                                                                                        |                                                                                                                                |                            | 817     |        |        |         | 2,196  |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                | Total current liabilities  |         |        | 35,685 |         |        |        | 22,946 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Other liabilities                                                                |                                                                                                                                                  |                                                                                                                                | 5,944                      |         |        |        | 849     |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                | Total liabilities          |         |        | 41,629 |         |        |        | 23,795 | 
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|Commitments and contingencies (notes 1, 4,
	16, 17 and 18) Shareholders Equity: |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Preferred Stock:                                                                                                                                 |                                                                                                                                |                            |         |        |        |         |        |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                                                                  | 10,000 shares authorized; -0- shares issued and
	outstanding                                                                   |                            |         |       |        |         |        |       |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Class A common stock; $.01 par value:                                                                                                            |                                                                                                                                |                            |         |        |        |         |        |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                                                                  | 70,000 shares authorized; 12,040 shares and
	12,271 shares issued and outstanding at December 31, 2000
	and 2001, respectively |                            |         | 120    |        |         |        | 123    |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Class B common stock; $.01 par value:                                                                                                            |                                                                                                                                |                            |         |        |        |         |        |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                                                                  | 20,000 shares authorized; 8,450 shares and 8,407
	shares issued and outstanding at December 31, 2000 and
	2001, respectively   |                            |         | 85     |        |         |        | 84     |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Paid-in capital                                                                                                                                  |                                                                                                                                |                            | 91,407  |        |        |         | 92,428 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accumulated deficit                                                                                                                              |                                                                                                                                |                            | (18,381 | )      |        |         | (1,409 | )     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Notes receivable from shareholders (note 6)                                                                                                      |                                                                                                                                |                            | (2,325  | )      |        |         | (2,325 | )     
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                | Subtotal                   |         |        | 70,906 |         |        |        | 88,901 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Accumulated other comprehensive loss 
	foreign currency translation adjustments |                                                                                                                                                  |                                                                                                                                | (2,490                     | )       |        |        | (3,097  | )     
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                | Total shareholders equity |         |        | 68,416 |         |        |        | 85,804 | 
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       
|                                                                                 |                                                                                                                                                  | $                                                                                                                              | 110,045                    |         |        | $      | 109,599 |       
|                                                                                 |                                                                                                                                                  |                                                                                                                                |                            |         |        |        |         |       

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

34



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

Years ended December 31, 1999, 2000 and 2001


(In thousands)


|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|-------------------------------------------------------------------- |  | --------- | - | ------------ |  | ------- | --- | ------------- |  | ----------- | -- | ------------ |  | -------- | ------ |  |  | - | ------ | - |  | - | ------- | - |  | - | ------ | -
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  | Notes   
|                                                                     |  |           |   |              |  |         |     |               |  |             |    | Receivable  
|                                                                     |  |           |   | Common Stock |  |         |     | Comprehensive |  |             |    | from        
|                                                                     |  | Preferred |   |              |  | Paid-in |     | Income        |  | Accumulated |    | Shareholders
|                                                                     |  | Stock     |   | Class A      |  | Class B |     | Capital       |  | (Loss)      |    | Deficit      |  | (note 6)
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |         
|Balances at December 31, 1998.                                       |  |           |  |              |  | $       | 72  |               |  | $           | 85 |              |  | $        | 37,130 |  |  |   |        |   |  | $ | (33,590 | ) |  | $ | (2,100 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payment from shareholder                                             |  |           |  |              |  |         |    |               |  |             |   |              |  |          | 164    |  |  |   |        |   |  |   |        |   |  |   | 700    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Loan to shareholder                                                  |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  |   |        |   |  |   |        |   |  |   | (1,625 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Conversion of debt                                                   |  |           |  |              |  |         | 37  |               |  |             |   |              |  |          | 46,484 |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise/issuance of stock options                                   |  |           |  |              |  |         | 7   |               |  |             |   |              |  |          | 1,833  |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Issuance of common stock                                             |  |           |  |              |  |         |    |               |  |             |   |              |  |          | 235    |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net loss                                                             |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  | $ | (5,409 | ) |  |   | (5,409  | ) |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other comprehensive loss  foreign
	currency translation adjustments |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  |   | (229   | ) |  |   |        |   |  |   |       |  
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|Comprehensive loss                                                   |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  | $ | (5,638 | ) |  |   |        |   |  |   |       |  
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|Balances at December 31, 1999.                                       |  |           |  |              |  |         | 116 |               |  |             | 85 |              |  |          | 85,846 |  |  |   |        |   |  |   | (38,999 | ) |  |   | (3,025 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payment from shareholder                                             |  |           |  |              |  |         |    |               |  |             |   |              |  |          | 100    |  |  |   |        |   |  |   |        |   |  |   | 700    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise/issuance of stock options                                   |  |           |  |              |  |         | 4   |               |  |             |   |              |  |          | 4,868  |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Issuance of common stock                                             |  |           |  |              |  |         |    |               |  |             |   |              |  |          | 593    |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net income                                                           |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  | $ | 20,618 |   |  |   | 20,618  |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other comprehensive loss  foreign
	currency translation adjustments |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  |   | (893   | ) |  |   |        |   |  |   |       |  
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|Comprehensive income                                                 |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  | $ | 19,725 |   |  |   |        |   |  |   |       |  
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|Balances at December 31, 2000                                        |  |           |  |              |  |         | 120 |               |  |             | 85 |              |  |          | 91,407 |  |  |   |        |   |  |   | (18,381 | ) |  |   | (2,325 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise/issuance of stock options                                   |  |           |  |              |  |         | 2   |               |  |             | (1 | )            |  |          | 536    |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Issuance of common stock                                             |  |           |  |              |  |         | 1   |               |  |             |   |              |  |          | 485    |  |  |   |        |   |  |   |        |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net income                                                           |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  | $ | 16,972 |   |  |   | 16,972  |   |  |   |       |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other comprehensive loss  foreign
	currency translation adjustments |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  |   | (607   | ) |  |   |        |   |  |   |       |  
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|Comprehensive income                                                 |  |           |  |              |  |         |    |               |  |             |   |              |  |          |       |  |  | $ | 16,365 |   |  |   |        |   |  |   |       |  
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  
|Balances at December 31, 2001.                                       |  |           |  |              |  | $       | 123 |               |  | $           | 84 |              |  | $        | 92,428 |  |  |   |        |   |  | $ | (1,409  | ) |  | $ | (2,325 | )
|                                                                     |  |           |   |              |  |         |     |               |  |             |    |              |  |          |        |  |  |   |        |   |  |   |         |   |  |   |        |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                     |  |               |        |       |  |   |        |  
|-------------------------------------------------------------------- |  | ------------- | ------ | ----- |  | - | ------ | -
|                                                                     |  | Accumulated   |        |      
|                                                                     |  | Other         |        |      
|                                                                     |  | Comprehensive |        |      
|                                                                     |  | Income        |        |      
|                                                                     |  | (Loss)        |        | Total
|                                                                     |  |               |        |      
|Balances at December 31, 1998.                                       |  | $             | (1,368 | )     |  | $ | 229    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payment from shareholder                                             |  |               |       |       |  |   | 864    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Loan to shareholder                                                  |  |               |       |       |  |   | (1,625 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Conversion of debt                                                   |  |               |       |       |  |   | 46,521 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise/issuance of stock options                                   |  |               |       |       |  |   | 1,840  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Issuance of common stock                                             |  |               |       |       |  |   | 235    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net loss                                                             |  |               |       |       |  |   | (5,409 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other comprehensive loss  foreign
	currency translation adjustments |  |               | (229   | )     |  |   | (229   | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Comprehensive loss                                                   |  |               |       |       |  |   |       |  
|                                                                     |  |               |        |       |  |   |        |  
|Balances at December 31, 1999.                                       |  |               | (1,597 | )     |  |   | 42,426 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payment from shareholder                                             |  |               |       |       |  |   | 800    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise/issuance of stock options                                   |  |               |       |       |  |   | 4,872  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Issuance of common stock                                             |  |               |       |       |  |   | 593    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net income                                                           |  |               |       |       |  |   | 20,618 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other comprehensive loss  foreign
	currency translation adjustments |  |               | (893   | )     |  |   | (893   | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Comprehensive income                                                 |  |               |       |       |  |   |       |  
|                                                                     |  |               |        |       |  |   |        |  
|Balances at December 31, 2000                                        |  |               | (2,490 | )     |  |   | 68,416 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Exercise/issuance of stock options                                   |  |               |       |       |  |   | 537    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Issuance of common stock                                             |  |               |       |       |  |   | 486    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net income                                                           |  |               |       |       |  |   | 16,972 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other comprehensive loss  foreign
	currency translation adjustments |  |               | (607   | )     |  |   | (607   | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Comprehensive income                                                 |  |               |       |       |  |   |       |  
|                                                                     |  |               |        |       |  |   |        |  
|Balances at December 31, 2001.                                       |  | $             | (3,097 | )     |  | $ | 85,804 |  
|                                                                     |  |               |        |       |  |   |        |  

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

35



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 1999, 2000, and 2001


(In thousands)


|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |         |        |  
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | --------------------------------------- | ------- | ------- | ------ | ---- | ------- | ------- | ------- | - | ------ | ------- | ------ | -
|                                                                                                             |                                                      | 1999                                    |         | 2000    |        | 2001
|                                                                                                             |                                                      |                                         |         |         |        |     
|Cash flows from operating
	activities:                                                                       |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Income (loss) from continuing operations                                                                     |                                                      | $                                       | (6,212  | )       |        | $    | 20,618  |         |         | $ | 16,972 |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Adjustments to reconcile income (loss) from
	continuing operations to net cash used in operating activities: |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Depreciation and amortization                        |                                         |         | 3,628   |        |      |         | 2,899   |         |   |        | 3,012   |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Provision (recovery) for doubtful accounts           |                                         |         |        |        |      |         | (306    | )       |   |        | 2,123   |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Realized gain on sale of investments and assets      |                                         |         |        |        |      |         |        |         |   |        | (22,395 | )     
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Loss from investments in joint ventures, net         |                                         |         |        |        |      |         | 796     |         |   |        |        |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Gain on sale of discontinued operations              |                                         |         | 803     |        |      |         |        |         |   |        |        |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Gain on sale of tower portfolio                      |                                         |         |        |        |      |         | (26,437 | )       |   |        | (2,998  | )     
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Changes in operating assets and liabilities:         |                                         |         |         |        |      |         |         |         |   |        |         |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                      | Trade, unbilled, and other receivables  |         |         | (1,527 | )    |         |         | (28,275 | ) |        |         | 9,358  |  
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                      | Accounts payable and accrued expenses   |         |         | 3,396  |      |         |         | 2,593   |   |        |         | (8,835 | )
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                      | Other current assets and liabilities    |         |         | 5,395  |      |         |         | 7,165   |   |        |         | (5,227 | )
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                      | Other noncurrent assets and liabilities |         |         | (9,651 | )    |         |         | 4,828   |   |        |         | 324    |  
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Net cash used in operating activities                                                                        |                                                      |                                         | (4,168  | )       |        |      | (16,119 | )       |         |   | (7,666 | )      
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Cash flows from investing
	activities:                                                                       |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from sales of short-term investments        |                                         |         | 27      |        |      |         | 31,282  |         |   |        | 42,069  |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Purchases of short-term investments                  |                                         |         |        |        |      |         | (51,260 | )       |   |        | (22,489 | )     
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Purchases of property and equipment                  |                                         |         | (17,100 | )      |      |         | (3,870  | )       |   |        | (3,377  | )     
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from sale of property and equipment         |                                         |         |        |        |      |         | 209     |         |   |        | 29      |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Investments in affiliates                            |                                         |         | (1,100  | )      |      |         | (3,386  | )       |   |        | (1,755  | )     
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from sale of investments and assets         |                                         |         |        |        |      |         |        |         |   |        | 22,624  |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Purchase of minority interest                        |                                         |         |        |        |      |         | (7,174  | )       |   |        |        |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from tower portfolio sale, net of
	expenses |                                         |         |        |        |      |         | 72,176  |         |   |        |        |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Disposal of discontinued operations, net             |                                         |         | 8,164   |        |      |         |        |         |   |        |        |       
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Net cash provided by (used in) investing
	activities                                                         |                                                      |                                         | (10,009 | )       |        |      | 37,977  |         |         |   | 37,101 |        
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Cash flows from financing
	activities:                                                                       |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from issuance of common stock, net          |                                         |         | 235     |        |      |         | 593     |         |   |        | 518     |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from exercise of options                    |                                         |         | 4,006   |        |      |         | 1,604   |         |   |        | 434     |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Proceeds from line of credit/note                    |                                         |         | 32,961  |        |      |         | 9,700   |         |   |        |        |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Payments on line of credit/note                      |                                         |         | (23,426 | )      |      |         | (14,235 | )       |   |        |        |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Repayment of loan to shareholder                     |                                         |         | 864     |        |      |         | 800     |         |   |        |        |       
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Net cash provided by (used in) financing
	activities                                                         |                                                      |                                         | 14,640  |         |        |      | (1,538  | )       |         |   | 952    |        
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Net increase in cash and cash
	equivalents  continuing operations                                           |                                                      |                                         | 463     |         |        |      | 20,320  |         |         |   | 30,387 |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Net decrease in cash and cash
	equivalents  discontinued operations                                         |                                                      |                                         | (2,752  | )       |        |      |        |         |         |   |       |        
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Net increase (decrease) in cash and cash
	equivalents                                                        |                                                      |                                         | (2,289  | )       |        |      | 20,320  |         |         |   | 30,387 |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Cash and cash equivalents at beginning of period                                                             |                                                      |                                         | 4,240   |         |        |      | 1,951   |         |         |   | 22,271 |        
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Cash and cash equivalents at end of period                                                                   |                                                      | $                                       | 1,951   |         |        | $    | 22,271  |         |         | $ | 52,658 |        
|                                                                                                             |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|Supplemental disclosures of cash flow information:                                                           |                                                      |                                         |         |         |        |      |         |         |         |   |        |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Cash paid during the year for:                       |                                         |         |         |        |      |         |         |         |   |        |         |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                      | Interest                                |         | $       | 2,154  |      |         | $       | 263     |   |        | $       | 13     |  
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                      | Income taxes                            |         |         | 3,540  |      |         |         | 2,781   |   |        |         | 14,103 |  

Supplemental disclosures of non-cash investing
and financing activities:

In July 1999, the Company issued
approximately 2.8 million shares of Class A Common
Stock to MCI in exchange for its 4.4% convertible subordinated
notes. As a result, $50.0 million and $12.6 million
reduced both long-term debt and long-term deferred tax assets,
respectively, and shareholders equity increased
$37.4 million.

