##### Table of Contents






United States Securities and Exchange
Commission

Washington, DC 20549




---

Form 10-Q

(Mark One)

|     |  |                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[X]  |  | Quarterly report pursuant to Section 13
    or 15(d) of the Securities
    Exchange Act of 1934
    For the quarterly period ended June 30, 2003                    
|     |  | or                                                                                                                                                                  
|[  ] |  | Transition Report Pursuant to Section 13
    or 15(d) of the Securities
    Exchange Act of 1934
    For the transition period
    from             to             .

Commission File Number: 0-21213


LCC International, Inc.

(Exact name of registrant as specified in its
charter)




---

|                                                                   |  |                                        
|------------------------------------------------------------------ |  | ---------------------------------------
|Delaware                                                           |  | 54-1807038                             
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer Identification Number)
|                                                                  
|7925 Jones Branch Drive, McLean, VA                                |  | 22102                                  
|(Address of Principal Executive Offices)                           |  | (Zip Code)                             

Registrants telephone number, including
area code: (703) 873-2000

Not Applicable




(Former name, former address and former fiscal
year, if changed, since last report.)

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 whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act). Yes           No X

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan
confirmed by a
court. Yes           No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date.

As of August 1, 2003 the registrant had
outstanding 14,658,545 shares of Class A Common Stock, par value
$0.01 per share (the Class A Common Stock) and
6,316,374 shares of Class B Common Stock, par value $0.01
per share (the Class B Common Stock).









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TABLE OF CONTENTS



|                                    |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION      
|                                    | Item 1: Financial Statements                                                                 
|                                    |                                                                                               | Condensed Consolidated Statements of Operations     
|                                    |                                                                                               | Condensed Consolidated Balance Sheets               
|                                    |                                                                                               | Condensed Consolidated Statements of Cash Flows     
|                                    |                                                                                               | Notes to Condensed Consolidated Financial Statements
|                                    | Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                    | Item 3: Quantitative and Qualitative Disclosures about Market Risk                           
|                                    | Item 4: Controls and Procedures                                                              
|PART II: OTHER INFORMATION         
|                                    | Item 1: Legal Proceedings                                                                    
|                                    | Item 2: Changes in Securities                                                                
|                                    | Item 3: Defaults Upon Senior Securities                                                      
|                                    | Item 4: Submission of Matters to a Vote of Security Holders                                  
|                                    | Item 5: Other Information                                                                    
|                                    | Item 6: Exhibits and Reports on Form 8-K                                                     
|Signature                          
|Calculation of Net Income Per Share
|Certifications                     
|Certifications                     
|Certifications                     
|Certifications                     



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##### Table of Contents



LCC International, Inc. and
Subsidiaries

Quarterly Report on Form 10-Q

For the quarter ended June 30,
2003


INDEX

|         |  |                                                                                                                          |  |        |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ------ | -- | 
|         |  |                                                                                                                          |  | Page  
|         |  |                                                                                                                          |  | Number
|         |  |                                                                                                                          |  |       
|PART I:  |  | FINANCIAL INFORMATION                                                                                                    |  |        |    | 
|ITEM 1:  |  | FINANCIAL STATEMENTS                                                                                                     |  |        |    | 
|         |  | Condensed consolidated statements of operations
    for the three months and six months ended June 30, 2002 and
    2003 |  |        | 3  | 
|         |  | Condensed consolidated balance sheets as of
    December 31, 2002 and June 30, 2003                                      |  |        | 4  | 
|         |  | Condensed consolidated statements of cash flows
    for the six months ended June 30, 2002 and 2003                      |  |        | 5  | 
|         |  | Notes to condensed consolidated financial
    statements                                                                 |  |        | 6  | 
|ITEM 2:  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                |  |        | 11 | 
|ITEM 3:  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                                                           |  |        | 19 | 
|ITEM 4:  |  | CONTROLS AND PROCEDURES                                                                                                  |  |        | 20 | 
|        
|PART II: |  | OTHER INFORMATION                                                                                                        |  |        |    | 
|ITEM 1:  |  | Legal Proceedings                                                                                                        |  |        | 22 | 
|ITEM 2:  |  | Changes in Securities                                                                                                    |  |        | 22 | 
|ITEM 3:  |  | Defaults Upon Senior Securities                                                                                          |  |        | 22 | 
|ITEM 4:  |  | Submission of Matters to a Vote of Security
    Holders                                                                  |  |        | 22 | 
|ITEM 5:  |  | Other Information                                                                                                        |  |        | 23 | 
|ITEM 6:  |  | Exhibits and Reports on Form 8-K                                                                                         |  |        | 23 | 

2



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##### Table of Contents






PART I: FINANCIAL INFORMATION




Item 1: Financial Statements

LCC International, Inc. and
Subsidiaries






Condensed Consolidated Statements of
Operations


(In thousands, except per share
data)


(Unaudited)


|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |        |  
|-------------------------------------------------- | ----------------------------------------------------------- | ------------------ | ------- | ---------------- | - | ---- | ------ | ------ | - | - | ------- | ------ | - | - | ------ | ------ | -
|                                                   |                                                             |                    |         |                 
|                                                   |                                                             | Three Months Ended |         | Six Months Ended
|                                                   |                                                             | June 30,           |         | June 30,        
|                                                   |                                                             |                    |         |                 
|                                                   |                                                             | 2002               |         | 2003             |   | 2002 |        | 2003  
|                                                   |                                                             |                    |         |                  |   |      |        |       
|REVENUES                                           |                                                             | $                  | 12,219  |                  |   | $    | 18,187 |        |   | $ | 29,617  |        |   | $ | 35,327 |       
|COST OF REVENUES                                   |                                                             |                    | 10,724  |                  |   |      | 14,860 |        |   |   | 26,994  |        |   |   | 29,459 |       
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|GROSS PROFIT                                       |                                                             |                    | 1,495   |                  |   |      | 3,327  |        |   |   | 2,623   |        |   |   | 5,868  |       
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|OPERATING (INCOME) EXPENSE:                        |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   | Sales and marketing                                         |                    |         | 1,951            |   |      |        | 1,481  |   |   |         | 4,246  |   |   |        | 3,437  |  
|                                                   | General and administrative                                  |                    |         | 2,084            |   |      |        | 4,731  |   |   |         | 7,189  |   |   |        | 9,469  |  
|                                                   | Restructuring charge                                        |                    |         | 10,030           |   |      |        |       |   |   |         | 10,030 |   |   |        | (152   | )
|                                                   | Gain on sale of tower portfolio and
    administration, net |                    |         | (2,000           | ) |      |        |       |   |   |         | (2,000 | ) |   |        |       |  
|                                                   | Depreciation and amortization                               |                    |         | 756              |   |      |        | 810    |   |   |         | 1,447  |   |   |        | 1,606  |  
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   |                                                             |                    | 12,821  |                  |   |      | 7,022  |        |   |   | 20,912  |        |   |   | 14,360 |       
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|OPERATING LOSS                                     |                                                             |                    | (11,326 | )                |   |      | (3,695 | )      |   |   | (18,289 | )      |   |   | (8,492 | )     
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|OTHER INCOME (EXPENSE):                            |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   | Interest income                                             |                    |         | 208              |   |      |        | 101    |   |   |         | 510    |   |   |        | 197    |  
|                                                   | Other                                                       |                    |         | (5,201           | ) |      |        | 79     |   |   |         | (5,199 | ) |   |        | 1,320  |  
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   |                                                             |                    | (4,993  | )                |   |      | 180    |        |   |   | (4,689  | )      |   |   | 1,517  |       
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|LOSS FROM OPERATIONS BEFORE INCOME TAXES           |                                                             |                    | (16,319 | )                |   |      | (3,515 | )      |   |   | (22,978 | )      |   |   | (6,975 | )     
|PROVISION (BENEFIT) FOR INCOME TAXES               |                                                             |                    | (5,075  | )                |   |      | 460    |        |   |   | (6,673  | )      |   |   | (838   | )     
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|NET LOSS                                           |                                                             | $                  | (11,244 | )                |   | $    | (3,975 | )      |   | $ | (16,305 | )      |   | $ | (6,137 | )     
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|NET LOSS PER SHARE:                                |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   | Basic                                                       |                    | $       | (0.54            | ) |      | $      | (0.19  | ) |   | $       | (0.79  | ) |   | $      | (0.29  | )
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   | Diluted                                                     |                    | $       | (0.54            | ) |      | $      | (0.19  | ) |   | $       | (0.79  | ) |   | $      | (0.29  | )
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|WEIGHTED AVERAGE SHARES USED IN CALCULATION OF NET |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   | LOSS PER SHARE:                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |        |  
|                                                   | Basic                                                       |                    |         | 20,731           |   |      |        | 20,969 |   |   |         | 20,728 |   |   |        | 20,964 |  
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       
|                                                   | Diluted                                                     |                    |         | 20,731           |   |      |        | 20,969 |   |   |         | 20,728 |   |   |        | 20,964 |  
|                                                   |                                                             |                    |         |                  |   |      |        |        |   |   |         |        |   |   |        |       

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



LCC International, Inc. and
Subsidiaries






Condensed Consolidated Balance
Sheets


(In thousands, except per share
data)


|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |        |        | 
|----------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------- | ----------- | ------ | - | ------- | ------ | ------ | 
|                                                                                    |                                                                                                                                        | December 31,                            |         | June 30,   
|                                                                                    |                                                                                                                                        | 2002                                    |         | 2003       
|                                                                                    |                                                                                                                                        |                                         |         |            
|                                                                                    |                                                                                                                                        | (Audited)                               |         | (Unaudited)
|ASSETS:                                                                             |                                                                                                                                        |                                         |         |             |        |   |         |       
|Current assets:                                                                     |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    | Cash and cash equivalents                                                                                                              |                                         | $       | 37,507      |        |   | $       | 25,874 |       
|                                                                                    | Restricted cash                                                                                                                        |                                         |         | 1,308       |        |   |         | 1,537  |       
|                                                                                    | Short-term investments                                                                                                                 |                                         |         | 514         |        |   |         | 532    |       
|                                                                                    | Receivables, net of allowance for doubtful
    accounts of $3,122 and $2,163 at December 31, 2002 and
    June 30, 2003, respectively: |                                         |         |             |        |   |         |        |       
|                                                                                    |                                                                                                                                        | Trade accounts receivable               |         |             | 13,165 |   |         |        | 14,639 | 
|                                                                                    |                                                                                                                                        | Unbilled receivables                    |         |             | 12,369 |   |         |        | 15,006 | 
|                                                                                    |                                                                                                                                        | Due from related parties and affiliates |         |             | 61     |   |         |        | 46     | 
|                                                                                    | Deferred income taxes, net                                                                                                             |                                         |         | 3,932       |        |   |         | 2,922  |       
|                                                                                    | Prepaid expenses and other current assets                                                                                              |                                         |         | 1,835       |        |   |         | 2,072  |       
|                                                                                    | Prepaid tax receivable and prepaid taxes                                                                                               |                                         |         | 8,285       |        |   |         | 8,434  |       
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total current assets                    |         |             | 78,976 |   |         |        | 71,062 | 
|Property and equipment, net                                                         |                                                                                                                                        |                                         | 5,010   |             |        |   | 4,325   |       
|Deferred income taxes, net                                                          |                                                                                                                                        |                                         | 504     |             |        |   | 2,009   |       
|Goodwill and other intangibles                                                      |                                                                                                                                        |                                         | 11,273  |             |        |   | 12,031  |       
|Other assets                                                                        |                                                                                                                                        |                                         | 960     |             |        |   | 1,144   |       
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | $                                       | 96,723  |             |        | $ | 90,571  |       
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|LIABILITIES AND SHAREHOLDERS
    EQUITY:                                           |                                                                                                                                        |                                         |         |             |        |   |         |       
|Current liabilities:                                                                |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    | Line of credit                                                                                                                         |                                         | $       |            |        |   | $       | 1,993  |       
|                                                                                    | Accounts payable                                                                                                                       |                                         |         | 7,316       |        |   |         | 7,700  |       
|                                                                                    | Accrued expenses                                                                                                                       |                                         |         | 10,543      |        |   |         | 7,642  |       
|                                                                                    | Accrued employee compensation and benefits                                                                                             |                                         |         | 6,272       |        |   |         | 6,389  |       
|                                                                                    | Deferred revenue                                                                                                                       |                                         |         | 41          |        |   |         | 771    |       
|                                                                                    | Income taxes payable                                                                                                                   |                                         |         | 882         |        |   |         | 926    |       
|                                                                                    | Accrued restructuring current                                                                                                          |                                         |         | 3,937       |        |   |         | 4,673  |       
|                                                                                    | Other current liabilities                                                                                                              |                                         |         | 26          |        |   |         | 349    |       
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total current liabilities               |         |             | 29,017 |   |         |        | 30,443 | 
|                                                                                    | Accrued restructuring                                                                                                                  |                                         |         | 5,786       |        |   |         | 3,407  |       
|                                                                                    | Other liabilities                                                                                                                      |                                         |         | 832         |        |   |         | 631    |       
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total liabilities                       |         |             | 35,635 |   |         |        | 34,481 | 
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|Shareholders equity:                                                               |                                                                                                                                        |                                         |         |             |        |   |         |       
|Preferred stock:                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    | 10,000 shares authorized; 0 shares issued and
    outstanding                                                                          |                                         |         |            |        |   |         |       |       
|Class A common stock, $0.01 par value:                                              |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    | 70,000 shares authorized; 14,632 and 14,656
    shares issued and outstanding at December 31, 2002 and June
    30, 2003, respectively |                                         |         | 146         |        |   |         | 147    |       
|Class B common stock, $0.01 par value:                                              |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    | 20,000 shares authorized; 6,319 and 6,316 shares
    issued and outstanding at December 31, 2002 and
    June 30, 2003, respectively   |                                         |         | 63          |        |   |         | 63     |       
|Paid-in capital                                                                     |                                                                                                                                        |                                         | 94,132  |             |        |   | 94,169  |       
|Accumulated deficit                                                                 |                                                                                                                                        |                                         | (30,079 | )           |        |   | (36,216 | )     
|Note receivable from shareholder                                                    |                                                                                                                                        |                                         | (1,625  | )           |        |   | (1,625  | )     
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    | Subtotal                                                                                                                               |                                         |         | 62,637      |        |   |         | 56,538 |       
|Accumulated other comprehensive loss 
    foreign currency translation adjustments |                                                                                                                                        |                                         | (1,549  | )           |        |   | (448    | )     
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | Total shareholders equity              |         |             | 61,088 |   |         |        | 56,090 | 
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       
|                                                                                    |                                                                                                                                        | $                                       | 96,723  |             |        | $ | 90,571  |       
|                                                                                    |                                                                                                                                        |                                         |         |             |        |   |         |       

See accompanying notes to condensed consolidated
financial statements.