In August 1999, the Company issued approximately
0.9 million shares of Class A Common Stock to Telcom
Ventures in exchange for its 9.0% convertible notes payable. As
a result, $5.0 million reduced current debt,
$0.2 million reduced accrued interest, and
shareholders equity increased $5.2 million.

In December 1999, the Company issued
approximately 0.108 million shares of Class A Common
Stock in exchange for a $1.625 million note receivable from
the Companys President and Chief Executive Officer. As a
result, common stock and paid-in capital increased, offset by an
increase in notes receivable from shareholders.

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

36



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 1999, 2000 and 2001


(1) Description of Operations

The Company provides integrated end-to-end solutions for
wireless voice and data communication networks with service
offerings to include high level technical consulting, system
design and deployment and ongoing operations and maintenance
services. Telcom Ventures owns the Class B Common Stock
shares outstanding, which have ten-to-one voting rights over the
Class A Common Stock shares and therefore represent
approximately 88% voting control.

The Company operates in a highly competitive environment subject
to rapid technological change and emergence of new technologies.
Historically, the key drivers of growth in the Companys
wireless services business have been (1) the issuance of
new or additional licenses to wireless operators; (2) the
introduction of new services or technologies; (3) increases
in the number of subscribers served by wireless operators; and
(4) the increasing complexity of wireless systems in
operation. Although the Company believes that its services are
transferable to emerging technologies, rapid changes in
technology could have an adverse financial impact on the Company.

(2) Summary of Significant Accounting Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

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



| |                 
| | ----------------
| | Cash Equivalents

Cash equivalents include all highly liquid investments purchased
with original maturities of three months or less and include
overnight repurchase agreements, short-term notes, and
short-term money market funds.



| |                       
| | ----------------------
| | Short-Term Investments

Short-term investments consist primarily of federally sponsored
short-term notes with maturity dates of more than three months
from the date of acquisition. The portfolio held by the Company
has been classified based on managements intentions as to
future investment activity. The Company carries these
investments at cost plus accrued interest receivable, which
approximates their market value. All short-term investments have
maturity dates of one year or less.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially expose the Company to
concentration of credit risk consist primarily of trade
receivables. The Company sells its services globally. Generally,
the Company does not require collateral or other security to
support customer receivables. The Company performs ongoing
credit evaluations of its customers financial condition
and maintains a provision for doubtful accounts related to
potential credit losses. The Company had the following
significant concentrations of trade receivables from customers
located outside the United States at December 31, 2000 and
2001:

|                    |  |                |       |      |  |   |       | 
|------------------- |  | -------------- | ----- | ---- |  | - | ----- | 
|                    |  | 2000           |       | 2001
|                    |  |                |       |     
|                    |  |               
|                    |  | (In thousands)
|                   
|                   
|                   
|                   
|Latin America       |  | $              | 671   |      |  | $ | 436   | 
|                   
|                   
|                   
|                   
|North America       |  |                | 63    |      |  |   | 20    | 
|                   
|                   
|                   
|                   
|Europe              |  |                | 4,894 |      |  |   | 3,529 | 
|                   
|                   
|                   
|                   
|Middle East/ Africa |  |                | 7,775 |      |  |   | 1,690 | 
|                   
|                   
|                   
|                   
|Asia-Pacific        |  |                | 577   |      |  |   | 1,777 | 

37



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Companys existing and potential customer base is
diverse and includes start-up companies and foreign enterprises.
The Company derived approximately 81.3% and 82.9% of its
revenues from its ten largest customers for the years ended
December 31, 2000 and 2001, respectively. These ten largest
customers constituted 83.3% of the Companys net receivable
balance as of December 31, 2001. Although the Company
believes that the diversity of its customer base has
historically minimized the risk of incurring material losses due
to concentrations of credit risk, it may be exposed to a
declining customer base in periods of market downturns, severe
competition, exchange rate fluctuations or other international
developments.

Revenues from a customer were approximately $10.3 million,
$58.4 million, and $57.3 million or 13.6%, 38.8%, and
43.9% of total revenues for 1999, 2000, and 2001, respectively.
Revenues from another customer were approximately
$19.0 million and $10.3 million or 12.6% and 7.9%,
respectively, of total revenues for 2000 and 2001. Revenues from
a third customer were approximately $8.5 million or 11.2%
of 1999 revenues and $9.9 million or 7.6% of total revenues
for 2001.



| |                                    
| | -----------------------------------
| | 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, 2000 and 2001
because of the relatively short duration of these instruments.
The carrying value of the notes receivable from shareholders
approximated the fair value as the instruments included a market
rate of interest.



| |                       
| | ----------------------
| | Property and Equipment

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

Depreciation is calculated using the straight-line method over
the estimated useful lives of the related assets. Estimated
useful lives of three years are used for computer equipment and
software. Furniture and office equipment are depreciated over
useful lives, which range from three to seven years. The costs
of leasehold improvements are capitalized and amortized using
the straight-line method over the shorter of their estimated
useful lives or the terms of the respective leases. An estimated
useful life of five years is used for vehicles.



| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

The Companys policy is to review its long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The
Company recognizes an impairment loss when the sum of the
expected undiscounted future cash flows is less than the
carrying amount of the asset. The measurement of the impairment
losses to be recognized is based upon the difference between the
fair value and the carrying amount of the assets.



| |                          
| | -------------------------
| | Investments in Affiliates

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

38



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

The Companys principal sources of revenues are design
services and system deployment services, and, prior to the sale
of its tower business, tower lease revenues (see note 4).
The Company recognizes revenues from long-term fixed price
contracts using the percentage-of-completion method. With the
percentage-of-completion method, the Company recognizes revenue
based on the ratio of individual contract costs incurred to date
on a project compared with total estimated contract costs.
Anticipated contract losses are recognized as soon as they
become known and estimable. The Company also recognizes revenues
on time and materials contracts as the services are performed.
Lease revenues from the tower business are recognized over the
term of the related lease. Revenues earned but not yet billed
are reflected as unbilled receivables in the accompanying
consolidated balance sheets. The Company expects substantially
all unbilled and billed receivables to be collected within one
year.



| |             
| | ------------
| | Income Taxes

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

Certain of the Companys international operations are
subject to local income taxation. Currently, the Company is
subject to taxation on income from certain operations in Europe,
Latin America, the Far East, the Middle East and the
non-U.S. portions of North America where the Company has
subsidiaries, has established branch offices or has performed
significant services that constitute a permanent
establishment for tax reporting purposes. Foreign taxes
account for a significant portion of the provision for income
taxes as reflected in the Companys consolidated statements
of operations (see note 12). The foreign taxes paid or
accrued by the Company may represent a potential credit for the
Company against its U.S. Federal income taxes.



| |                             
| | ----------------------------
| | Foreign Currency Translation

Gains and losses on translation of the accounts of the
Companys foreign operations where the local currency is
the functional currency are accumulated and included in other
comprehensive loss within the accompanying consolidated
statement of shareholders equity. Foreign currency
transaction gains and losses are recognized currently in the
consolidated statements of operations.



| |                 
| | ----------------
| | Use of Estimates

The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Estimates
are used in accounting for, among other things, long-term
contracts, allowance for doubtful accounts, accrual of
expatriate taxes, accrual of income taxes and recoverability of
investments in affiliates. Actual results could differ from
those estimates.



| |                         
| | ------------------------
| | Stock-Based Compensation

The Company accounts for equity-based compensation arrangements
in accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for
Stock Issued to Employees,and

39



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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



| |                                  
| | ---------------------------------
| | Other Comprehensive Income (Loss)

Comprehensive income is defined as net income plus the changes
in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources. Other comprehensive income refers to revenues,
expenses, gains and losses that under generally accepted
accounting principles are included in comprehensive income, but
excluded from net income. Other comprehensive income
(loss) consists solely of foreign currency translation
adjustments in 1999, 2000 and 2001. Changes in components of
other comprehensive income (loss) are reported net of
income tax, as follows (in thousands).

|                                         |  |        |      |          |  |        |     |        |  |          |      |        |  |        |        |          |  |        |      |   |  |   |      |   |  |   |        |   |  |   |      |   |  |   |      |  
|---------------------------------------- |  | ------ | ---- | -------- |  | ------ | --- | ------ |  | -------- | ---- | ------ |  | ------ | ------ | -------- |  | ------ | ---- | - |  | - | ---- | - |  | - | ------ | - |  | - | ---- | - |  | - | ---- | -
|                                         |  |        |      |          |  |       
|                                         |  | 1999   |      | 2000     |  | 2001  
|                                         |  |        |      |          |  |       
|                                         |  |        |      | 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 |  | $      | (327 | )        |  | $      | (98 | )      |  | $        | (229 | )      |  | $      | (1,609 | )        |  | $      | (716 | ) |  | $ | (893 | ) |  | $ | (1,002 | ) |  | $ | (395 | ) |  | $ | (607 | )
|                                         |  |        |      |          |  |        |     |        |  |          |      |        |  |        |        |          |  |        |      |   |  |   |      |   |  |   |        |   |  |   |      |   |  |   |      |  



|    |                        
|--- | -----------------------
|(3) | Discontinued Operations

In March 1999, the Companys Board of Directors adopted a
plan to discontinue the operations comprising its software and
hardware products segments. On October 22, 1999, the
Company sold its products businesses, which consisted of the
design, development, manufacture, marketing, sale and servicing
of field testing and measurement products (and related software)
and network planning software for the wireless communications
industry (the Products Businesses), to Ericsson
Radio Systems AB, a Swedish corporation, and certain of its
affiliates (Ericsson), pursuant to an Asset Purchase
Agreement, dated as of August 25, 1999.

Pursuant to the Asset Purchase Agreement, the Company
transferred substantially all of the assets of the Products
Businesses for a purchase price of approximately
$22.3 million, which included approximately
$1.9 million for the collection of certain accounts
receivable of the Products Businesses sold to Ericsson. In
addition, Ericsson assumed certain of the liabilities of the
Products Businesses, including, among others, certain
liabilities arising with respect to the products businesses in
the ordinary course of business consistent with past practice
and certain liabilities arising under assumed contracts. As part
of the transaction, the Company entered into product supply
agreements and a software license and related support agreement
with Ericsson pursuant to which the Company will purchase or
license certain of the products which were sold to Ericsson.

Revenues from the products businesses were approximately
$19.5 million for the period from January 1, 1999 to
October 22, 1999. The gain on disposal in 1999 was
approximately $0.8 million, net of losses during the phase
out period of approximately $8.9 million, and tax expense
of approximately $0.3 million.



|    |                                        
|--- | ---------------------------------------
|(4) | Tower Portfolio Sale and Administration

During March 2000, Microcell Management, Inc.
(Microcell), a subsidiary of the Company, completed
the initial 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,

40



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 a part of the tower sale transaction, Microcell and Pinnacle
entered into a Master Antenna Site Lease pursuant to which
Microcell agreed to lease, until December 31, 2002, the
unoccupied space on each telecommunication tower sold to
Pinnacle. As of December 31, 2000, the Company had
recognized a gain of $26.4 million on the sale of the tower
portfolio and deferred $5.2 million of the gain. The
deferred gain related to the maximum lease obligation under the
Master Antenna Site Lease and was included in other long-term
liabilities. During 2001, the Company recognized
$3.2 million of the deferred gain, which was offset by
$0.2 million in related operating expenses. As of
December 31, 2001, the Company had deferred
$2.0 million of the gain that relates to the maximum lease
obligations under the Master Antenna Site Lease, which has been
included in other current liabilities. Microcell and Pinnacle
also entered into a Tower Services Agreement to provide Pinnacle
with audit, maintenance, and program management services. The
Tower Services Agreement, which expired in August 2001, provided
for minimum annual payments to Microcell of $10 million for
the contemplated services. On January 25, 2002, the Company
and Pinnacle entered into a settlement agreement to satisfy both
the Master Antenna Site Lease obligation and Pinnacles
obligations under the Tower Services Agreement.
(see note 22)



|    |                          
|--- | -------------------------
|(5) | Cash and Cash Equivalents

At December 31, 2000 and 2001, cash and cash equivalents
consisted of the following (in thousands):

|                 |  |      |        |      |  |   |        | 
|---------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                 |  | 2000 |        | 2001
|                 |  |      |        |     
|Cash in banks    |  | $    | 8,652  |      |  | $ | 3,106  | 
|                
|                
|                
|                
|Cash equivalents |  |      | 13,619 |      |  |   | 49,552 | 
|                 |  |      |        |      |  |   |        | 
|                 |  | $    | 22,271 |      |  | $ | 52,658 | 
|                 |  |      |        |      |  |   |        | 



|    |                           
|--- | --------------------------
|(6) | Related Party Transactions

During 1999, 2000, and 2001, the Company provided services to
Telcom Ventures and various other companies majority owned, or
controlled by, Telcom Ventures or its members. Revenues earned
during 1999, 2000 and 2001 for services provided to these
customers were approximately $1.6 million,
$1.9 million, and $0.1 million, respectively.
Receivables from these related parties were $178,000 and $19,000
at December 31, 2000 and 2001, respectively, and are
included in due from related parties and affiliates in the
accompanying consolidated balance sheets. Also included in due
from related parties and affiliates are unbilled receivables and
advances to employees aggregating approximately $304,000 and
$89,000 at December 31, 2000 and 2001, respectively.

During 1999, 2000, and 2001 the Company provided services to
XM Satellite. Telcom Ventures has a minority investment in
XM Satellite, and Dr. Rajendra Singh, a director of
Telcom Ventures, is a member of the board of directors for both
XM Satellite and the Company. Revenues earned during 1999,
2000, and 2001 for services provided to XM Satellite were
$10.3 million, $58.4 million, and $57.3 million,
respectively. Receivables from XM Satellite were
$18.5 million and $17.0 million at December 31,
2000 and 2001, respectively.

During 2000 and 2001, the Company made certain payments on
behalf of Telcom Ventures that consisted primarily of fringe
benefit and payroll service-related payments. At
December 31, 2000 and 2001,

41



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

outstanding amounts associated with these payments, totaling
$264,000 and $418,000, respectively, are included in due from
related parties and affiliates within the accompanying
consolidated balance sheets.