4



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##### Table of Contents



LCC International, Inc. and
Subsidiaries






Condensed Consolidated Statements of Cash
Flows


(In thousands)


(Unaudited)


|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |        |   |        |        |  
|-------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------- | -------------------------------------------- | ---------------------------------------- | - | ------ | ------- | ------ | - | ------ | ------ | -
|                                                   |                                                                                 |                                  
|                                                   |                                                                                 | Six Months Ended                 
|                                                   |                                                                                 | June 30,                         
|                                                   |                                                                                 |                                  
|                                                   |                                                                                 | 2002                              |                                              | 2003                                    
|                                                   |                                                                                 |                                   |                                              |                                         
|Cash flows from operating activities:              |                                                                                 |                                   |                                              |                                          |   |        |         |       
|                                                   | Net loss                                                                        |                                   | $                                            | (16,305                                  | ) |        | $       | (6,137 | )
|                                                   | Adjustments to reconcile net loss to net cash
    used in operating activities: |                                   |                                              |                                          |   |        |         |        |  
|                                                   |                                                                                 |                                   | Depreciation and amortization                |                                          |   | 1,447  |         |        |   | 1,606  |       
|                                                   |                                                                                 |                                   | Provision (recovery) for doubtful accounts   |                                          |   | 632    |         |        |   | (1,257 | )     
|                                                   |                                                                                 |                                   | Impairment of assets                         |                                          |   | 5,139  |         |        |   |       |       
|                                                   |                                                                                 |                                   | Restructuring charge (recovery)              |                                          |   | 10,030 |         |        |   | (152   | )     
|                                                   |                                                                                 |                                   | Gain on sale of tower portfolio              |                                          |   | (2,000 | )       |        |   |       |       
|                                                   |                                                                                 |                                   | Changes in operating assets and liabilities: |                                          |   |        |         |        |   |        |       
|                                                   |                                                                                 |                                   |                                              | Trade, unbilled, and other receivables   |   |        | 14,150  |        |   |        | (3,057 | )
|                                                   |                                                                                 |                                   |                                              | Accounts payable and accrued expenses    |   |        | (7,747  | )      |   |        | (2,664 | )
|                                                   |                                                                                 |                                   |                                              | Other current assets and liabilities     |   |        | (7,076  | )      |   |        | (744   | )
|                                                   |                                                                                 |                                   |                                              | Other non-current assets and liabilities |   |        | (800    | )      |   |        | (294   | )
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Net cash used in operating activities              |                                                                                 |                                   | (2,530                                       | )                                        |   |        | (12,699 | )     
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Cash flows from investing activities:              |                                                                                 |                                   |                                              |                                          |   |        |         |       
|                                                   | Proceeds from sales of short-term investments                                   |                                   |                                              | (21                                      | ) |        |         | (17    | )
|                                                   | Purchases of property and equipment                                             |                                   |                                              | (753                                     | ) |        |         | (477   | )
|                                                   | Proceeds from disposals of property and equipment                               |                                   |                                              | 31                                       |   |        |         | 32     |  
|                                                   | Business acquisitions                                                           |                                   |                                              | (7,146                                   | ) |        |         | (273   | )
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Net cash used in investing activities              |                                                                                 |                                   | (7,889                                       | )                                        |   |        | (735    | )     
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Cash flows from financing activities:              |                                                                                 |                                   |                                              |                                          |   |        |         |       
|                                                   | Proceeds from issuance of common stock, net                                     |                                   |                                              | 14                                       |   |        |         | 37     |  
|                                                   | Proceeds from exercise of options                                               |                                   |                                              | 109                                      |   |        |         |       |  
|                                                   | Proceeds from line of credit                                                    |                                   |                                              |                                         |   |        |         | 2,787  |  
|                                                   | Repayment of line of credit                                                     |                                   |                                              |                                         |   |        |         | (794   | )
|                                                   | Increase in restricted cash                                                     |                                   |                                              |                                         |   |        |         | (229   | )
|                                                   | Repayment of loan to shareholder                                                |                                   |                                              | 700                                      |   |        |         |       |  
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Net cash provided by financing activities          |                                                                                 |                                   | 823                                          |                                          |   |        | 1,801   |       
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Net decrease in cash and cash equivalents          |                                                                                 |                                   | (9,596                                       | )                                        |   |        | (11,633 | )     
|Cash and cash equivalents at beginning of period   |                                                                                 |                                   | 52,658                                       |                                          |   |        | 37,507  |       
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Cash and cash equivalents at end of period         |                                                                                 | $                                 | 43,062                                       |                                          |   | $      | 25,874  |       
|                                                   |                                                                                 |                                   |                                              |                                          |   |        |         |       
|Supplemental disclosures of cash flow information: |                                                                                 |                                   |                                              |                                          |   |        |         |       
|                                                   |                                                                                 | Cash paid during the quarter for: |                                              |                                          |   |        |         |        |   |       
|                                                   |                                                                                 |                                   | Income taxes                                 |                                          | $ | 1,414  |         |        | $ | 224    |       
|                                                   |                                                                                 |                                   | Interest                                     |                                          |   |       |         |        |   | 30     |       

Supplemental disclosures of non-cash investing
and financing activities:

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

In May 2003, in satisfaction of the purchase
agreement between the Company and Westminster Capital, B.V.
(Westminster), the Company paid Westminster
approximately $0.3 million in cash and assigned a note to
Westminster in the amount of approximately $0.2 million. As
a result of the note assignment, goodwill and other intangible
assets increased, offset by an increase in due to related
parties, which is included in accounts payable on the condensed
consolidated balance sheet. (See note 8).

See accompanying notes to condensed consolidated
financial statements.

5



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LCC International, Inc. and
Subsidiaries






Notes to Condensed Consolidated Financial
Statements


(Unaudited)


Note
1:     Description of
Operations

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

Note 2:     Basis of
Presentation

The condensed consolidated financial statements
of the Company included herein have been prepared by the Company
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods.

Certain information and footnote disclosure
normally included in the consolidated financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or
omitted. The interim financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2002.
Operating results for the interim periods are not necessarily
indicative of results for an entire year.

Note 3:     Recent
Accounting Pronouncements

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities(FIN 46). FIN 46 gives further guidance to
Accounting Research Bulletin (ARB) No. 51,
Consolidated Financial Statements.ARB
No. 51 requires companies to consolidate their financial
statements when one company has a controlling financial
interest, which is usually having a majority of the voting
interest. FIN 46 further defines a controlling financial
interest where the majority voting interest requirement is not
met, a variable interest entity, and if the assets, liabilities
and results of activities of the variable interest entity should
be included in the consolidated statements of the company. FIN
46 is effective for all arrangements entered into after
January 31, 2003. As of June 30, 2003, the Company had
not entered into any such arrangements.

Note
4:     Equity-Based
Compensation

The Company accounts for equity-based
compensation arrangements in accordance with the provisions of
Accounting Principles Board (APB) No. 25 and
complies with the disclosure provisions of Financial Accounting
Standards Board (FASB) Statement of Financial
Accounting Standard (SFAS) No. 123, as amended
by FASB SFAS No. 148. All equity-based awards to
non-employees are accounted for at their fair value in
accordance with FASB SFAS No. 123. Under APB No. 25,
compensation expense is based upon the difference, if any, on
the date of grant, between the fair value of the Companys
stock and the exercise price.

6



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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 FASB SFAS No. 123, the
Companys net loss and net loss per share would have been
reported at the pro forma amounts indicated below.

|                   |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |        |       |  
|------------------ | ------------ | ------------------ | - | ---------------- | ----- | ---- | - | ------ | ----- | - | - | ------- | ----- | - | - | ------ | ----- | -
|                   |              |                    |   |                 
|                   |              | Three Months Ended |   | Six Months Ended
|                   |              | June 30,           |   | June 30,        
|                   |              |                    |   |                 
|                   |              | 2002               |   | 2003             |       | 2002 |   | 2003  
|                   |              |                    |   |                  |       |      |   |       
|Net loss:          |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |       
|                   | As reported  |                    | $ | (11,244          | )     |      | $ | (3,975 | )     |   | $ | (16,305 | )     |   | $ | (6,137 | )    
|                   | Pro forma    |                    | $ | (11,884          | )     |      | $ | (4,557 | )     |   | $ | (17,653 | )     |   | $ | (7,682 | )    
|Net loss per share |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |       
|                   | As reported: |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |        |      
|                   |              | Basic              |   | $                | (0.54 | )    |   | $      | (0.19 | ) |   | $       | (0.79 | ) |   | $      | (0.29 | )
|                   |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |       
|                   |              | Diluted            |   | $                | (0.54 | )    |   | $      | (0.19 | ) |   | $       | (0.79 | ) |   | $      | (0.29 | )
|                   |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |       
|                   | Pro forma:   |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |        |      
|                   |              | Basic              |   | $                | (0.57 | )    |   | $      | (0.22 | ) |   | $       | (0.85 | ) |   | $      | (0.37 | )
|                   |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |       
|                   |              | Diluted            |   | $                | (0.57 | )    |   | $      | (0.22 | ) |   | $       | (0.85 | ) |   | $      | (0.37 | )
|                   |              |                    |   |                  |       |      |   |        |       |   |   |         |       |   |   |       

Note
5:     Restructuring Charge

During the second quarter of 2002, the Company
adopted a restructuring plan and recorded a restructuring charge
of $10.0 million. During the fourth quarter of 2002, the
Company recorded an additional $3.5 million restructuring
charge relating to the costs of excess office space. The
restructuring plan was in response to the low utilization of
professional employees caused by the completion of several large
fixed-price contracts and the difficulty in obtaining new
contracts as a result of the slowdown in wireless
telecommunications infrastructure spending. The cost of the
severance and associated expenses was approximately
$1.0 million and resulted in a work force reduction of
approximately 140 people. In addition, the Company had excess
facility costs relative to the space occupied by the employees
affected by the reduction in force, space previously occupied by
divested operations, and reduced business use of office space
resulting from a continued trend for clients to provide
professional staff office space while performing their services.
The charge for the excess office space was approximately $12.5
million, which included $1.5 million in written-off
leasehold improvements and other assets related to the excess
space. The facility charge takes the existing lease obligation,
less the anticipated rental receipts to be received from
existing and potential subleases. This charge required
significant judgments about the length of time that space will
remain vacant, anticipated cost escalators and operating costs
associated with the leases, market rate of the subleased space,
and broker fees or other costs necessary to market the space.
During the first quarter of 2003, the Company reversed excess
severance payable of approximately $0.2 million.

7



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##### Table of Contents



A reconciliation of the restructuring activities
is as follows:

|                                                   |                                                         |                |       |            |   |       |        |        |   |   |        |        |  
|-------------------------------------------------- | ------------------------------------------------------- | -------------- | ----- | ---------- | - | ----- | ------ | ------ | - | - | ------ | ------ | -
|                                                   |                                                         | Severance      |       | Facilities |   | Total
|                                                   |                                                         |                |       |            |   |      
|                                                   |                                                         |               
|                                                   |                                                         | (in thousands)
|Restructuring charge                               |                                                         | $              | 1,030 |            |   | $     | 12,492 |        |   | $ | 13,522 |       
|Reclassification of deferred rent                  |                                                         |                |      |            |   |       | 639    |        |   |   | 639    |       
|                                                   |                                                         |                |       |            |   |       |        |        |   |   |        |       
|                                                   |                                                         |                | 1,030 |            |   |       | 13,131 |        |   |   | 14,161 |       
|Charges against the provision:                     |                                                         |                |       |            |   |       |        |        |   |   |        |       
|                                                   | Excess office space                                     |                |       |           |   |       |        | (2,152 | ) |   |        | (2,152 | )
|                                                   | Severance and associated costs paid                     |                |       | (878       | ) |       |        |       |   |   |        | (878   | )
|                                                   | Leasehold improvements and other assets
    written-off |                |       |           |   |       |        | (1,461 | ) |   |        | (1,461 | )
|                                                   | Other                                                   |                |       |           |   |       |        | 53     |   |   |        | 53     |  
|                                                   |                                                         |                |       |            |   |       |        |        |   |   |        |       
|Restructuring payable as of December 31,
    2002. |                                                         |                | 152   |            |   |       | 9,571  |        |   |   | 9,723  |       
|                                                   |                                                         |                |       |            |   |       |        |        |   |   |        |       
|Charges against the provision:                     |                                                         |                |       |            |   |       |        |        |   |   |        |       
|                                                   | Excess office space                                     |                |       |           |   |       |        | (1,491 | ) |   |        | (1,491 | )
|                                                   | Reversal of excess severance                            |                |       | (152       | ) |       |        |       |   |   |        | (152   | )
|                                                   |                                                         |                |       |            |   |       |        |        |   |   |        |       
|Restructuring payable as of June 30, 2003.         |                                                         | $              |      |            |   | $     | 8,080  |        |   | $ | 8,080  |       
|                                                   |                                                         |                |       |            |   |       |        |        |   |   |        |       

The restructuring payable was classified as
follows:

|                              |  |              |       |          |  |   |       | 
|----------------------------- |  | ------------ | ----- | -------- |  | - | ----- | 
|                              |  | December 31, |       | June 30,
|                              |  | 2002         |       | 2003    
|                              |  |              |       |         
|Accrued restructuring current |  | $            | 3,937 |          |  | $ | 4,673 | 
|Accrued restructuring         |  |              | 5,786 |          |  |   | 3,407 | 
|                              |  |              |       |          |  |   |       | 
|Accrued restructuring total   |  | $            | 9,723 |          |  | $ | 8,080 | 
|                              |  |              |       |          |  |   |       | 

Note 6:     Other
Comprehensive Income (Loss)

Comprehensive income (loss) is defined as
net income (loss) plus the change in equity of a business
enterprise during a period from transactions and other events
and circumstances from non-owner sources. Other comprehensive
income (loss) refers to revenues, expenses, gains and
losses that under accounting principles generally accepted in
the United States of America are included in comprehensive
income (loss), but excluded from net income (loss). Other
comprehensive income (loss) consists solely of foreign
currency translation adjustments at June 30, 2002 and 2003.
Comprehensive income (loss) for the three and six months ended
June 30 2002 and 2003 is as follows (in thousands).

|                                                                         |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |        |  
|------------------------------------------------------------------------ |  | ------------------ | ------- | ---------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                         |  |                    |         |                 
|                                                                         |  | Three Months Ended |         | Six Months Ended
|                                                                         |  | June 30,           |         | June 30,        
|                                                                         |  |                    |         |                 
|                                                                         |  | 2002               |         | 2003             |  | 2002 |        | 2003
|                                                                         |  |                    |         |                  |  |      |        |     
|Net loss                                                                 |  | $                  | (11,244 | )                |  | $    | (3,975 | )    |  | $ | (16,305 | ) |  | $ | (6,137 | )
|                                                                         |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |        |  
|Other comprehensive income (loss), before tax                            |  |                    | 1,204   |                  |  |      | 1,870  |      |  |   | 1,101   |   |  |   | 1,251  |  
|Income tax provision related to items of
    comprehensive income (loss) |  |                    | 344     |                  |  |      | 382    |      |  |   | 319     |   |  |   | 150    |  
|                                                                         |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |        |  
|Other comprehensive income (loss), net of tax                            |  |                    | 860     |                  |  |      | 1,488  |      |  |   | 782     |   |  |   | 1,101  |  
|                                                                         |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |        |  
|Comprehensive loss                                                       |  | $                  | (10,384 | )                |  | $    | (2,486 | )    |  | $ | (15,523 | ) |  | $ | (5,036 | )
|                                                                         |  |                    |         |                  |  |      |        |      |  |   |         |   |  |   |        |  

Note 7:     Related
Party Transactions

RF Investors, a subsidiary of Telcom Ventures,
indirectly owns the Class B Common Stock shares
outstanding, which have ten-to-one voting rights over the
Class A Common Stock shares and therefore represent
approximately 81.0% voting control.

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During 2002 and the first half of 2003, the
Company continued to make certain payments on behalf of Telcom
Ventures consisting primarily of fringe and payroll-related
costs of $155,000 and $43,000, respectively and received
reimbursements of $464,000 in 2002 and $24,000 during the first
half of 2003. At December 31, 2002 and June 30, 2003,
outstanding amounts associated with these payments, totaling
$9,000 and $19,000, respectively, are included in due from
related parties and affiliates within the accompanying condensed
balance sheets. During 2002, the Company also provided an
allowance of $100,000 for amounts in dispute. In April 2003, the
Company received $100,000 to resolve the dispute in its entirety.