In September 1996, the Company lent $3.5 million to Telcom
Ventures to assist in the payment of taxes due in connection
with the assumption by the Company of $30.0 million of
convertible subordinated debt from Telcom Ventures
(see note 14). 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%.
Principal payments in the amount of $0.7 million were
received for both 1999 and 2000, with interest of
$0.2 million and $0.1 million for each of the
respective years. The final payment of principal and accrued
interest of $0.8 million was received by the Company
subsequent to year end, in satisfaction of the note. The note is
reflected as a reduction of shareholders equity in the
accompanying statement of shareholders equity.

In January 1999, the Company entered into a $5.0 million
convertible promissory note with Telcom Ventures. Under the
terms of the note, anytime after August 1, 1999, the entire
principal balance and accrued interest thereon at a rate of
9.0 percent could be converted into shares of the
Companys Class A Common Stock based on a conversion
price of $6.22 per share, subject to adjustment for stock split,
stock dividend, recapitalization or similar events. On
August 24, 1999 Telcom Ventures elected to convert its note
into 845,087 shares of the Companys Class A
Common Stock.

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

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

(7)  Property and Equipment

At December 31, 2000 and 2001, property and equipment
consisted of the following:

|                                               |  |                |         |      |  |   |         |  
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                               |  | 2000           |         | 2001
|                                               |  |                |         |     
|                                               |  |               
|                                               |  | (In thousands)
|                                              
|                                              
|                                              
|                                              
|Computer equipment                             |  | $              | 13,830  |      |  | $ | 14,078  |  
|                                              
|                                              
|                                              
|                                              
|Software                                       |  |                | 1,799   |      |  |   | 2,017   |  
|                                              
|                                              
|                                              
|                                              
|Furniture and office equipment                 |  |                | 5,975   |      |  |   | 7,281   |  
|                                              
|                                              
|                                              
|                                              
|Leasehold improvements                         |  |                | 3,360   |      |  |   | 3,587   |  
|                                              
|                                              
|                                              
|                                              
|Vehicles                                       |  |                | 227     |      |  |   | 224     |  
|                                               |  |                |         |      |  |   |         |  
|                                               |  |                | 25,191  |      |  |   | 27,187  |  
|                                              
|                                              
|                                              
|                                              
|Less accumulated depreciation and amortization |  |                | (19,553 | )    |  |   | (21,457 | )
|                                               |  |                |         |      |  |   |         |  
|                                               |  | $              | 5,638   |      |  | $ | 5,730   |  
|                                               |  |                |         |      |  |   |         |  

(8)  Restructuring Charge

On October 20, 1998, the Companys Board of Directors
approved a restructuring plan that resulted in a total fourth
quarter charge of approximately $2.5 million, including
approximately $1.2 million related to

42



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

continuing operations. The restructuring charge included
$0.1 million related to the Companys Services
businesses, $1.1 million related to corporate general and
administrative expenses and $1.3 million related to the
Companys products businesses. The charge was taken to
cover the costs associated with the closure of the
Companys office in Dusseldorf, Germany, a reduction in
non-billable positions of approximately 70 full and
part-time employees and approximately 30 contractors. The
remaining balance of $108,000 was reversed during 2000.

(9)  Recovery of Receivables

On March 28, 2001, the United States Bankruptcy Court,
District of Maryland, Northern Division, entered an order
confirming the Amended Joint Plan of Reorganization Under
Chapter 11 (the Plan) for DCR
PCS, Inc. (DCR) and Pocket
Communications, Inc. (Pocket). The Plan
provided that the Companys claim against DCR would be
allowed in the amount of $5.0 million. The Company received
payment of $5.0 million on April 11, 2001, which was
recognized as a recovery of a bad debt and included in general
and administrative expense in 2001. The Plan also provides that
LCCs general unsecured claim against Pocket will be
allowed in the amount filed minus $5.0 million, or
approximately $12.4 million, which is to be paid at the
same percentage recovery received by the Pocket general
unsecured creditors as a class (excluding certain creditors
which also hold secured claims under the Plan and who have
agreed to forgo recovery on the first $5.8 million in
available funds) after the resolution of certain remaining
disputed claims and the calculation of administrative fees and
expenses of the estate. Based on the current estimates of the
Official Committee of Unsecured Creditors, there is a potential
of recovery on the Pocket general unsecured claims of 10% to 12%
of the allowed amount. Any additional amounts recovered will be
recognized if and when received. As of December 31, 2001,
the Company did not carry any assets or liabilities on its books
relating to Pocket; all amounts were written off in previous
years.

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

(10)  Investments

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

In June 2000, the Company acquired 18.2% of Mobilocity, Inc.
(Mobilocity) for $0.5 million. Mobilocity
provides mobile-business strategic consulting and implementation
services. During August 2000, the Companys ownership
percentage was diluted to 3.1% as Mobilocity raised additional
capital, as planned, through issuance of additional stock. The
Company uses the cost method to account for this investment.

In August 2000, the Company acquired 15.0% of
Plan + Design Netcare AG, a German wireless
network deployment firm (PDN) for $2.9 million.
In February 2001, the Company invested an additional
$1.6 million to maintain its 15.0% interest in PDN. In
addition to the investment, the Company entered into a

43



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

five-year joint marketing agreement with PDN. The Company uses
the cost method to account for this investment.

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

The Company held 1,666,666 shares of Class B Common Stock
of NextWave Telecom, Inc. (NextWave Telecom).
NextWave Telecom is the parent corporation of NPCI. The Company
acquired the shares of NextWave Telecom in May 1996 for a
purchase price of $5.0 million in connection with a series
of transactions entered into between the Company and NextWave
Telecom under an agreement dated March 12, 1996 (the
March Agreement). The Company also acquired warrants
to purchase an additional 123,356 shares of Class B Common
Stock at $3.00 per share. Under the March Agreement,
NextWave Telecom agreed to use the Company to provide not less
than (a) $14 million of radio frequency engineering
services and (b) $35 million of system deployment
services. These services were to be provided in increments of
twenty-percent (20%) each year during the five-year period
following the execution of the March Agreement. NextWave Telecom
filed for bankruptcy protection on December 23, 1998. The
March Agreement has not been assumed or rejected by NextWave
Telecom in the bankruptcy proceeding. Shares of Class B
Common Stock of NextWave Telecom have traded on the OTC Bulletin
Board under the symbol NXLC.

The total amount of pre-petition debt owed to the Company by
NextWave Telecom and certain of its subsidiaries (collectively,
NextWave) was approximately $14.25 million,
plus post-petition interest thereon. This amount includes the
Companys interest, amounting to approximately $650,000
plus post-petition interest thereon, in a general unsecured
claim against NextWave that was acquired by the Company in
connection with its acquisition of Koll Telecommunications LLC
in 1997. The total amount owed by NextWave to the Company is
reflected in the Companys general unsecured claims filed
in bankruptcy court. These unsecured claims will be amended and
increased if the March Agreement is rejected in the bankruptcy
proceedings. The Company does not carry any assets or
liabilities on its books relating to its equity investment in
NextWave or the March Agreement; these balances were written off
in previous years.

In September 2001, the Company sold all of its 1,666,666 shares
of Class B common stock and the Companys pre-petition
debt claims 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 2001
consolidated statement of operations. The sale of current
pre-petition debt excluded the claims of Koll Telecommunications
LLC and any post petition contract rejection claims.

(11)     Business Combinations

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

44



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

taken place on January 1, 2001, consolidated sales and
income would not have been significantly different from reported
amounts.

(12) Income Taxes

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

|          |                 |                |        |        |        |      |        |       |        |  |       |        |        | 
|--------- | --------------- | -------------- | ------ | ------ | ------ | ---- | ------ | ----- | ------ |  | ----- | ------ | ------ | 
|          |                 | 1999           |        | 2000   |        | 2001
|          |                 |                |        |        |        |     
|          |                 |               
|          |                 | (In thousands)
|         
|         
|         
|         
|Current:  |                 |                |        |        |        |      |        |       |        |  |       |       
|         
|         
|         
|         
|          | Federal         |                | $      | 100    |        |      | $      | 4,009 |        |  | $     | 10,647 |       
|         
|         
|         
|         
|          | State and local |                |        |       |        |      |        | 522   |        |  |       | 1,241  |       
|         
|         
|         
|         
|          | Foreign         |                |        | 919    |        |      |        | 1,115 |        |  |       | (3,002 | )     
|          |                 |                |        |        |        |      |        |       |        |  |       |       
|          |                 |                | 1,019  |        |        |      | 5,646  |       |        |  | 8,886 |       
|          |                 |                |        |        |        |      |        |       |        |  |       |       
|Deferred: |                 |                |        |        |        |      |        |       |        |  |       |       
|         
|         
|         
|         
|          | Federal         |                |        | (3,568 | )      |      |        | 9,730 |        |  |       | 1,900  |       
|         
|         
|         
|         
|          | State and local |                |        | (128   | )      |      |        | 1,155 |        |  |       | 255    |       
|         
|         
|         
|         
|          | Foreign         |                |        |       |        |      |        |      |        |  |       |       |       
|          |                 |                | (3,696 | )      |        |      | 10,885 |       |        |  | 2,155 |       
|          |                 |                |        |        |        |      |        |       |        |  |       |       
|          |                 | Total          |        | $      | (2,677 | )    |        | $     | 16,531 |  |       | $      | 11,041 | 
|          |                 |                |        |        |        |      |        |       |        |  |       |       

The 1999, 2000, and 2001 income tax provisions related to
operations do not include a $0.6 million tax charge, a
$3.3 million tax benefit, and a $0.1 million tax benefit,
respectively, related to exercising stock options which was
recorded directly to paid-in capital. In addition, the 1999
income tax provision related to continuing operations does not
include a tax charge of $12.6 million related to the
cancellation of indebtedness income from the conversion of the
note payable to MCI. The tax charge was recorded directly to
paid-in capital.

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

|         |       |                |        |        |   |      |        |        |  |   |        |        | 
|-------- | ----- | -------------- | ------ | ------ | - | ---- | ------ | ------ |  | - | ------ | ------ | 
|         |       | 1999           |        | 2000   |   | 2001
|         |       |                |        |        |   |     
|         |       |               
|         |       | (In thousands)
|        
|        
|        
|        
|Domestic |       | $              | (5,248 | )      |   | $    | 34,184 |        |  | $ | 33,550 |       
|        
|        
|        
|        
|Foreign  |       |                | (3,641 | )      |   |      | 2,965  |        |  |   | (5,537 | )     
|         |       |                |        |        |   |      |        |        |  |   |        |       
|         | Total |                | $      | (8,889 | ) |      | $      | 37,149 |  |   | $      | 28,013 | 
|         |       |                |        |        |   |      |        |        |  |   |        |       

45



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A reconciliation of the statutory Federal income tax rate and
the effective income tax rate from continuing operations for the
years ended December 31, 1999, 2000 and 2001 follows.

|                                  |                                                           |      |       |       |   |      |      |      |   |  |       |      |  
|--------------------------------- | --------------------------------------------------------- | ---- | ----- | ----- | - | ---- | ---- | ---- | - |  | ----- | ---- | -
|                                  |                                                           | 1999 |       | 2000  |   | 2001
|                                  |                                                           |      |       |       |   |     
|Statutory Federal income tax rate |                                                           |      | (35.0 | )%    |   |      | 35.0 | %    |   |  | 35.0% |     
|                                 
|                                 
|                                 
|                                 
|Effect of:                        |                                                           |      |       |       |   |      |      |      |   |  |       |     
|                                 
|                                 
|                                 
|                                 
|                                  | State and local income taxes, net of federal tax
	benefit |      |       | (1.1  | ) |      |      | 2.9  |   |  |       | 3.5  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Foreign                                                   |      |       | 14.6  |   |      |      | (2.8 | ) |  |       | (8.3 | )
|                                 
|                                 
|                                 
|                                 
|                                  | Tax credits                                               |      |       | 2.6   |   |      |      | (0.6 | ) |  |       | 2.0  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Non deductible expenses                                   |      |       | 8.5   |   |      |      | 7.4  |   |  |       | 0.5  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                                     |      |       | 8.3   |   |      |      | 2.6  |   |  |       | 3.2  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Valuation Allowance                                       |      |       | (28.0 | ) |      |      |     |   |  |       | 3.5  |  
|                                  |                                                           |      |       |       |   |      |      |      |   |  |       |     
|Effective income tax rate         |                                                           |      | (30.1 | )%    |   |      | 44.5 | %    |   |  | 39.4% |     
|                                  |                                                           |      |       |       |   |      |      |      |   |  |       |     

The tax effects of temporary differences that give rise to
significant portions of the net deferred tax assets at
December 31, 2000 and 2001 are presented below:

|                                                                         |                                  |                |        |        |   |   |        |        |  
|------------------------------------------------------------------------ | -------------------------------- | -------------- | ------ | ------ | - | - | ------ | ------ | -
|                                                                         |                                  | 2000           |        | 2001  
|                                                                         |                                  |                |        |       
|                                                                         |                                  |               
|                                                                         |                                  | (In thousands)
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Deferred tax assets:                                                     |                                  |                |        |        |   |   |        |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Accounts receivable, principally due to allowance
	for doubtful accounts |                                  | $              | 381    |        |   | $ | 115    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other receivables                                                        |                                  |                | 1,567  |        |   |   | 754    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Non-cash compensation                                                    |                                  |                | 1,283  |        |   |   | 1,245  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Accrued expenses                                                         |                                  |                | 2,719  |        |   |   | 2,083  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Foreign tax credit carry-forward                                         |                                  |                | 4,596  |        |   |   | 4,031  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Foreign net operating loss carry-forwards                                |                                  |                | 1,120  |        |   |   | 2,391  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Research tax credit carryover                                            |                                  |                | 281    |        |   |   | 281    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Alternative minimum tax credit                                           |                                  |                |       |        |   |   | 455    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other                                                                    |                                  |                | 353    |        |   |   | 340    |       
|                                                                         |                                  |                |        |        |   |   |        |       
|                                                                         | Total gross deferred tax assets  |                |        | 12,300 |   |   |        | 11,695 |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Less valuation allowance                                                 |                                  |                | (4,951 | )      |   |   | (5,941 | )     
|                                                                         |                                  |                |        |        |   |   |        |       
|Deferred tax assets net of valuation allowance                           |                                  |                | 7,349  |        |   |   | 5,754  |       
|                                                                         |                                  |                |        |        |   |   |        |       
|Deferred tax liabilities:                                                |                                  |                |        |        |   |   |        |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Property and equipment                                                   |                                  |                | (192   | )      |   |   | (116   | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Deferred revenue                                                         |                                  |                | (170   | )      |   |   | (320   | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other                                                                    |                                  |                | (71    | )      |   |   | (556   | )     
|                                                                         |                                  |                |        |        |   |   |        |       
|                                                                         | Total gross deferred liabilities |                |        | (433   | ) |   |        | (992   | )
|                                                                         |                                  |                |        |        |   |   |        |       
|Net deferred tax assets                                                  |                                  | $              | 6,916  |        |   | $ | 4,762  |       
|                                                                         |                                  |                |        |        |   |   |        |       

The components giving rise to the net deferred tax assets
described above have been included in the accompanying balance
sheet as of December 31, 2000 and 2001 as follows:

|                 |  |      |       |      |  |   |       | 
|---------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                 |  | 2000 |       | 2001
|                 |  |      |       |     
|Current asset    |  | $    | 1,850 |      |  | $ | 2,724 | 
|                
|                
|                
|                
|Noncurrent asset |  |      | 5,066 |      |  |   | 2,038 | 
|                 |  |      |       |      |  |   |       | 
|                 |  | $    | 6,916 |      |  | $ | 4,762 | 
|                 |  |      |       |      |  |   |       | 

46



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

At December 31, 2001, the Company had foreign tax credits
for U.S. tax purposes of $4.0 million, which expire between
2002 and 2005 and an alternative minimum tax credit of
$0.5 million. The Company also had $8.7 million of
foreign operating loss carry-forwards from operations, which
expire between 2006 and 2009.