In September 1996, the Company lent
$3.5 million to Telcom Ventures to assist in the payment of
taxes due in connection with the assumption by the Company of
$30.0 million of convertible subordinated debt from Telcom
Ventures. The original note was payable over five years with
equal annual principal payments over the term. Interest accrued
at the rate of LIBOR, plus 1.75%. The Company received the final
payment of principal and accrued interest of approximately
$700,000 during the first quarter of 2002 in satisfaction of the
note.

In July 2002, the Company acquired
51 percent of the outstanding shares of Detron LCC Network
Services B.V. (Detron), a newly formed corporation
in the Netherlands. The Company acquired the shares from
Westminster B.V. (Westminster), which transferred
the shares to Detron Corporation B.V. in January 2003. Detron
has certain ongoing transactions with Detron Corporation B.V.
Under a five-year lease agreement for office space, Detron
recorded approximately $28,000 and $50,000 of rent expense for
the three and six months ended June 30, 2003. Detron
seconded various idle employees to Detron Telematics, Detron
Corporations wholly owned subsidiary and recorded revenue
of approximately $181,000 and $284,000 respectively, for the
three and six months ended June 30, 2003.

Advances to employees aggregating approximately
$33,000 and $11,000 at December 31, 2002 and June 30,
2003, respectively are included in due from related parties and
affiliates on the accompanying condensed balance sheets.

Note
8:     Commitments and
Contingencies

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

In connection with the acquisition of
51 percent of Detron in July 2002, the purchase agreement
provided for the payment of an additional $0.5 million
should Detron achieve certain objectives by the end of the
calendar year as confirmed by its adopted accounts. Having
determined that these objectives were achieved, the Company and
the sellers, Westminster, agreed upon the payment of the second
purchase price by way of (a) assignment of a note to the
sellers in the amount of approximately $0.2 million and
(b) the payment in cash of approximately $0.3 million.
The payment in cash to Westminster was made in May in accordance
with the deed of assignment agreement.

Note 9:     Line of
Credit

During the second quarter of 2003, Detron
established a line of credit with NMB-Heller N.V.
(NMB). The line of credit provides that NMB will
provide credit to Detron in the form of advance payments
collateralized by Detrons outstanding receivables. The
agreement provides for NMB to advance up to 75% of the
receivable balance. There is no maximum on the amount of
receivables Detron can assign to NMB. Detron must repay the
advances from NMB within 90 days or upon customer payment
whichever occurs first. Interest on the advance payments will be
calculated at a rate equal to NMBs overdraft base rate
plus 2% subject to a minimum of 5.75% per year. The agreement
has an initial term of two years and can be extended. During the
second quarter, Detron received $2.8 million in proceeds
from the line of credit and repaid $0.8 million. As of
June 30, 2003, Detron had $2.0 million outstanding to
NMB.

9



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##### Table of Contents



Note
10:     Subsequent Events

On August 4, 2003 the Company, through its
wholly owned subsidiary LCC China Services, L.L.C., closed an
investment in a newly created entity based in China, Beijing LCC
Bright Oceans Communication Consulting Co. Ltd (LCC/
BOCO). The Company will contribute approximately
$1,067,000 for a 49% share of LCC/ BOCOs registered
capital. Bright Oceans Inter-Telecom Corporation, a Chinese
publicly traded network management and systems integrator
(BOCO) will contribute approximately $1,108,000 to
hold the remaining 51% of LCC/ BOCOs registered capital.
The Companys capital contribution is paid in three equal
installments of approximately $355,000 each and the first
installment was made on the date of closing. The second and
third installments will be made on the date three months from
the date of closing and six months from the date of closing,
respectively. LCC/ BOCO offers design, deployment and
maintenance services to wireless carriers in China.

10



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2: | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

LCC International, Inc. and
Subsidiaries

For the Three and Six Months Ended
June 30, 2002 and 2003

This quarterly report on Form 10-Q contains
forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1934. The
Managements Discussion and Analysis of Financial Condition
and Results of Operations includes, without limitation,
forward-looking statements regarding the Companys ability
to pursue and secure new business opportunities. A more complete
discussion of business risks is included in the Companys
Annual Report on Form 10-K for the year ended
December 31, 2002.

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
350 customers in over 50 countries.

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

The Company operates in a highly competitive
environment subject to rapid technological change and emergence
of new technologies. Historically, the key drivers of changes in
the Companys wireless services business have been (1) the
issuance of new or additional licenses to wireless operators;
(2) the introduction of new services or technologies;
(3) increases in the number of subscribers served by
wireless operators; (4) the increasing complexity of
wireless systems in operation and (5) changes in wireless
infrastructure spending and deployment.

The Companys primary sources of revenues
are from engineering design and system deployment services.
Revenues from services are derived both from fixed price and
time and materials contracts. The Company recognizes revenues
from fixed price service contracts using the
percentage-of-completion method. 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.

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 caused some of the
Companys customers or

11



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##### Table of Contents



potential customers to slow, postpone or reduce
the scope of the deployment of new wireless networks or
expansion of existing networks, which has reduced the demand for
the Companys services.


The completion of the XM Satellite contract in
the first quarter of 2002, coupled with the industry slowdown,
has caused revenue to decline dramatically since 2001.
Additionally, the need to replace revenue derived from the XM
Satellite contract and the difficult marketplace has caused
gross profit as a percentage of total revenues to decline. Cost
reduction measures taken by the Company are not sufficient to
return the Company to profitability without additional growth in
revenue.

Europe is a promising area for revenue growth for
the Company. This optimism is caused by the need of the European
carriers to meet network-building obligations associated with
their 3G licenses, which represent a significant investment on
their part. With the recent availability of 3G equipment in
Europe, the Company expects that demand for the types of
services provided by the Company will increase. Revenue from 3G
networks constituted 17.0% and 31.7% of the Companys
revenues for the quarter ended June 30, 2002 and 2003,
respectively, and it is expected to continue to be an area of
business growth in the future. In anticipation of this growth,
and in order to complement its European Radio Frequency
Engineering capacity with local deployment capability necessary
to provide end-to-end services in key European markets, the
Company acquired additional deployment capability in Europe. In
December 2001, the Company acquired LCC Italia (formerly known
as Transmast), a wireless infrastructure, deployment, civil
engineering and project management firm located in Milan, Italy.
In January 2002, the Company acquired the assets of Smith
Woolley Telecom, a telecommunications consultancy company that
specializes in the provision of search, acquisition, design,
build, and management and maintenance services to the wireless
industry in the United Kingdom. In July 2002, the Company
acquired 51% of Detron LCC Network Services B.V., a newly formed
company specializing in the provision of deployment, management
and maintenance services to the wireless industry in the
Netherlands. The Company also anticipates that its reliance upon
fixed price contracts will continue to grow in connection with
these acquisitions. These international operations provide more
support for network deployment and construction management,
where use of fixed price contracts is more typical. These
contracts typically contain payment terms that are less
favorable, and consequently require greater working capital than
has historically been required by the Company, which is
reflected as an increase in days sales outstanding.
Additionally, the work may provide lower gross profit margins
than engineering design services.