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

In determining the tax valuation allowance, management considers
if it is more likely than not 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 and foreign tax credits, before
they expire.

(13)  Note Payable

The Company maintained a credit facility with the Chase
Manhattan Bank, which was established in 1996. The Credit
Facility consisted of a revolving loan and letter of credit
facility in an aggregate principal amount not to exceed
$20.0 million for the Company and $2.5 million for LCC
Europe (the LCC Europe Credit Facility). In
March 2000, the Credit facility was paid-off in its entirety.

(14)  Convertible Subordinated Debt

In June 1994, the Company issued to MCI Worldcom
(MCI) a $20.0 million convertible Subordinated
Note (the Subordinated Note). The Subordinated Note
bore interest at a rate equal to 6.8% payable semiannually,
which was reduced to 4.4% in an amendment dated October 23,
1997. The entire principal amount of the Subordinated Note was
due in June 2000. In addition, the Company assumed a
$30.0 million note from Telcom Ventures to MCI, which
contained the same terms as the Subordinated Note, in connection
with the Companys initial public offering of Class A
Common Stock. On July 13, 1999, the Company received notice
of conversion from MCI of its convertible subordinated notes in
the aggregate principal amount of $50.0 million. The notes
were converted into 2,841,099 shares of the Companys
Class A Common Stock on July 27, 1999.

(15)  Health and Retirement Plans

The Company has a defined contribution profit sharing plan under
Section 401(k) of the IRC that provides for voluntary
employee contributions of 1.0 to 15.0 percent of
compensation for substantially all employees. The Company makes
a matching contribution of 50.0 percent of an
employees contribution up to 6.0 percent of each
employees contribution. Company contributions and other
expenses associated with the plan were approximately
$0.5 million, $0.6 million, and $0.7 million for
the years ended December 31, 1999, 2000, and 2001,
respectively.

The Companys subsidiary, LCC UK Ltd., has a defined
contribution pension plan under Chapter 1 Part XIV of
the Income and Corporation Taxes Act, 1988. The plan provides
for voluntary employee contributions of
1.0 to 5.0 percent of an employees base
salary. It is available to all full-time employees who have
completed their three-month probation period. The Company
contributes 5.0 percent of an employees base salary
and matches the employees contribution up to
5.0 percent. LCC UK Ltd., contributions and other expenses
related to the plan were approximately $0.1 million,
$0.2 million, and $0.2 million for the years ended
December 31, 1999, 2000 and 2001, respectively.

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

47



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(16)  Incentive Plans

At December 31, 1999, 2000, and 2001, the Company had two
stock-based incentive plans, an employee stock purchase plan and
an employee stock option plan, which are described below. The
Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its fixed stock option
plans and employee stock purchase plan. Had compensation cost
for the Companys stock-based compensation plans and
employee stock purchase plan been determined on the fair value
at the grant dates for awards under those plans, consistent with
Financial Accounting Standards Board Statement No. 123
(SFAS No. 123), the Companys income
(loss) from continuing operations and income
(loss) from continuing operations per share would have been
reduced to the pro forma amounts indicated below.

|                                        |              |                       |   |        |       |      |   |        |      |  |   |        |      | 
|--------------------------------------- | ------------ | --------------------- | - | ------ | ----- | ---- | - | ------ | ---- |  | - | ------ | ---- | 
|                                        |              | 1999                  |   | 2000   |       | 2001
|                                        |              |                       |   |        |       |     
|                                        |              |                      
|                                        |              | (In thousands, except
|                                        |              | per share data)      
|Income (loss) from operations           |              |                       |   |        |       |      |   |        |      |  |   |       
|                                       
|                                       
|                                       
|                                       
|                                        | As reported  |                       | $ | (6,212 | )     |      | $ | 20,618 |      |  | $ | 16,972 |     
|                                       
|                                       
|                                       
|                                       
|                                        | Pro forma    |                       |   | (7,613 | )     |      |   | 17,257 |      |  |   | 14,316 |     
|Income (loss) from operations per share |              |                       |   |        |       |      |   |        |      |  |   |       
|                                       
|                                       
|                                       
|                                       
|                                        | As reported: |                       |   |        |       |      |   |        |      |  |   |        |     
|                                       
|                                       
|                                       
|                                       
|                                        |              | Basic                 |   | $      | (0.36 | )    |   | $      | 1.01 |  |   | $      | 0.83 | 
|                                       
|                                       
|                                       
|                                       
|                                        |              | Diluted               |   |        | (0.36 | )    |   |        | 0.93 |  |   |        | 0.81 | 
|                                       
|                                       
|                                       
|                                       
|                                        | Pro forma:   |                       |   |        |       |      |   |        |      |  |   |        |     
|                                       
|                                       
|                                       
|                                       
|                                        |              | Basic                 |   | $      | (0.44 | )    |   | $      | 0.85 |  |   | $      | 0.70 | 
|                                       
|                                       
|                                       
|                                       
|                                        |              | Diluted               |   |        | (0.44 | )    |   |        | 0.78 |  |   |        | 0.68 | 

The per share weighted-average fair value of stock options
granted during 1999, 2000 and 2001 was $3.88, $10.93, and $7.93
respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average
assumptions:

|                        |  |           |  |           |  |          
|----------------------- |  | --------- |  | --------- |  | ---------
|                        |  | 1999      |  | 2000      |  | 2001     
|                        |  |           |  |           |  |          
|Expected dividend yield |  | 0%        |  | 0%        |  | 0%       
|                       
|                       
|                       
|                       
|Risk-free interest rate |  | 6.0%      |  | 6.0%      |  | 5.0%     
|                       
|                       
|                       
|                       
|Expected life           |  | 3-5 years |  | 3-7 years |  | 3-8 years
|                       
|                       
|                       
|                       
|Volatility              |  | 60.0%     |  | 75-100%   |  | 75-125%  

Under the Companys Employee Stock Purchase Plan,
360,000 shares of Class A Common Stock were available
for purchase by eligible employees of the Company beginning in
1997. Rights to purchase shares are deemed granted to
participating employees as of the beginning of each applicable
period, as specified by the Compensation and Stock Option
Committee of the Companys Board of Directors. The purchase
price for each share is not less than 85% of the fair market
value of the share of Class A Common Stock on the first or
last trading day of such period, whichever is lower. Under the
Employee Stock Purchase Plan, the Company sold
55,898 shares in 1999, 43,888 shares in 2000, and
102,530 shares in 2001 to employees. Compensation cost of
approximately $54,000, $138,000, and $127,000 respectively,
would have been recognized under SFAS No. 123 for the
fair value of the employees purchase rights and is included in
proforma net income above. Compensation cost was estimated using
the Black Scholes model with the following assumptions. As of

48



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

January 2002, the Employee Stock Purchase Plan was suspended,
pending stockholder approval of an increase in the number of
shares available for issuance under such plan.

|                        |  |            |  |         |  |        
|----------------------- |  | ---------- |  | ------- |  | -------
|                        |  | 1999       |  | 2000    |  | 2001   
|                        |  |            |  |         |  |        
|Expected dividend yield |  | 0%         |  | 0%      |  | 0%     
|                       
|                       
|                       
|                       
|Risk-free interest rate |  | 3.0%       |  | 3.0%    |  | 2.0%   
|                       
|                       
|                       
|                       
|Expected life           |  | 1-3 months |  | 1 month |  | 1 month
|                       
|                       
|                       
|                       
|Volatility              |  | 60-70%     |  | 75-100% |  | 75-125%

The weighted average fair value of the purchase rights granted
in 1999, 2000, and 2001 was $0.96, $3.15, and $1.23 respectively.

In connection with its initial public offering, the Company
established the 1996 Employee Stock Option Plan, which
authorized the issuance of up to 3,224,000 shares of
Class A Common Stock pursuant to options granted under the
plan. An additional 1,501,000 shares of Class A Common
Stock were reserved under the 1996 Employee Stock Option Plan in
1998. In late 1999 and early 2000, the Board of Directors
adopted amendments to the 1996 Employee Stock Option Plan, which
were subsequently approved by the shareholders at the 2000
annual meeting, increasing the total number of shares reserved
by 4,100,000 shares so that the aggregate number of shares
reserved for issuance is 8,825,000.

Also in connection with the Companys initial public
offering, the Company established the 1996 Directors Stock
Option Plan. The Directors Plan provides for the
formula grant of options, and authorizes the
issuance of up to 60,000 shares of Class A Common
Stock and 250,000 shares of Class B Common Stock. An
additional 80,000 shares of Class A Common Stock were
reserved under the Directors Plan in 1998 and an additional
110,000 shares of Class A Common Stock were reserved
under the Directors Plan in 2000. The option exercise price for
options granted under the Directors Plan is 100% of the fair
value of the shares on the date of grant. Each eligible director
who is not eligible to hold shares of Class B Common Stock
was granted an initial option to purchase 10,000 shares of
Class A Common Stock in connection with the offering. Each
eligible director who is eligible to hold shares of Class B
Common Stock and who was a director as of the offering was
granted an initial option to purchase 35,000 shares of
Class B Common Stock in connection with the offering, and
was granted additional options to purchase 22,500 shares of
Class B Common Stock as of each of the next four annual
meetings of the stockholders of the Company if the director
continued to be an eligible director. Options granted with
respect to Class A Common Stock become immediately
exercisable with respect to directors who were directors of the
Company prior to July 1, 1996, and become exercisable with
respect to one-third of the shares of Class A Common Stock
that are subject to the options on each of the first three
anniversaries of the date of grant subject to acceleration of
vesting on a change of control with respect to directors who
became directors of the Company after July 1, 1996.

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

On October 17, 2001, the Company offered to exchange all
eligible outstanding options under the Amended and Restated LCC
International, Inc. 1996 Employee Stock Option Plan (the
1996 Plan) for new options the Company will grant
under the 1996 Plan. Eligible outstanding options are all
options with an exercise price of $10.50 or more that are held
by an employee of the Company other than the Companys
Chief Executive Officer. The Company will grant an option to
purchase one share of the Companys Class A

49



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Common Stock for every option to purchase two shares tendered
and accepted for exchange. The new options will be granted on or
about the first business day that is at least six months and one
day following the date the Company cancels the accepted options
for exchange. The exercise price of the new options will be
equal to the closing price of the Companys Class A
common stock on the business day immediately preceding the date
of grant. The terms of the new options other than the exercise
price will be substantially the same as the terms of the options
tendered for exchange. The Companys offer to exchange
expired on November 20, 2001. On November 20, 2001,
eligible employees had tendered 1,460,250 options.

Changes in stock options outstanding were as follows:

|                             |  |           |       |                |  |           |      |                |  |           |       |                |  |   |       |  |  |  |        |   |  |   |       | 
|---------------------------- |  | --------- | ----- | -------------- |  | --------- | ---- | -------------- |  | --------- | ----- | -------------- |  | - | ----- |  |  |  | ------ | - |  | - | ----- | 
|                             |  |           |       |                |  |          
|                             |  | 1999      |       | 2000           |  | 2001     
|                             |  |           |       |                |  |          
|                             |  |           |       | Weighted-      |  |           |      | Weighted-      |  |           |       | Weighted-     
|                             |  | Number of |       | Average        |  | Number of |      | Average        |  | Number of |       | Average       
|                             |  | Shares    |       | Exercise Price |  | Shares    |      | Exercise Price |  | Shares    |       | Exercise Price
|                             |  |           |       |                |  |           |      |                |  |           |       |               
|Balance at beginning of Year |  |           | 2,213 |                |  | $         | 7.42 |                |  |           | 2,799 |                |  | $ | 7.62  |  |  |  | 4,461  |   |  | $ | 12.11 | 
|                            
|                            
|                            
|                            
|Granted                      |  |           | 2,078 |                |  |           | 7.46 |                |  |           | 2,645 |                |  |   | 16.06 |  |  |  | 2,182  |   |  |   | 11.05 | 
|                            
|                            
|                            
|                            
|Exercised                    |  |           | (584  | )              |  |           | 4.68 |                |  |           | (361  | )              |  |   | 4.48  |  |  |  | (83    | ) |  |   | 5.21  | 
|                            
|                            
|                            
|                            
|Cancelled                    |  |           | (908  | )              |  |           | 8.93 |                |  |           | (622  | )              |  |   | 13.18 |  |  |  | (2,964 | ) |  |   | 14.28 | 
|                             |  |           |       |                |  |           |      |                |  |           |       |                |  |   |       |  |  |  |        |   |  |   |       | 
|Balance at end of year       |  |           | 2,799 |                |  |           | 7.62 |                |  |           | 4,461 |                |  |   | 12.11 |  |  |  | 3,596  |   |  |   | 9.83  | 
|                             |  |           |       |                |  |           |      |                |  |           |       |                |  |   |       |  |  |  |        |   |  |   |       | 

The following table summarizes information about options at
December 31, 2001.