In addition, the Companys North America
operations also have the chance to benefit from some increased
spending by certain U.S. wireless carriers. Despite 2003 capital
expenditure estimates for U.S. wireless carriers being lower
than those reported for 2002, the Company has observed an
increase in spending in the areas of network design, deployment
and optimization by several carriers. This increased spending
can be attributed to several trends: (1) preparation for number
portability scheduled to be implemented by November 24,
2003, (2) license swaps as a result of carriers trying to
maximize spectrum utilization and increase coverage,
(3) enhanced network quality programs to reduce churn,
(4) network expansion and capacity programs geared toward
enabling new and enhanced services and (5) other
miscellaneous network upgrades and enhancements required for
market share maintenance and competitive reasons. Due to the
strengthening of its sales initiatives, the Company has been
successful in winning several major contracts awarded by
carriers to specifically address these trends. For example,
during the first half of 2003, the Company entered into
agreements with Sprint Spectrum L.P. (Sprint) and US
Cellular Corporation (USCC) to perform turnkey
design and deployment services. In the case of Sprint, the
Company will perform RF engineering and turnkey deployment
services with an estimated contract value of approximately
$70.0 million. In the case of USCC, the Company will
perform turnkey design and deployment services with an estimated
contract value of approximately $40.0 million. The
Companys ability to offer a full turnkey solution has been
important in winning these awards. A mix of project management,
engineering design and optimization, network deployment,
construction and construction management services, characterizes
these turnkey contracts. These types of contracts are frequently
awarded on a fixed price basis and tend to generate lower gross
profit margins than stand alone engineering design or network
deployment services. The Company anticipates further growth in
this area of business, resulting in an increased reliance upon
fixed price turnkey contracts coupled with some degradation in
its gross margins.

12



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##### Table of Contents



Results of Operations

The following table and discussion provide
information which management believes is relevant to an
assessment and understanding of the Companys consolidated
results of operations and financial condition. The discussion
should be read in conjunction with the condensed consolidated
financial statements and accompanying notes thereto included
elsewhere herein.

|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |      |      | 
|---------------------------------------- | -------------------------------------------- | -------------------------------- | ------ | ---------- | ----- | ---- | ----- | ---- | ---- |  | ----- | ----- | ----- | - | ----- | ---- | ---- | 
|                                         |                                              |                                 
|                                         |                                              | Percentage of Revenues          
|                                         |                                              |                                 
|                                         |                                              |                                  |        |           
|                                         |                                              | Three Months                     |        | Six Months
|                                         |                                              | Ended                            |        | Ended     
|                                         |                                              | June 30,                         |        | June 30,  
|                                         |                                              |                                  |        |           
|                                         |                                              | 2002                             |        | 2003       |       | 2002 |       | 2003
|                                         |                                              |                                  |        |            |       |      |       |     
|Revenues                                 |                                              |                                  | 100.0  | %          |       |      | 100.0 | %    |      |  | 100.0 | %     |       |   | 100.0 | %   
|Cost of revenues                         |                                              |                                  | 87.8   |            |       |      | 81.7  |      |      |  | 91.1  |       |       |   | 83.4  |     
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Gross profit                             |                                              |                                  | 12.2   |            |       |      | 18.3  |      |      |  | 8.9   |       |       |   | 16.6  |     
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Operating (income) expense:              |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|                                         | Sales and marketing                          |                                  |        | 16.0       |       |      |       | 8.1  |      |  |       | 14.3  |       |   |       | 9.7  |     
|                                         | General and administrative                   |                                  |        | 17.0       |       |      |       | 26.0 |      |  |       | 24.3  |       |   |       | 26.8 |     
|                                         | Restructuring charge                         |                                  |        | 82.1       |       |      |       | 0.0  |      |  |       | 33.9  |       |   |       | (0.4 | )   
|                                         | Tower portfolio sale and administration, net |                                  |        | (16.4      | )     |      |       | 0.0  |      |  |       | (6.8  | )     |   |       | 0.0  |     
|                                         | Depreciation and amortization                |                                  |        | 6.2        |       |      |       | 4.5  |      |  |       | 4.9   |       |   |       | 4.5  |     
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|                                         |                                              | Total operating (income) expense |        |            | 104.9 |      |       |      | 38.6 |  |       |       | 70.6  |   |       |      | 40.6 | 
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Operating loss                           |                                              |                                  | (92.7  | )          |       |      | (20.3 | )    |      |  | (61.7 | )     |       |   | (24.0 | )   
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Other income (expense):                  |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|                                         | Interest income                              |                                  |        | 1.7        |       |      |       | 0.6  |      |  |       | 1.7   |       |   |       | 0.6  |     
|                                         | Other                                        |                                  |        | (42.6      | )     |      |       | 0.4  |      |  |       | (17.6 | )     |   |       | 3.7  |     
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|                                         |                                              | Total other income (expense)     |        |            | (40.9 | )    |       |      | 1.0  |  |       |       | (15.9 | ) |       |      | 4.3  | 
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Loss from operations before income taxes |                                              |                                  | (133.6 | )          |       |      | (19.3 | )    |      |  | (77.6 | )     |       |   | (19.7 | )   
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Provision (benefit) for income taxes     |                                              |                                  | (41.5  | )          |       |      | 2.5   |      |      |  | (22.5 | )     |       |   | (2.4  | )   
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     
|Net loss                                 |                                              |                                  | (92.1  | )%         |       |      | (21.8 | )%   |      |  | (55.1 | )%    |       |   | (17.3 | )%  
|                                         |                                              |                                  |        |            |       |      |       |      |      |  |       |       |       |   |       |     

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Three Months Ended June 30,
2003

Compared to


Three Months Ended June 30,
2002


Revenues.Revenues
for the three months ended June 30, 2003 were $18.2 million
compared to $12.2 million for the prior year, an increase
of $6.0 million or 49.2%. The EMEA and Americas regions
increased $5.2 million and $0.8 million, respectively, over
the same period last year. The EMEA regions increase was
primarily due to continued growth of LCC Italia and Detron, and
to increased activity in Algeria. The Americas region increase
in revenues of $0.8 million was primarily attributable to growth
in North America.

Cost of Revenues.Cost of revenues for the three months
ended June 30, 2003 was $14.9 million compared to
$10.7 million for the prior year, an increase of
$4.2 million. Consistent with the explanation for the
changes in revenue above, the increase of $4.2 million
comprised a net increase in cost in the EMEA and the Americas
regions of $4.1 million and $0.2 million, respectively
and a decrease in cost in the Asia Pacific region of
$0.1 million. The increase in cost of revenues in the EMEA
region primarily represents an increase in cost for LCC Italia,
Detron and Algeria of $4.8 million. In addition, costs
increased over the prior year by $0.4 million reflecting
the reversal in the prior year of employee benefit related
accruals. The increase in cost of revenues in the Americas
region was primarily attributable to growth in North America.

Gross Profit.Gross
profit for the three months ended June 30, 2003 was
$3.3 million compared to $1.5 million for the prior
year, an increase of $1.8 million. As a percentage of revenues,
gross profit was 18.3% in 2003 compared to 12.2% in 2002, an
increase of 6.1%. This increase of gross profit comprised
increases in the EMEA region of $1.1 million (3.7%), in the
Americas region of $0.6 million (1.6%) and in the Asia
Pacific region of $0.1 million (0.8%). The increase of
$1.1 million in the EMEA region is primarily composed of
$1.1 million (6.7%) related to LCC Italia and Detron,
$0.6 million (4.0%) related to Algeria and a
$0.4 million decrease (3.4%) related to the reversal of
employee benefit accruals in 2002. The increase in the Americas
is mostly due to growth in North America.

Sales and Marketing.Sales and marketing expenses were
$1.5 million for the three months ended June 30, 2003
compared to $2.0 million for the prior year, a decrease of
$0.5 million. Sales and marketing as a percentage of total
revenues was 8.1% and 16.0%, respectively for the three months
ended June 30, 2003 and 2002. The decrease in sales and
marketing expenses is largely attributable to cost savings
initiatives in the EMEA ($0.2 million) and Asia Pacific
regions ($0.2 million).

General and Administrative.General and administrative expenses
were $4.7 million for the three months ended June 30, 2003
compared to $2.1 million for the prior year, an increase of
$2.6 million. The Company recorded recoveries of previously
reserved receivables for customers of $0.5 million and $1.6
million during the three months ended June 30, 2003 and
2002, respectively. Excluding the recoveries, general and
administrative expenses for the three months ended June 30,
2003 would have been $5.2 million compared to $3.7 million
for the prior year. The increase of $1.5 million is
primarily due to continued growth of LCC Italia
($0.3 million), Detron ($0.4 million) and Algeria
($0.4 million).