|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 
|--------------- |  | ------------------- | ----- | ------------------- |  | ------------- | ---- | ----------------- |  | ------------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|                |  |                     |       |                    
|                |  | Options Outstanding |       | Options Exercisable
|                |  |                     |       |                    
|                |  |                     |       | Weighted Avg.       |  | Weighted Avg. |      |                   |  | Weighted Avg.
|Range of        |  | Number at           |       | Remaining           |  | Exercise      |      | Number at         |  | Exercise     
|Exercise Prices |  | December 31, 2001   |       | Contractual Life    |  | Price         |      | December 31, 2001 |  | Price        
|                |  |                     |       |                     |  |               |      |                   |  |              
|                |  | (In thousands)      |       | (In years)          |  |               |      | (In thousands)    |  |              
|               
|               
|               
|               
|$ 4.00   4.62  |  |                     | 249   |                     |  |               | 7.26 |                   |  | $             | 4.22  |  |  |  | 172   |  |  | $ | 4.19  | 
|               
|               
|               
|               
|$ 5.00   5.00  |  |                     | 635   |                     |  |               | 6.41 |                   |  |               | 5.00  |  |  |  | 507   |  |  |   | 5.00  | 
|               
|               
|               
|               
|$ 5.09   5.75  |  |                     | 707   |                     |  |               | 8.28 |                   |  |               | 5.68  |  |  |  | 310   |  |  |   | 5.71  | 
|               
|               
|               
|               
|$ 5.98  12.13  |  |                     | 186   |                     |  |               | 7.22 |                   |  |               | 10.15 |  |  |  | 114   |  |  |   | 11.16 | 
|               
|               
|               
|               
|$12.25  12.25  |  |                     | 752   |                     |  |               | 9.08 |                   |  |               | 12.25 |  |  |  |      |  |  |   |      | 
|               
|               
|               
|               
|$12.38  13.56  |  |                     | 540   |                     |  |               | 8.02 |                   |  |               | 13.53 |  |  |  | 348   |  |  |   | 13.55 | 
|               
|               
|               
|               
|$16.00  26.75  |  |                     | 527   |                     |  |               | 7.40 |                   |  |               | 16.48 |  |  |  | 307   |  |  |   | 16.65 | 
|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 
|                |  |                     | 3,596 |                     |  |               | 7.82 |                   |  |               | 9.83  |  |  |  | 1,758 |  |  |   | 9.17  | 
|                |  |                     |       |                     |  |               |      |                   |  |               |       |  |  |  |       |  |  |   |       | 

(17)  Lease Commitments

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

Benefits associated with a rent abatement period and certain
lease incentives for office facilities are reflected ratably
over the period of the lease. For leases that have been
terminated, the applicable portion of the benefit has been
offset against the lease termination penalty. The total deferred
rent was approximately $1.0 million and $0.8 million
at December 31, 2000 and 2001, respectively.

50



---



##### 



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)
|          
|          
|          
|          
|2002       |  | $              | 4,702  |                    |  | $ | 1,011 | 
|          
|          
|          
|          
|2003       |  |                | 3,772  |                    |  |   | 153   | 
|          
|          
|          
|          
|2004       |  |                | 3,687  |                    |  |   | 30    | 
|          
|          
|          
|          
|2005       |  |                | 3,754  |                    |  |   |      | 
|          
|          
|          
|          
|2006       |  |                | 3,822  |                    |  |   |      | 
|          
|          
|          
|          
|Thereafter |  |                | 4,398  |                    |  |   |      | 
|           |  |                |        |                    |  |   |       | 
|           |  | $              | 24,135 |                    |  | $ | 1,194 | 
|           |  |                |        |                    |  |   |       | 

Rent expense under operating leases was approximately,
$6.2 million, $8.7 million, and $8.6 million for
the years ended December 31, 1999, 2000, and 2001, respectively.

(18)  Contingencies

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

(19)  Income (Loss) Per Share

Income (loss) per share is presented on both a basic and
diluted basis in accordance with the provisions of Financial
Accounting Standards Board Statement No. 128,
Earnings per Share(SFAS
No. 128). Basic earnings per share excludes dilution
and is computed by dividing income available to common
stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that
shared in the earnings of the Company. The reconciliation of the
basic and diluted earnings per share computations for the years
ended December 31, 1999, 2000 and 2001 are as follows:

|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |   |      | 
|---------------------------------------------------- | ------------------ | ------------------------------------- |  | -------- |  | --------- | ------ | ------ | ----- | ------ | ----- | --------- | ------ | ------ | ------ | ------ |  | --------- | ------ | - | ---- | - | ---- | - | ------ | - | ------ |  |  | --- | ------ | - | ---- | - | ---- | 
|                                                     |                    |                                       |  |          |  |          
|                                                     |                    | 1999                                  |  | 2000     |  | 2001     
|                                                     |                    |                                       |  |          |  |          
|                                                     |                    | Net                                   |  |          |  | Per Share |        | Net    |       |        |       | Per Share |        | Net    |        |        |  | Per Share
|                                                     |                    | (Loss)                                |  | Shares   |  | Amount    |        | Income |       | Shares |       | Amount    |        | Income |        | Shares |  | Amount   
|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |          
|                                                     |                    |                                      
|                                                     |                    | (in thousands, except per share data)
|                                                    
|                                                    
|                                                    
|                                                    
|Basic EPS                                            |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss) available to common
	shareholders: |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|                                                    
|                                                    
|                                                    
|                                                    
|Continuing operations                                |                    | $(6,212)                              |  |          |  |           |        |        |       |        |       | $         | 20,618 |        |        |        |  |           |        |   |      |   |      | $ | 16,972 |   |        |  |  |     |        |   |      |  
|                                                    
|                                                    
|                                                    
|                                                    
|Gain on disposal of discontinued operations          |                    | 803                                   |  |          |  |           |        |        |       |        |       |           |       |        |        |        |  |           |        |   |      |   |      |   |       |   |        |  |  |     |        |   |      |  
|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|                                                     |                    | Total                                 |  | $(5,409) |  |           | 17,302 |        |       |        |       |           |        | $      | 20,618 |        |  |           | 20,360 |   |      |   |      |   |        | $ | 16,972 |  |  |     | 20,571 |   |      |   |      | 
|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|Continuing operations                                |                    |                                       |  |          |  |           |        | $      | (0.36 | )      |       |           |        |        |        |        |  |           |        | $ | 1.01 |   |      |   |        |   |        |  |  |     |        | $ | 0.83 |  
|                                                    
|                                                    
|                                                    
|                                                    
|Discontinued operations                              |                    |                                       |  |          |  |           |        |        | 0.05  |        |       |           |        |        |        |        |  |           |        |   |     |   |      |   |        |   |        |  |  |     |        |   |     |  
|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|                                                     |                    | Total                                 |  |          |  |           |        |        |       | $      | (0.31 | )         |        |        |        |        |  |           |        |   |      | $ | 1.01 |   |        |   |        |  |  |     |        |   |      | $ | 0.83 | 
|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|Effective of Dilutive Securities                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Stock option plans |                                       |  |          |  |          |        |        |       |        |       |           |        |        |        |        |  | 1,750     |        |   |      |   |      |   |        |   |        |  |  | 345 |        |   |      |   |     
|                                                     |                    |                                       |  |          |  |           |        |        |       |        |       |           |        |        |        |        |  |           |        |   |      |   |      |   |        |   |        |  |  |     |        |   |      |  

51



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|             |                                                                              |                                       |          |          |  |           |        |        |   |        |       |           |   |        |        |        |  |           |        |  |   |      |      |  |   |        |        |  |  |  |        |  |   |      |      | 
|------------ | ---------------------------------------------------------------------------- | ------------------------------------- | -------- | -------- |  | --------- | ------ | ------ | - | ------ | ----- | --------- | - | ------ | ------ | ------ |  | --------- | ------ |  | - | ---- | ---- |  | - | ------ | ------ |  |  |  | ------ |  | - | ---- | ---- | 
|             |                                                                              |                                       |          |          |  |          
|             |                                                                              | 1999                                  |          | 2000     |  | 2001     
|             |                                                                              |                                       |          |          |  |          
|             |                                                                              | Net                                   |          |          |  | Per Share |        | Net    |   |        |       | Per Share |   | Net    |        |        |  | Per Share
|             |                                                                              | (Loss)                                |          | Shares   |  | Amount    |        | Income |   | Shares |       | Amount    |   | Income |        | Shares |  | Amount   
|             |                                                                              |                                       |          |          |  |           |        |        |   |        |       |           |   |        |        |        |  |          
|             |                                                                              |                                      
|             |                                                                              | (in thousands, except per share data)
|            
|            
|            
|            
|Dilutive EPS |                                                                              |                                       |          |          |  |           |        |        |   |        |       |           |   |        |        |        |  |           |        |  |   |      |      |  |   |        |        |  |  |  |        |  |   |     
|            
|            
|            
|            
|             | Net income (loss) available to common
	Stockholders and assumed conversions: |                                       |          |          |  |           |        |        |   |        |       |           |   |        |        |        |  |           |        |  |   |      |      |  |   |        |        |  |  |  |        |  |   |      |     
|            
|            
|            
|            
|             | Continuing operations                                                        |                                       | $(6,212) |          |  |           |        |        | $ | (0.36  | )     |           | $ | 20,618 |        |        |  |           |        |  | $ | 0.93 |      |  | $ | 16,972 |        |  |  |  |        |  | $ | 0.81 |     
|            
|            
|            
|            
|             | Gain on disposal of discontinued operations                                  |                                       | 803      |          |  |           |        |        |   | 0.05   |       |           |   |       |        |        |  |           |        |  |   |     |      |  |   |       |        |  |  |  |        |  |   |     |     
|             |                                                                              |                                       |          |          |  |           |        |        |   |        |       |           |   |        |        |        |  |           |        |  |   |      |      |  |   |        |        |  |  |  |        |  |   |     
|             |                                                                              | Total                                 |          | $(5,409) |  |           | 17,302 |        |   | $      | (0.31 | )         |   | $      | 20,618 |        |  |           | 22,110 |  |   | $    | 0.93 |  |   | $      | 16,972 |  |  |  | 20,916 |  |   | $    | 0.81 | 
|             |                                                                              |                                       |          |          |  |           |        |        |   |        |       |           |   |        |        |        |  |           |        |  |   |      |      |  |   |        |        |  |  |  |        |  |   |     

The Companys convertible subordinated debt was exchanged
into 2.8 million shares of the Companys Class A
Common Stock during 1999. The convertible subordinated debt, was
outstanding during calendar year 1999, but was not included in
the computation of diluted earnings per share because the effect
would have been anti-dilutive. Options to purchase
2.8 million, 0.1 million and 3.8 million shares
of Class A Common Stock were outstanding during 1999, 2000
and 2001, respectively, but were not included in the computation
of diluted earnings per share because the effect would have been
anti-dilutive.

(20)  Segment Reporting

The Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information(SFAS No. 131). SFAS No. 131
established standards for reporting information about the
operating segments in interim and annual financial reports
issued to stockholders. It also established standards for
related disclosures about products and services and geographic
areas. Operating segments are defined as components of an
enterprise about which separate financial information is
available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to
allocate resources and assess performance. The Companys
chief operating decision-making group is the Executive
Committee, which is comprised of the Chief Executive Officer and
the lead executives of each of the Companys operating
segments. The operating segments are managed separately because
each operating segment represents a strategic business unit that
offers distinct services.

The Companys operating segments include Services (Design
Services and Deployment Services) and Tower Ownership and
Management. Design Services provides engineering and design
services for cellular phone system operators, personal
communication system (PCS) operators and other
wireless communication systems providers. Deployment Services
provides program and construction management services related to
the build-out of wireless communication systems.

The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies. The Company evaluates performance based on stand alone
operating segment profit or loss from operations before income
taxes not including nonrecurring gains and losses, and generally
accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market
prices. Interdivisional transactions are eliminated in
consolidation. Revenues are attributed to geographic areas based
on the location of the assignment.

52



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segments:

(In thousands)


|     |                                                        |          |   |            |  |       |   |        |   |  |   |         | 
|---- | ------------------------------------------------------ | -------- | - | ---------- |  | ----- | - | ------ | - |  | - | ------- | 
|     |                                                        |          |   | Tower      |  |      
|     |                                                        |          |   | Ownership  |  |      
|     |                                                        |          |   | and        |  |      
|     |                                                        | Services |   | Management |  | Total
|     |                                                        |          |   |            |  |      
|1999 |                                                        |          |   |            |  |       |   |        |   |  |   |        
|    
|    
|    
|    
|     | Net revenue from external customers                    |          | $ | 73,289     |  |       | $ | 2,504  |   |  | $ | 75,793  | 
|    
|    
|    
|    
|     | Intersegment revenues                                  |          |   | 268        |  |       |   |       |   |  |   | 268     | 
|     |                                                        |          |   |            |  |       |   |        |   |  |   |        
|     | Total revenues                                         |          | $ | 73,557     |  |       | $ | 2,504  |   |  | $ | 76,061  | 
|     |                                                        |          |   |            |  |       |   |        |   |  |   |        
|     | Depreciation and amortization                          |          |   | 1,112      |  |       |   | 1,220  |   |  |   | 2,332   | 
|    
|    
|    
|    
|     | Interest income                                        |          |   | 192        |  |       |   |       |   |  |   | 192     | 
|    
|    
|    
|    
|     | Interest expense                                       |          |   | 9          |  |       |   |       |   |  |   | 9       | 
|    
|    
|    
|    
|     | Income tax expense (benefit)                           |          |   | 2,672      |  |       |   | (1,238 | ) |  |   | 1,434   | 
|    
|    
|    
|    
|     | Income (loss) from continuing operations
	before taxes |          |   | 8,069      |  |       |   | (4,103 | ) |  |   | 3,966   | 
|    
|    
|    
|    
|     | Segment assets                                         |          |   | 28,642     |  |       |   | 31,098 |   |  |   | 59,740  | 
|    
|    
|    
|    
|     | Expenditures for property                              |          |   | 1,691      |  |       |   | 15,240 |   |  |   | 16,931  | 
|    
|    
|    
|    
|2000 |                                                        |          |   |            |  |       |   |        |   |  |   |        
|    
|    
|    
|    
|     | Net revenue from external customers                    |          | $ | 149,385    |  |       | $ | 1,008  |   |  | $ | 150,393 | 
|    
|    
|    
|    
|     | Intersegment revenues                                  |          |   |           |  |       |   |       |   |  |   |        | 
|     |                                                        |          |   |            |  |       |   |        |   |  |   |        
|     | Total revenues                                         |          | $ | 149,385    |  |       | $ | 1,008  |   |  | $ | 150,393 | 
|     |                                                        |          |   |            |  |       |   |        |   |  |   |        
|     | Depreciation and amortization                          |          |   | 1,812      |  |       |   | 265    |   |  |   | 2,077   | 
|    
|    
|    
|    
|     | Interest income                                        |          |   | 277        |  |       |   |       |   |  |   | 277     | 
|    
|    
|    
|    
|     | Interest expense                                       |          |   | 10         |  |       |   |       |   |  |   | 10      | 
|    
|    
|    
|    
|     | Income tax expense                                     |          |   | 7,580      |  |       |   | 93     |   |  |   | 7,673   | 
|    
|    
|    
|    
|     | Income before taxes                                    |          |   | 17,035     |  |       |   | 207    |   |  |   | 17,242  | 
|    
|    
|    
|    
|     | Segment assets                                         |          |   | 60,017     |  |       |   | 1,390  |   |  |   | 61,407  | 
|    
|    
|    
|    
|     | Expenditures for property                              |          |   | 2,645      |  |       |   | 96     |   |  |   | 2,741   | 
|    
|    
|    
|    
|2001 |                                                        |          |   |            |  |       |   |        |   |  |   |        
|    
|    
|    
|    
|     | Net revenue from external customers                    |          | $ | 130,609    |  |       | $ |       |   |  | $ | 130,609 | 
|    
|    
|    
|    
|     | Intersegment revenues                                  |          |   |           |  |       |   |       |   |  |   |        | 
|     |                                                        |          |   |            |  |       |   |        |   |  |   |        
|     | Total revenues                                         |          | $ | 130,609    |  |       | $ |       |   |  | $ | 130,609 | 
|     |                                                        |          |   |            |  |       |   |        |   |  |   |        
|     | Depreciation and amortization                          |          |   | 1,808      |  |       |   |       |   |  |   | 1,808   | 
|    
|    
|    
|    
|     | Interest income                                        |          |   | 318        |  |       |   |       |   |  |   | 318     | 
|    
|    
|    
|    
|     | Interest expense                                       |          |   | 12         |  |       |   |       |   |  |   | 12      | 
|    
|    
|    
|    
|     | Income tax expense                                     |          |   | 1,991      |  |       |   |       |   |  |   | 1,991   | 
|    
|    
|    
|    
|     | Income (loss) before taxes                             |          |   | 5,045      |  |       |   | (14    | ) |  |   | 5,031   | 
|    
|    
|    
|    
|     | Segment assets                                         |          |   | 51,248     |  |       |   | 149    |   |  |   | 51,397  | 
|    
|    
|    
|    
|     | Expenditures for property                              |          |   | 2,134      |  |       |   | 13     |   |  |   | 2,147   | 

53



---



##### 



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):

|                          |                                                 |                           |        |        |        |      |         |         |        |   |         |         |        | 
|------------------------- | ----------------------------------------------- | ------------------------- | ------ | ------ | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                          |                                                 | 1999                      |        | 2000   |        | 2001
|                          |                                                 |                           |        |        |        |     
|Revenues                  |                                                 |                           |        |        |        |      |         |         |        |   |         |        
|                         
|                         
|                         
|                         
|                          | Revenues for reportable segments                |                           | $      | 76,061 |        |      | $       | 150,393 |        |   | $       | 130,609 |       
|                         
|                         
|                         
|                         
|                          | Eliminations                                    |                           |        | (268   | )      |      |         |        |        |   |         |        |       
|                          |                                                 |                           |        |        |        |      |         |         |        |   |         |        
|                          | Total consolidated revenues                     |                           | $      | 75,793 |        |      | $       | 150,393 |        |   | $       | 130,609 |       
|                          |                                                 |                           |        |        |        |      |         |         |        |   |         |        
|Assets                    |                                                 |                           |        |        |        |      |         |         |        |   |         |        
|                         
|                         
|                         
|                         
|                          | Total assets for reportable segments            |                           | $      | 59,740 |        |      | $       | 61,407  |        |   | $       | 51,397  |       
|                         
|                         
|                         
|                         
|                          | Assets not attributable to reportable segments: |                           |        |        |        |      |         |         |        |   |         |         |       
|                         
|                         
|                         
|                         
|                          |                                                 | Cash and cash equivalents |        |        | 716    |      |         |         | 19,279 |   |         |         | 49,124 | 
|                         
|                         
|                         
|                         
|                          |                                                 | Short-term investments    |        |        | 86     |      |         |         | 19,038 |   |         |         | 484    | 
|                         
|                         
|                         
|                         
|                          |                                                 | Deferred tax assets       |        |        | 16,645 |      |         |         | 6,916  |   |         |         | 4,762  | 
|                         
|                         
|                         
|                         
|                          |                                                 | Property and equipment    |        |        | 2,758  |      |         |         | 2,778  |   |         |         | 2,854  | 
|                         
|                         
|                         
|                         
|                          |                                                 | Receivables               |        |        | 608    |      |         |         |       |   |         |         |       | 
|                         
|                         
|                         
|                         
|                          |                                                 | Prepaids                  |        |        | 1,428  |      |         |         | 292    |   |         |         | 684    | 
|                         
|                         
|                         
|                         
|                          |                                                 | Other                     |        |        | 887    |      |         |         | 335    |   |         |         | 294    | 
|                          |                                                 |                           |        |        |        |      |         |         |        |   |         |        
|Total consolidated assets |                                                 | $                         | 82,868 |        |        | $    | 110,045 |         |        | $ | 109,599 |        
|                          |                                                 |                           |        |        |        |      |         |         |        |   |         |        

|                                                              |                                                          |      |        |         |   |      |        |        |   |   |        |        |  
|------------------------------------------------------------- | -------------------------------------------------------- | ---- | ------ | ------- | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                                              |                                                          | 1999 |        | 2000    |   | 2001
|                                                              |                                                          |      |        |         |   |     
|Income (loss) before income taxes for
	reportable segments    |                                                          | $    | 3,966  |         |   | $    | 17,242 |        |   | $ | 5,031  |       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Gain on sale of tower portfolio and
	administration, net |      |        |        |   |      |        | 26,437 |   |   |        | 2,998  |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Sale of investments and assets                           |      |        |        |   |      |        |       |   |   |        | 22,395 |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | General corporate expenses                               |      |        | (12,855 | ) |      |        | (6,530 | ) |   |        | (2,411 | )
|                                                              |                                                          |      |        |         |   |      |        |        |   |   |        |       
|Income (loss) from continuing operations
	before income taxes |                                                          | $    | (8,889 | )       |   | $    | 37,149 |        |   | $ | 28,013 |       
|                                                              |                                                          |      |        |         |   |      |        |        |   |   |        |       

|                        |                               |         |   |              |  |              |   |              |   |  |   |   |  |  |   |        |  
|----------------------- | ----------------------------- | ------- | - | ------------ |  | ------------ | - | ------------ | - |  | - | - |  |  | - | ------ | -
|                        |                               |         |   | Unallocated  |  |              |   |             
|                        |                               | Segment |   | Corporate    |  |              |   | Consolidated
|Other Significant Items |                               | Total   |   | Expenditures |  | Eliminations |   | Total       
|                        |                               |         |   |              |  |              |   |             
|1999                    |                               |         |   |              |  |              |   |              |   |  |   |   |  |  |   |       
|                       
|                       
|                       
|                       
|                        | Depreciation and amortization |         | $ | 2,332        |  |              | $ | 1,296        |   |  | $ |  |  |  | $ | 3,628  |  
|                       
|                       
|                       
|                       
|                        | Interest income               |         |   | 192          |  |              |   | 135          |   |  |   |  |  |  |   | 327    |  
|                       
|                       
|                       
|                       
|                        | Interest expense              |         |   | 9            |  |              |   | 2,145        |   |  |   |  |  |  |   | 2,154  |  
|                       
|                       
|                       
|                       
|                        | Income taxes                  |         |   | 1,434        |  |              |   | (4,111       | ) |  |   |  |  |  |   | (2,677 | )
|                       
|                       
|                       
|                       
|                        | Expenditures for property     |         |   | 16,931       |  |              |   | 169          |   |  |   |  |  |  |   | 17,100 |  
|                       
|                       
|                       
|                       
|2000                    |                               |         |   |              |  |              |   |              |   |  |   |   |  |  |   |       
|                       
|                       
|                       
|                       
|                        | Depreciation and amortization |         | $ | 2,077        |  |              | $ | 822          |   |  |   |  |  |  | $ | 2,899  |  
|                       
|                       
|                       
|                       
|                        | Interest income               |         |   | 277          |  |              |   | 1,674        |   |  |   |  |  |  |   | 1,951  |  
|                       
|                       
|                       
|                       
|                        | Interest expense              |         |   | 10           |  |              |   | 253          |   |  |   |  |  |  |   | 263    |  
|                       
|                       
|                       
|                       
|                        | Income taxes                  |         |   | 19,437       |  |              |   | (2,906       | ) |  |   |  |  |  |   | 16,531 |  
|                       
|                       
|                       
|                       
|                        | Expenditures for property     |         |   | 2,741        |  |              |   | 1,129        |   |  |   |  |  |  |   | 3,870  |  
|                       
|                       
|                       
|                       
|2001                    |                               |         |   |              |  |              |   |              |   |  |   |   |  |  |   |       
|                       
|                       
|                       
|                       
|                        | Depreciation and amortization |         | $ | 1,808        |  |              | $ | 1,204        |   |  | $ |  |  |  | $ | 3,012  |  
|                       
|                       
|                       
|                       
|                        | Interest income               |         |   | 318          |  |              |   | 1,581        |   |  |   |  |  |  |   | 1,899  |  
|                       
|                       
|                       
|                       
|                        | Interest expense              |         |   | 12           |  |              |   | 1            |   |  |   |  |  |  |   | 13     |  
|                       
|                       
|                       
|                       
|                        | Income taxes                  |         |   | 3,167        |  |              |   | 7,874        |   |  |   |  |  |  |   | 11,041 |  
|                       
|                       
|                       
|                       
|                        | Expenditures for property     |         |   | 2,147        |  |              |   | 1,230        |   |  |   |  |  |  |   | 3,377  |  

54



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                           |  |      |        |      |  |      |         |  |  |   |         | 
|-------------------------- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------- | 
|                           |  | 1999 |        | 2000 |  | 2001
|                           |  |      |        |      |  |     
|Design and deployment      |  | $    | 68,725 |      |  | $    | 142,566 |  |  | $ | 123,210 | 
|                          
|                          
|                          
|                          
|Operations and maintenance |  |      |       |      |  |      | 1,655   |  |  |   | 2,056   | 
|                          
|                          
|                          
|                          
|Consulting                 |  |      | 4,213  |      |  |      | 5,164   |  |  |   | 5,343   | 
|                          
|                          
|                          
|                          
|Towers                     |  |      | 2,855  |      |  |      | 1,008   |  |  |   |        | 
|                           |  |      |        |      |  |      |         |  |  |   |         | 
|Total revenues             |  | $    | 75,793 |      |  | $    | 150,393 |  |  | $ | 130,609 | 
|                           |  |      |        |      |  |      |         |  |  |   |         | 

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

|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |       |       | 
|---------------------------- | ------------------- | -------- | ------ | -------- | ------ | -------- | ------ | -------- | ------ | -------- | ------- | -------- | ------- |  | ----- | ----- | ----- |  | ------- | ------- | ------- |  | ----- | ----- | ----- | 
|                             |                     |          |        |          |        |         
|                             |                     | 1999     |        | 2000     |        | 2001    
|                             |                     |          |        |          |        |         
|                             |                     |          |        | Net      |        |          |        | Net      |        |          |         | Net     
|                             |                     | Revenues |        | Property |        | Revenues |        | Property |        | Revenues |         | Property
|                             |                     |          |        |          |        |          |        |          |        |          |         |         
|North America                |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|                            
|                            
|                            
|                            
|                             | United States       |          | $      | 40,370   |        |          | $      | 35,353   |        |          | $       | 106,406  |         |  | $     | 4,215 |       |  | $       | 100,168 |         |  | $     | 3,609 |      
|                            
|                            
|                            
|                            
|                             | Canada and Mexico   |          |        | 1,654    |        |          |        |         |        |          |         | 375      |         |  |       |      |       |  |         | 36      |         |  |       |      |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Total North America          |                     |          | 42,024 |          |        |          | 35,353 |          |        |          | 106,781 |          |         |  | 4,215 |       |       |  | 100,204 |         |         |  | 3,609 |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Europe                       |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|                            
|                            
|                            
|                            
|                             | United Kingdom      |          |        | 1,476    |        |          |        | 1,896    |        |          |         | 3,859    |         |  |       | 914   |       |  |         | 7,477   |         |  |       | 1,473 |      
|                            
|                            
|                            
|                            
|                             | Belgium             |          |        | 4,261    |        |          |        |         |        |          |         | 1,780    |         |  |       |      |       |  |         | 1,140   |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Netherlands         |          |        | 8,718    |        |          |        |         |        |          |         | 10,213   |         |  |       |      |       |  |         | 9,516   |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Italy               |          |        | 2,766    |        |          |        |         |        |          |         | 2,275    |         |  |       |      |       |  |         | 937     |         |  |       | 103   |      
|                            
|                            
|                            
|                            
|                             | Other               |          |        | 2,161    |        |          |        | 15       |        |          |         | 2,177    |         |  |       | 4     |       |  |         | 96      |         |  |       |      |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Total Europe                 |                     |          | 19,382 |          |        |          | 1,911  |          |        |          | 20,304  |          |         |  | 918   |       |       |  | 19,166  |         |         |  | 1,576 |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Middle East and Africa       |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|                            
|                            
|                            
|                            
|                             | Egypt               |          |        | 3,655    |        |          |        | 182      |        |          |         | 15,321   |         |  |       | 198   |       |  |         | 4,252   |         |  |       | 205   |      
|                            
|                            
|                            
|                            
|                             | Other               |          |        |         |        |          |        |         |        |          |         | 290      |         |  |       |      |       |  |         | 143     |         |  |       |      |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Total Middle East and Africa |                     |          | 3,655  |          |        |          | 182    |          |        |          | 15,611  |          |         |  | 198   |       |       |  | 4,395   |         |         |  | 205   |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Latin America                |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|                            
|                            
|                            
|                            
|                             | Brazil              |          |        | 6,685    |        |          |        | 316      |        |          |         | 4,230    |         |  |       | 307   |       |  |         | 2,893   |         |  |       | 340   |      
|                            
|                            
|                            
|                            
|                             | Argentina           |          |        | 120      |        |          |        |         |        |          |         | 209      |         |  |       |      |       |  |         |        |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Other Latin America |          |        | 522      |        |          |        |         |        |          |         | 470      |         |  |       |      |       |  |         | 243     |         |  |       |      |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Total Latin America          |                     |          | 7,327  |          |        |          | 316    |          |        |          | 4,909   |          |         |  | 307   |       |       |  | 3,136   |         |         |  | 340   |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Asia-Pacific                 |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|                            
|                            
|                            
|                            
|                             | Malaysia            |          |        | 289      |        |          |        |         |        |          |         |         |         |  |       |      |       |  |         |        |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Korea               |          |        | 78       |        |          |        |         |        |          |         | 642      |         |  |       |      |       |  |         |        |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | China               |          |        | 405      |        |          |        |         |        |          |         |         |         |  |       |      |       |  |         | 1,809   |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Philippines         |          |        | 1,369    |        |          |        |         |        |          |         | 114      |         |  |       |      |       |  |         |        |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Thailand            |          |        | 12       |        |          |        |          |        |          |         | 275      |         |  |       |      |       |  |         | 1,282   |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Australia           |          |        | 683      |        |          |        |         |        |          |         | 1,552    |         |  |       |      |       |  |         | 617     |         |  |       |      |      
|                            
|                            
|                            
|                            
|                             | Other               |          |        | 569      |        |          |        |         |        |          |         | 205      |         |  |       |      |       |  |         |        |         |  |       |      |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|Total Asia-Pacific           |                     |          | 3,405  |          |        |          |       |          |        |          | 2,788   |          |         |  |      |       |       |  | 3,708   |         |         |  |      |      
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      
|                             |                     | Total    |        | $        | 75,793 |          |        | $        | 37,762 |          |         | $        | 150,393 |  |       | $     | 5,638 |  |         | $       | 130,609 |  |       | $     | 5,730 | 
|                             |                     |          |        |          |        |          |        |          |        |          |         |          |         |  |       |       |       |  |         |         |         |  |       |      