Restructuring Charge.A restructuring charge of
$10.0 million was recorded for the three months ended
June 30, 2002 pursuant to a restructuring plan adopted by
the Company. The plan was formulated to respond to the low
utilization of professional employees caused by the completion
of several large fixed price contracts and the difficulty in
obtaining new contracts as a result of a slowdown in wireless
telecommunications infrastructure spending. The cost of the
severance and associated expenses were approximately
$1.0 million. Additionally, the Company had excess facility
costs relative to the space occupied by the employees affected
by the reduction in force and reduced business use of office
space resulting from a continued trend for clients to provide
professional staff office space while performing their services.
The charge for the excess office space was approximately
$9.0 million. The Company did not record any restructuring
charges during the three months ended June 30, 2003.

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

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Company agreed to lease unoccupied space on the
towers, effectively guaranteeing a minimum rent level of a fixed
amount on the towers sold. The gain from the tower portfolio
sale deferred an amount corresponding to this rent commitment,
until the space was leased to another tenant or otherwise
satisfied. The Company recognized the remainder
($2.0 million) of the deferred gain during the three months
ended June 30, 2002.


Depreciation and Amortization.Depreciation and amortization expense
was $0.8 million for both the three months ended
June 30, 2003 and 2002.

Other Income (Expense).Other income and expense for the three
months ended June 30, 2003 was a net income of
$0.2 million compared to a net expense of $5.0 million
for the three months ended June 30, 2002, an increase of
$5.2 million. The $5.0 million of other income
(expense) for the three months ended June 30, 2002
contained an impairment charge of $5.2 million related to
the investments the Company made in 2000 in Plan + Design
Netcare AG and Mobilocity.

Income Taxes.The
provision for income taxes was recorded for the three months
ended June 30, 2003 using an effective income tax rate of
13.1% compared to a benefit of 31.1% for the comparable period
in 2002. The rates utilized included cumulative adjustments of a
provision of $0.9 million and a benefit of
$0.3 million for three months ended June 30, 2003 and
2002, respectively, to reflect a change in the estimated
effective income tax rates for the year to 12.0% in 2003 and
29.0% in 2002. The estimated effective income tax rates differed
from the federal statutory tax rate of 35.0% due primarily to no
tax benefits being recognized for losses generated by the
Companys foreign subsidiaries and an increase in the
valuation allowance for foreign tax credits.

Net Loss.The net
loss was $4.0 million for the three months ended June 30,
2003 compared to a net loss of $11.2 million in the prior
year. The higher loss in 2002 reflected the restructuring charge
and the impairment charge for the investments. These charges
were offset by the recovery of the previously deferred amount
related to the tower sale. Both periods were affected by the
cumulative adjustments made to the estimated effective tax rates
for the year, as described above.

Six Months Ended June 30, 2003

Compared to


Six Months Ended June 30, 2002


Revenues.Revenues
for the six months ended June 30, 2003 were $35.3 million
compared to $29.6 million for the prior year, an increase
of $5.7 million or 19.3%. The net increase consisted of an
increase in revenues in the EMEA region of $8.9 million
offset by decreases in both the Americas region
($2.5 million) and the Asia-Pacific region
($0.7 million). The change in the EMEA region was due to
the continued growth of LCC Italia, Detron and Algeria of
$12.3 million, offset by decreases representing the
completion of other contracts primarily in Egypt and the
Netherlands of $3.4 million. The Americas net decrease of
$2.5 million consisted of $3.3 million related to the
completion of the XM Satellite contract in 2002 offset by growth
of $0.8 million.

Cost of Revenues.Cost of revenues for the six months
ended June 30, 2003 was $29.5 million compared to
$27.0 million for the prior year, an increase of
$2.5 million. The EMEA region increased cost of revenues by
$6.2 million, which was offset by decreases in the Americas and
Asia Pacific regions of $3.3 million and $0.4 million
respectively. The increase in the EMEA region was primarily due
to LCC Italia, Detron and Algeria ($9.8 million), offset by
reductions in Egypt and the Netherlands of $4.0 million.
The Americas decrease was primarily due to the completion of the
XM Satellite contract of $3.2 million in 2002.

Gross Profit.Gross
profit for the six months ended June 30, 2003 was
$5.9 million compared to $2.6 million for the prior
year, an increase of $3.3 million. As a percentage of revenues,
gross profit was 16.6% in 2003 compared to 8.9% in 2002, an
increase of 7.7%. The EMEA and Americas regions increased by
$2.7 million (6.8%) and $0.9 million (2.1%)
respectively, while the Asia Pacific region decreased by
$0.3 million (1.2%). The EMEA regions increase was
primarily due to LCC Italia, Detron, and Algeria
($2.6 million), the completion of a fixed price contract in
Egypt ($0.7 million), offset by $0.4 million related

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to the reversal of employee benefit accruals in
2002. The Americas increase of $0.9 million reflects the
growth in revenues above.


Sales and Marketing.Sales and marketing expenses were
$3.4 million for the six months ended June 30, 2003
compared to $4.2 million for the prior year, a decrease of
$0.8 million. The decrease is attributable to cost saving
initiatives in the EMEA and Asia Pacific regions.

General and Administrative.General and administrative expenses
were $9.5 million for the six months ended June 30, 2003
compared to $7.2 million for the prior year, an increase of
$2.3 million. Included in general and administrative
expenses are net benefits from recoveries of previously reserved
receivables of $1.3 million in 2003 and $1.0 million
in 2002, respectively.

Excluding the effects of bad debts, general and
administrative expenses for 2003 was $10.8 million compared
to $8.2 million for the prior year. The increase of
$2.6 million was largely attributable to continued growth
in the EMEA region, primarily Algeria ($0.5 million), LCC
Italia ($0.6 million) and Detron ($0.9 million).

Restructuring Charge.A restructuring charge of
$10.0 million was recorded for the six months ended
June 30, 2002 pursuant to a restructuring plan adopted by
the Company. The plan was formulated to respond to the low
utilization of professional employees caused by successful
completion of several large fixed price contracts and difficulty
in obtaining new contracts as a result of a slowdown in wireless
telecommunications infrastructure spending. The cost of the
severance and associated costs was approximately
$1.0 million. Additionally, the Company had excess facility
costs relative to the space occupied by the employees affected
by the reduction in force and reduced business use of office
space resulting from a continued trend for clients to provide
professional staff office space while performing their services.
The charge for the excess office space was approximately $9.0
million. During the first half of 2003, the Company reversed
$0.2 million related to excess severance accruals.

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 a fixed
amount 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 or otherwise
satisfied. The Company recognized $2.0 million of this
previously deferred gain, for the six months ended June 30, 2002.

Depreciation and
Amortization.Depreciation and
amortization expense was $1.6 million for the six months
ended June 30, 2003 compared to $1.4 million for the
prior year, an increase of $0.2 million. The increase in
depreciation and amortization is due to the amortization of
intangibles for the acquisitions the Company made in 2002.

Other Income (Expense).Other income for the six months ended
June 30, 2003 was $1.5 million compared to other
expense of $4.7 million in the prior year, an increase of
$6.2 million. Other expense for the six months ended June
30, 2002 contained an impairment charge of $5.2 million
related to investments the Company made in 2000. Other income
for the six months ended June 30, 2003 included
approximately $1.0 million of cash received from the sale
of NextWave Pre-Petition interest.

Income Taxes.The
benefit for income taxes was recorded for the six months ended
June 30, 2003 and 2002 using an effective income tax rate
of 12.0% in 2003 and 29.0% in 2002. The estimated effective
income tax rates differed from the federal statutory tax rate of
35.0% due primarily to no tax benefits being recognized for
losses generated by the Companys foreign subsidiaries and
an increase in the valuation allowance for foreign tax credits.