55



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(21)  Quarterly Data (Unaudited)

|                                           |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |      | 
|------------------------------------------ | ------- | ---------------------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ | ---- |  | - | ------ | ---- | 
|                                           |         |                                         
|                                           |         | 2000                                    
|                                           |         |                                         
|                                           |         | 1st                                      |        | 2nd     |  | 3rd     |        | 4th    
|                                           |         | Quarter                                  |        | Quarter |  | Quarter |        | Quarter
|                                           |         |                                          |        |         |  |         |        |        
|                                           |         |                                         
|                                           |         | (In thousands, except per share amounts)
|                                          
|                                          
|                                          
|                                          
|Revenues                                   |         | $                                        | 30,146 |         |  | $       | 34,284 |         |  | $ | 40,937 |      |  | $ | 45,026 |     
|                                          
|                                          
|                                          
|                                          
|Operating income                           |         |                                          | 22,510 |         |  |         | 5,870  |         |  |   | 4,083  |      |  |   | 3,785  |     
|                                          
|                                          
|                                          
|                                          
|Income from operations before income taxes |         |                                          | 22,118 |         |  |         | 6,262  |         |  |   | 4,413  |      |  |   | 4,356  |     
|                                          
|                                          
|                                          
|                                          
|Net income                                 |         |                                          | 12,828 |         |  |         | 3,632  |         |  |   | 1,904  |      |  |   | 2,254  |     
|                                          
|                                          
|                                          
|                                          
|Net income per share:                      |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |     
|                                          
|                                          
|                                          
|                                          
|                                           | Basic   |                                          | $      | 0.64    |  |         | $      | 0.18    |  |   | $      | 0.09 |  |   | $      | 0.11 | 
|                                           |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |     
|                                           | Diluted |                                          | $      | 0.57    |  |         | $      | 0.16    |  |   | $      | 0.09 |  |   | $      | 0.11 | 
|                                           |         |                                          |        |         |  |         |        |         |  |   |        |      |  |   |        |     

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

During the first quarter of 2000, the Company had a gain from
the sale of its tower portfolio of $21.2 million. (see
note 4)

During the second quarter of 2000, the Company had a gain from
the sale of its tower portfolio of $4.1 million. (see
note 4)

With respect to the fourth quarter of 2000, the Company
evaluated certain employment related tax accruals recorded in
prior years. This evaluation included the effect of systems and
procedures implemented by the Company, as well as, assumed
reductions in exposure due to changed circumstances and the
passage of time. As a result, the Company reduced Cost of
revenues, related to service by $1.6 million and increased
net income by $1.0 million.

During the first quarter of 2001, the Company received payment
of $2.1 million, net of taxes withheld at the source of
$0.4 million, related to a recovery of bad debt. (see
note 9)

During the second quarter of 2001, the Company received payment
of $5.0 million related to the reorganization of Pocket
Communications (see note 9). This gain was offset by
increased operating costs related to an increase in estimated
costs to complete a large fixed price contract in the Middle
East of $2.2 million, and an additional provision for
expatriate employee reimbursed taxes of $1.3 million.

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

During the fourth quarter of 2001, the Company incurred an
operating loss as a result of increased cost to complete the XM
Satellite contract of $1.7 million and reduced gross profit
resulting from lower revenues.

56



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(22)  Subsequent Events

During January 2002, the Company acquired all of the assets of
Smith Woolley Telecom (Smith Woolley). Smith Woolley
is a telecommunications consultancy company that specializes in
the provision of search, acquisition, design, build, management
and maintenance services to the wireless industry in the United
Kingdom. Smith Woolley is based in Cambridge, England, with
several regional offices and approximately 75 employees. The
purchase price of the acquisition was approximately
$8.5 million including the issuance of 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 $1.4 million and was based on a price of
$6.556 per share, which represents the average closing price of
the Class A common stock for the 10 days prior to the
closing of the deal.

On January 25, 2002, the Company entered into a settlement
agreement with Pinnacle (see note 4). Pursuant to the
agreement the Company received $2.0 million in cash to
satisfy Pinnacles obligations under the Tower Service
Agreement. The Company has not determined the timing of
recognition of the gain related to payment under the Tower
Services Agreement and will not do so until the ultimate
resolution of uncertainties. In addition, the Company paid
Pinnacle $2.0 million to satisfy all remaining obligations
under the Master Antenna Site Lease.

57



---



##### 



LCC INTERNATIONAL, INC. AND SUBSIDIARIES

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

None.

PART III

Item 10.     Directors and
Executive Officers of the Registrant

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

Item 11.     Executive
Compensation

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

Item 12.     Security
Ownership of Certain Beneficial Owners and Management

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

Item 13.     Certain
Relationships and Related Transactions

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

PART IV

Item 14.     Exhibits,
Financial Statement Schedules, and Reports on
Form 8-K



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



| |  |                                                                                                  
| |  | -------------------------------------------------------------------------------------------------
| |  | Report of Independent Auditors.                                                                  
|
| |  | Consolidated Statements of Operations  Years Ended
	December 31, 1999, 2000, and 2001.          
|
| |  | Consolidated Balance Sheets as of December 31, 2000 and
	2001.                                   
|
| |  | Consolidated Statements of Shareholders Equity 
	Years Ended December 31, 1999, 2000, and 2001.
|
| |  | Consolidated Statements of Cash Flows  Years Ended
	December 31, 1999, 2000, and 2001.          
|
| |  | Notes to Consolidated Financial Statements.                                                      



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

Schedule II  Valuation and Qualifying Accounts

58



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##### 





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

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

59



---



##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                          
|------- | ----- |  |  | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 10.11 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
	Stock Option Plan incentive stock option agreement (incorporated
	by reference to Exhibit 10.41 to Amendment No. 2 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on September 20,
	1996).                                       
|        | 10.12 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
	Stock Option Plan non-incentive stock option agreement
	(incorporated by reference to Exhibit 10.42 to Amendment
	No. 2 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	September 20, 1996).                                   
|        | 10.13 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
	Stock Option Plan, as amended, non-incentive stock option
	agreement for eligible persons who have executed grant letters
	on or after January 30, 2001 (incorporated by reference to
	Exhibit 10.26 to the Companys Annual Report on
	Form 10-K filed on April 2, 2001).
|        | 10.14 |  |  |                    |  | Form of Stock Option Agreement between LCC
	International, Inc. and the Carlyle Option Designees.
	(incorporated by reference to Exhibit 10.40 to Amendment
	No. 2 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	September 20, 1996).                                       
|        | 10.15 |  |  |                    |  | Letter Agreement dated February 22, 1999,
	between LCC International, Inc. and Terri Feely (incorporated by
	reference to Exhibit 10.9 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                             
|        | 10.16 |  |  |                    |  | Letter Agreement dated May 26, 1999, between
	LCC International, Inc. and David Walker (incorporated by
	reference to Exhibit 10.10 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                                
|        | 10.17 |  |  |                    |  | Letter Agreement dated May 31, 1996 between
	LCC International, Inc. and Michael McNelly (incorporated by
	reference to Exhibit 10.11 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                              
|        | 10.18 |  |  |                    |  | Employee Agreement on Ideas, Inventions and
	Confidential Information between Michael S. McNelly and LCC
	International, Inc. dated July 20, 1998 (incorporated by
	reference to Exhibit 10.41 to Amendment No. 1 to the
	Companys Annual Report on Form 10-K filed on
	December 20, 2001).                             
|        | 10.19 |  |  |                    |  | Service Agreement, dated January 1, 1999,
	between LCC International, Inc. and Peter Zaugg (incorporated by
	reference to Exhibit 10.12 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                            
|        | 10.20 |  |  |                    |  | Employment Agreement, dated May 24, 1999,
	between LCC International, Inc. and C. Thomas Faulders, III
	(incorporated by reference to Exhibit 10 to the
	Companys Current Report on Form 8-K filed on
	May 27, 1999).                                                                                                   
|        | 10.21 |  |  |                    |  | Loan Agreement between C. Thomas Faulders, III,
	and LCC International, Inc. dated December 22, 1999
	(incorporated by reference to Exhibit 10.42 to Amendment
	No. 1 to the Companys Annual Report on Form 10-K
	filed on December 20, 2001).                                                                          
|        | 10.22 |  |  |                    |  | Contract of Employment dated April 30, 2001
	between LCC UK Ltd. and Carlo Baravalle.                                                                                                                                                                                                                                    
|        | 10.23 |  |  |                    |  | Letter dated January 11, 2001, from LCC
	International, Inc. to Susan Mayer (incorporated by reference to
	Exhibit 10.14 to the Companys Annual Report on
	Form 10-K filed on April 2, 2001).                                                                                                                           
|        | 10.24 |  |  |                    |  | Letter dated June 19, 2001, from LCC
	International, Inc. to Susan Ness.                                                                                                                                                                                                                                                 
|        | 10.25 |  |  |                    |  | Letter Agreement dated August 22, 1996
	between LCC International, Inc. and Arno Penzias (incorporated
	by reference to Exhibit 10.49 to Amendment No. 2 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on September 20,
	1996).                                                

60



---



##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ----- |  |  | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|No.     |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 10.26 |  |  |                    |  | Form of Indemnity Agreement between LCC International, Inc. and
	the current and former officers and directors of LCC
	International, Inc. (incorporated by reference to Exhibit 10.32
	to Amendment No. 2 to the Companys Registration
	Statement on Form S-1, Registration No. 333-6067,
	filed on September 20, 1996).                                                                                                                                                                                                                                                                       
|        | 10.27 |  |  |                    |  | Intercompany Agreement dated as of August 27, 1996 among
	Telcom Ventures, L.L.C., LCC, L.L.C., LCC International, Inc.,
	Cherrywood Holdings, Inc., Rajendra Singh, Neera Singh, certain
	trusts for the benefit of members of the Singh family,
	Carlyle-LCC Investors I, L.P., Carlyle-LCC Investors II, L.P.,
	Carlyle-LCC Investors III, L.P., Carlyle-LCC IV (E), L.P.,
	MDLCC, L.L.C. and TC Group, L.L.C. (incorporated by reference to
	Exhibit 10.30 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).
|        | 10.28 |  |  |                    |  | Registration Rights Agreement dated July 25, 1996 among LCC
	International, Inc., RF Investors, L.L.C. and MCI
	Telecommunications Corporation (incorporated by reference to
	Exhibit 10.31 to Amendment No. 1 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                                                      
|        | 10.29 |  |  |                    |  | Overhead and Administrative Services Agreement dated
	August 27, 1996 between LCC International, Inc. and Telcom
	Ventures, L.L.C. (incorporated by reference to Exhibit 10.33 to
	Amendment No. 2 to the Companys Registration
	Statement on Form S-1, Registration No. 333-6067,
	filed on September 20, 1996).                                                                                                                                                                                                                                                                               
|        | 10.30 |  |  |                    |  | Agreement of Merger dated September 15, 1996 between LCC,
	L.L.C. and LCC International, Inc. (incorporated by reference to
	Exhibit 10.34 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                                                    
|        | 10.31 |  |  |                    |  | Form of Promissory Note by Telcom Ventures, L.L.C. to LCC
	International, Inc. (incorporated by reference to
	Exhibit 10.39 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                                                                   
|        | 10.32 |  |  |                    |  | First Amendment to Promissory Note, dated December 1, 2001,
	by Telcom Ventures, L.L.C. to LCC International, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10.33 |  |  |                    |  | Amended and Restated Shareholders Rights Agreement dated
	February   , 1996 between NextWave Telecom Inc.
	and LCC, L.L.C. (incorporated by reference to Exhibit 10.16
	to Amendment No. 1 to the Companys Registration
	Statement on Form S-1, Registration No. 333-6067, filed on
	August 16, 1996).                                                                                                                                                                                                                                                                                         
|        | 10.34 |  |  |                    |  | Subscription Agreement dated March 12, 1996 between
	NextWave Telecom, Inc. and LCC, L.L.C. (incorporated by
	reference to Exhibit 10.19 to Amendment No. 1 to the
	Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                                                                                                         
|        | 10.35 |  |  |                    |  | Convertible Loan and Investment Agreement dated March 20,
	1996 by and between LCC, L.L.C. and DCR Communications, Inc.
	(incorporated by reference to Exhibit 10.21 to Amendment
	No. 1 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	August 16, 1996).                                                                                                                                                                                                                                                                                            
|        | 10.36 |  |  |                    |  | Agreement dated May 17, 1996, between LCC, L.L.C. and
	West*Park Associates Limited Partnership for office space at
	7925 Jones Branch Drive, McLean, Virginia, 22102 (incorporated
	by reference to Exhibit 10.23 to Amendment No. 1 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                               
|        | 10.37 |  |  |                    |  | Agreement dated May 17, 1996, between LCC, L.L.C. and
	West*Park Associates Limited Partnership for office space at
	7927 Jones Branch Drive, McLean, Virginia, 22102 (incorporated
	by reference to Exhibit 10.24 to Amendment No. 1 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                               

61



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##### 



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



---

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

(b) Reports on Form 8-K.

On October 16, 2001, the Company filed a Current Report on
Form 8-K, which reported that the Company filed a Tender
Offer Statement on Schedule TO with the Securities and
Exchange Commission in connection with the Companys offer
to the Companys employees to exchange eligible outstanding
options.

On November 8, 2001, the Company filed a Current Report on
Form 8-K, which reported that the Company on
November 5, 2001, issued a press release announcing its
revenues and operating results for the third quarter of 2001.

On January 31, 2002, the Company filed a Current Report on
Form 8-K, which reported that the Company issued a press
release on January 31, 2002 announcing the purchase of all
of the assets of Smith Woolley Telecom.

On February 11, 2002, the Company filed a Current Report on
Form 8-K, which reported that the Company issued a press
release on February 11, 2002 announcing its revenues and
operating results for the fourth quarter of 2001 and for the
fiscal year ended December 31, 2001.

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

(d) None.

62



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##### 



SIGNATURES

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



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



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

| | 
| | 
| | 



| |                                     
| | ------------------------------------
| | C. Thomas Faulders, III             
| | Chairman and Chief Executive Officer
|
| | Date: March 28, 2002                

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

|                                                   |  |                                                                                                                               |  |      |                | 
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------------- | 
|Signatures                                         |  | Title                                                                                                                         |  | Date
|                                                   |  |                                                                                                                               |  |     
|/s/ C. THOMAS FAULDERS, IIIC. Thomas Faulders, III |  | Chairman of the Board of Directors and Chief
	Executive Officer (Principal Executive Officer)                                 |  |      | March 28, 2002 | 
|                                                  
|/s/ DAVID N. WALKERDavid N. Walker                 |  | Senior Vice President, Chief Financial Officer
	and Treasurer (Principal Financial Officer and Principal
	Accounting Officer) |  |      | March 28, 2002 | 
|                                                  
|/s/ MARK D. EINMark D. Ein                         |  | Director                                                                                                                      |  |      | March 28, 2002 | 
|                                                  
|/s/ STEVEN GILBERTSteven Gilbert                   |  | Director                                                                                                                      |  |      | March 28, 2002 | 
|                                                  
|/s/ SUSAN MAYERSusan Mayer                         |  | Director                                                                                                                      |  |      | March 28, 2002 | 
|                                                  
|/s/ SUSAN NESSSusan Ness                           |  | Director                                                                                                                      |  |      | March 28, 2002 | 
|                                                  
|/s/ NEERA SINGHNeera Singh                         |  | Director                                                                                                                      |  |      | March 28, 2002 | 
|                                                  
|/s/ RAJENDRA SINGHRajendra Singh                   |  | Director                                                                                                                      |  |      | March 28, 2002 | 

63



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##### 



SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)


|                             |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |       | 
|---------------------------- | ------------------------------- | ------------------- |  | ------------------ |  | -------------- |  | ------------- | - | ------------- |  | --- |  |  |  | ----- |  |  |  | ----- | 
|                             |                                 |                     |  |                    |  |                |  |              
|                             |                                 |                     |  | Column C           |  |                |  |              
|                             |                                 |                     |  |                    |  |                |  |              
|                             |                                 |                     |  |                    |  |                |  |              
|Column A                     |                                 | Column B            |  | Additions          |  | Column D       |  | Column E     
|                             |                                 |                     |  |                    |  |                |  |              
|                             |                                 | Balance at          |  | Charged to         |  | Charges to     |  |               |   | Balance at   
|Description                  |                                 | Beginning of period |  | costs and expenses |  | other accounts |  | Deductions(1) |   | end of period
|                             |                                 |                     |  |                    |  |                |  |               |   |              
|Year ended December 31, 1999 |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |      
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts |                     |  | 10,453             |  |                |  |              |   |               |  | 850 |  |  |  | 3,443 |  |  |  | 7,860 | 
|Year ended December 31, 2000 |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |      
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts |                     |  | 7,860              |  |                |  | (306          | ) |               |  | 81  |  |  |  | 5,806 |  |  |  | 1,829 | 
|Year ended December 31, 2001 |                                 |                     |  |                    |  |                |  |               |   |               |  |     |  |  |  |       |  |  |  |      
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts |                     |  | 1,829              |  |                |  | 2,123         |   |               |  | 316 |  |  |  | 2,220 |  |  |  | 2,048 | 




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

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##### 



EXHIBIT INDEX

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

65



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##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                          
|------- | ----- |  |  | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|Number  |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 10.11 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
	Stock Option Plan incentive stock option agreement (incorporated
	by reference to Exhibit 10.41 to Amendment No. 2 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on September 20,
	1996).                                       
|        | 10.12 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
	Stock Option Plan non-incentive stock option agreement
	(incorporated by reference to Exhibit 10.42 to Amendment
	No. 2 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	September 20, 1996).                                   
|        | 10.13 |  |  |                    |  | Form of LCC International, Inc. 1996 Employee
	Stock Option Plan, as amended, non-incentive stock option
	agreement for eligible persons who have executed grant letters
	on or after January 30, 2001 (incorporated by reference to
	Exhibit 10.26 to the Companys Annual Report on
	Form 10-K filed on April 2, 2001).
|        | 10.14 |  |  |                    |  | Form of Stock Option Agreement between LCC
	International, Inc. and the Carlyle Option Designees.
	(incorporated by reference to Exhibit 10.40 to Amendment
	No. 2 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	September 20, 1996).                                       
|        | 10.15 |  |  |                    |  | Letter Agreement dated February 22, 1999,
	between LCC International, Inc. and Terri Feely (incorporated by
	reference to Exhibit 10.9 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                             
|        | 10.16 |  |  |                    |  | Letter Agreement dated May 26, 1999, between
	LCC International, Inc. and David Walker (incorporated by
	reference to Exhibit 10.10 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                                
|        | 10.17 |  |  |                    |  | Letter Agreement dated May 31, 1996 between
	LCC International, Inc. and Michael McNelly (incorporated by
	reference to Exhibit 10.11 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                              
|        | 10.18 |  |  |                    |  | Employee Agreement on Ideas, Inventions and
	Confidential Information between Michael S. McNelly and LCC
	International, Inc. dated July 20, 1998 (incorporated by
	reference to Exhibit 10.41 to Amendment No. 1 to the
	Companys Annual Report on Form 10-K filed on
	December 20, 2001).                             
|        | 10.19 |  |  |                    |  | Service Agreement, dated January 1, 1999,
	between LCC International, Inc. and Peter Zaugg (incorporated by
	reference to Exhibit 10.12 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                                                            
|        | 10.20 |  |  |                    |  | Employment Agreement, dated May 24, 1999,
	between LCC International, Inc. and C. Thomas Faulders, III
	(incorporated by reference to Exhibit 10 to the
	Companys Current Report on Form 8-K filed on
	May 27, 1999).                                                                                                   
|        | 10.21 |  |  |                    |  | Loan Agreement between C. Thomas Faulders, III,
	and LCC International, Inc. dated December 22, 1999
	(incorporated by reference to Exhibit 10.42 to Amendment
	No. 1 to the Companys Annual Report on Form 10-K
	filed on December 20, 2001).                                                                          
|        | 10.22 |  |  |                    |  | Contract of Employment dated April 30, 2001
	between LCC UK Ltd. and Carlo Baravalle.                                                                                                                                                                                                                                    
|        | 10.23 |  |  |                    |  | Letter dated January 11, 2001, from LCC
	International, Inc. to Susan Mayer (incorporated by reference to
	Exhibit 10.14 to the Companys Annual Report on Form
	10-K filed on April 2, 2001).                                                                                                                           
|        | 10.24 |  |  |                    |  | Letter dated June 19, 2001, from LCC
	International, Inc. to Susan Ness.                                                                                                                                                                                                                                                 
|        | 10.25 |  |  |                    |  | Letter Agreement dated August 22, 1996
	between LCC International, Inc. and Arno Penzias (incorporated
	by reference to Exhibit 10.49 to Amendment No. 2 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on September 20,
	1996).                                                

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##### 



|        |       |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ----- |  |  | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |  |                    
|Number  |       |  |  | Exhibit Description
|        |       |  |  |                    
|        | 10.26 |  |  |                    |  | Form of Indemnity Agreement between LCC International, Inc. and
	the current and former officers and directors of LCC
	International, Inc. (incorporated by reference to
	Exhibit 10.32 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                       
|        | 10.27 |  |  |                    |  | Intercompany Agreement dated as of August 27, 1996 among
	Telcom Ventures, L.L.C., LCC, L.L.C., LCC International, Inc.,
	Cherrywood Holdings, Inc., Rajendra Singh, Neera Singh, certain
	trusts for the benefit of members of the Singh family,
	Carlyle-LCC Investors I, L.P., Carlyle-LCC Investors II, L.P.,
	Carlyle-LCC Investors III, L.P., Carlyle-LCC IV (E), L.P.,
	MDLCC, L.L.C. and TC Group, L.L.C. (incorporated by reference to
	Exhibit 10.30 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).
|        | 10.28 |  |  |                    |  | Registration Rights Agreement dated July 25, 1996 among LCC
	International, Inc., RF Investors, L.L.C. and MCI
	Telecommunications Corporation (incorporated by reference to
	Exhibit 10.31 to Amendment No. 1 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                                                      
|        | 10.29 |  |  |                    |  | Overhead and Administrative Services Agreement dated
	August 27, 1996 between LCC International, Inc. and Telcom
	Ventures, L.L.C. (incorporated by reference to
	Exhibit 10.33 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                               
|        | 10.30 |  |  |                    |  | Agreement of Merger dated September 15, 1996 between LCC,
	L.L.C. and LCC International, Inc. (incorporated by reference to
	Exhibit 10.34 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                                                    
|        | 10.31 |  |  |                    |  | Form of Promissory Note by Telcom Ventures, L.L.C. to LCC
	International, Inc. (incorporated by reference to
	Exhibit 10.39 to Amendment No. 2 to the Companys
	Registration Statement on Form S-1, Registration
	No. 333-6067, filed on September 20, 1996).                                                                                                                                                                                                                                                                                                                                   
|        | 10.32 |  |  |                    |  | First Amendment to Promissory Note, dated December 1, 2001,
	by Telcom Ventures, L.L.C. to LCC International, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10.33 |  |  |                    |  | Amended and Restated Shareholders Rights Agreement dated
	February   , 1996 between NextWave Telecom Inc.
	and LCC, L.L.C. (incorporated by reference to Exhibit 10.16
	to Amendment No. 1 to the Companys Registration
	Statement on Form S-1, Registration No. 333-6067,
	filed on August 16, 1996).                                                                                                                                                                                                                                                                                         
|        | 10.34 |  |  |                    |  | Subscription Agreement dated March 12, 1996 between
	NextWave Telecom, Inc. and LCC, L.L.C. (incorporated by
	reference to Exhibit 10.19 to Amendment No. 1 to the
	Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                                                                                                         
|        | 10.35 |  |  |                    |  | Convertible Loan and Investment Agreement dated March 20,
	1996 by and between LCC, L.L.C. and DCR Communications, Inc.
	(incorporated by reference to Exhibit 10.21 to Amendment
	No. 1 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	August 16, 1996).                                                                                                                                                                                                                                                                                            
|        | 10.36 |  |  |                    |  | Agreement dated May 17, 1996, between LCC, L.L.C. and
	West*Park Associates Limited Partnership for office space at
	7925 Jones Branch Drive, McLean, Virginia, 22102 (incorporated
	by reference to Exhibit 10.23 to Amendment No. 1 to
	the Companys Registration Statement on Form S-1,
	Registration No. 333-6067, filed on August 16, 1996).                                                                                                                                                                                                                                               

67



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##### 



|        |        |  |  |                     |  |                                                                                                                                                                                                                                                                                                                                                    
|------- | ------ |  |  | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |  |  |                    
|Number  |        |  |  | Exhibit Description
|        |        |  |  |                    
|        | 10.37  |  |  |                    |  | Agreement dated May 17, 1996, between LCC,
	L.L.C. and West*Park Associates Limited Partnership for office
	space at 7927 Jones Branch Drive, McLean, Virginia, 22102
	(incorporated by reference to Exhibit 10.24 to Amendment
	No. 1 to the Companys Registration Statement on
	Form S-1, Registration No. 333-6067, filed on
	August 16, 1996).
|        | 10.38 |  |  |                    |  | Contract for Engineering and Construction of
	Terrestrial Repeater Network System between XM Satellite Radio
	Inc. and LCC International, Inc. dated August 18, 1999
	(incorporated by reference to Exhibit 10 to the
	Companys Quarterly Report on Form 10-Q filed on
	November 12, 1999).                                                       
|        | 10.39 |  |  |                    |  | Amendment No. 6 to the Terrestrial Repeater
	Network System Contract between XM Satellite Radio Inc. and LCC
	International, Inc. dated January 8, 2001 (incorporated by
	reference to Exhibit 10.34 to the Companys Annual
	Report on Form 10-K filed on April 2, 2001).                                                                         
|        | 10.40  |  |  |                    |  | Ericsson Radio Systems AB Asset Purchase
	Agreement dated August 25, 1999 (incorporated by reference
	to Exhibit 2.1 to the Companys Current Report on Form
	8-K filed on November 8, 1999).                                                                                                                                                      
|        | 10.41  |  |  |                    |  | Letter, dated October 22, 1999, among LCC
	International, Inc., LCC Europe AS and Ericsson Radio Systems AB
	(incorporated by reference to Exhibit 2.2 to the
	Companys Current Report on Form 8-K filed on
	November 8, 1999).                                                                                                                   
|        | 10.42  |  |  |                    |  | Master Antenna Site Lease between Pinnacle Towers
	Inc. and Microcell Management, Inc. dated February 24, 2000
	(incorporated by reference to Exhibit 2.3 to the
	Companys Current Report on Form 8-K filed on
	March 20, 2000).                                                                                                                  
|        | 10.43  |  |  |                    |  | Settlement and Release between LCC International,
	Inc. and minority shareholders of Microcell Management Inc.
	dated February 15, 2000 (incorporated by reference to
	Exhibit 10.40 to Amendment No. 1 to the Companys
	Annual Report on Form 10-K filed on December 20, 2001).                                                                  
|        | 21     |  |  |                    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                       
|        | 23.1   |  |  |                    |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                               






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

68