Net Loss.The net
loss was $6.1 million for the six months ended June 30,
2003 compared to a net loss of $16.3 million in the prior
year. The higher net loss in 2002 reflected the restructuring
charge and the impairment charge for the investments. These
charges were offset by the recovery of the previously deferred
amount related to the tower sale described above.

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Liquidity and Capital Resources

Cash combined with restricted cash and short-term
investments at June 30, 2003 provided total liquid assets
of $27.9 million, compared to $39.3 million at
December 31, 2002, a decrease of $11.4 million. This
decrease in liquidity largely related to cash used in operations
for the six months ended June 30, 2003.

Cash used by operations was $12.7 million
for the six months ended June 30, 2003, compared to
$2.5 million for the prior year, an increase of $10.2
million. Of this increase, $4.9 million was used to fund
operating losses and $5.3 million was used to fund the
increase in working capital.

Cash used by investing activities was
$0.7 million for the six months ended June 30, 2003,
compared to $7.9 million for the prior year. Cash used by
investing activities in 2002 largely related to the acquisition
of Smith Woolley Telecom in the United Kingdom.

Cash provided by financing activities was
$1.8 million for the six months ended June 30, 2003,
compared to cash provided of $0.8 million for the prior
year. During the second quarter of 2003, the Companys
subsidiary in the Netherlands, Detron, established a line of
credit, collateralized by Detrons outstanding accounts
receivable. Detron received proceeds from the line of credit of
$2.8 million and repaid $0.8 million during the second
quarter of 2003. Additionally, the Company increased restricted
cash by $0.2 million Cash provided in 2002 mostly related
to the repayment to the Company of the final installment of a
loan by Telcom Ventures, a shareholder. Except for the line of
credit described above, the Company has no other debt. The
Company has no material cash commitments other than obligations
under its operating leases and to fund the joint venture in
China. The Company does anticipate an increase in restricted
cash in the future to serve as collateral for certain short term
guarantees that will be necessary to support project
procurements. The Company has not engaged in any off-balance
sheet financing as of June 30, 2003. The Company believes
it has sufficient assets and relationships with financial
institutions to obtain additional debt facilities should the
business need arise.

The Company anticipates the receipt in the third
quarter of approximately $9.0 million for US federal and
state refunds. The recent award of certain major projects is
anticipated to provide a source of longer-term cash from
operations. As noted above, during the six months ended
June 30, 2003, the Company increased working capital by
approximately $5.0 million, and this use of cash is likely
to continue during the execution period of these major projects.
In addition, the Company may consider the sale of securities
and/ or the use of debt facilities to support working capital
requirements. As these projects are delivered and certain
milestones are achieved, working capital should be reduced and
cash balances increased. For the short term, the Company
believes it has adequate cash and short-term investments, which,
together with the receipt of tax refunds described above, will
satisfy cash requirements for at least the next twelve months.
Therefore, the Company believes that it will generate sufficient
cash from operations to meet its long-term liquidity needs.

Critical Accounting Policies

The Companys critical accounting policies
are as follows:



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

Revenue
recognition policy

The Companys principal source of revenues
consists of design and system deployment services. The Company
provides design services on a contract basis, usually in a
customized plan for each client and generally charges for
engineering services on a time and materials or fixed price
basis. The Company generally offers its deployment services on a
fixed price, time-certain basis. The portion of the
Companys revenue from

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fixed-price contracts was 78.9% during the first
half of 2003. 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. If total
contract cost estimates increase, gross profit for any single
project may be significantly reduced or eliminated. If the total
contract cost estimates indicate that there is a loss, the loss
is recognized in the period the determination is made.


Allowance
for doubtful accounts and accrual of expatriate taxes

The preparation of financial statements requires
the Companys management to make estimates and assumptions
that affect the reported amount of assets, liabilities,
contingent assets and liabilities and the reported amounts of
revenues and expenses during the reported period. Specifically,
the Companys management must make estimates of the
probability of collection of its accounts receivable. Management
specifically analyzes accounts receivable balances, customer
concentrations, customer credit-worthiness, current economic
trends and changes in its customer payment terms when evaluating
the adequacy of the valuation allowance for doubtful accounts.
For the quarter ended June 30, 2003, the Company derived
76.5% of its total revenues from its ten largest customers,
indicating significant customer concentration risk with the
Companys receivables. These ten largest customers
constituted 69.1% of the Companys net receivable balance
as of June 30, 2003. In addition, fixed-price contracts
with unfavorable milestone payments can cause unbilled
receivables to grow prior to achieving the applicable milestone
that permits billing. At June 30, 2003, the Company had
approximately $15.1 million of unbilled receivables,
compared to approximately $12.4 million at
December 31, 2002. Lastly, the Company frequently performs
services for development-stage customers, which carry a higher
degree of risk, particularly as to the collection of accounts
receivable. These customers may be particularly vulnerable to
current tightening of available credit and general economic
slowdown.

The Company estimates liabilities associated with
taxes relative to employees sent to assignments in foreign
countries. These expatriate employees are reimbursed for any
additional personal income tax burden that was derived as a
result of the assignment. Calculation of these obligations takes
considerable knowledge of payroll, social, and other taxes in
multiple countries, and the employees personal tax
situation. In addition, it requires interpretation of tax laws,
an assessment of potential audit risk from tax authorities, and
often the resolution of the tax liabilities may not occur for
several years. The Company has $2.6 million accrued for
expatriate tax obligations as of June 30, 2003.

Accounting
for income taxes

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

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Considerable management judgment may be required
in determining the Companys provision for income taxes,
its deferred tax assets and liabilities and any valuation
allowance recorded against its net deferred tax assets. The
Company has recorded a valuation allowance of $6.7 million
as of June 30, 2003, due to uncertainties related to its
ability to utilize some of its deferred tax assets before they
expire. These deferred tax assets primarily consist of foreign
net operating losses carried forward, foreign tax credits and
non-cash compensation accruals relating to stock options issued
under a phantom membership plan in effect prior to the
Companys initial public offering. The net deferred tax
assets, as of June 30, 2003 were $4.9 million.

Restructuring
charge

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

Related Party Transactions

During 2002 and the first half of 2003, the
Company continued to make certain payments on behalf of Telcom
Ventures consisting primarily of fringe and payroll-related
costs of $155,000 and $43,000, respectively and received
reimbursements of $464,000 in 2002 and $24,000 during the first
half of 2003. At December 31, 2002 and June 30, 2003,
outstanding amounts associated with these payments, totaling
$9,000 and $19,000, respectively, are included in due from
related parties and affiliates within the accompanying condensed
balance sheets. During 2002, the Company also provided an
allowance of $100,000 for amounts in dispute. In April 2003, the
Company received $100,000 to resolve the dispute in its entirety.

In July 2002, the Company acquired
51 percent of the outstanding shares of Detron LCC Network
Services B.V. (Detron), a newly formed corporation
in the Netherlands. The Company acquired the shares from
Westminster B.V., which in turn transferred the shares to Detron
Corporation BV in January 2003. Detron has certain ongoing
transactions with Detron Corporation BV. Under a five-year lease
agreement for office space, Detron recorded approximately
$28,000 and $50,000 of rent expense for the three and six months
ended June 30, 2003. Detron seconded various idle employees
to Detron Telematics, Detron Corporations wholly owned
subsidiary and recorded revenue of approximately $181,000 and
$284,000 respectively, for the three and six months ended
June 30, 2003.

Recent Accounting Pronouncements

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities(FIN 46). FIN 46 gives further guidance to
Accounting Research Bulletin (ARB) No. 51,
Consolidated Financial Statements.ARB
No. 51 requires companies to consolidate their financial
statements when one company has a controlling financial
interest, which is usually having a majority of the voting
interest. FIN 46 further defines a controlling financial
interest where the majority voting interest requirement is not
met, a variable interest entity, and if the assets, liabilities
and results of activities of the variable interest entity should
be included in the consolidated statements of the company. FIN
46 is effective for all arrangements entered into after
January 31, 2003. As of June 30, 2003, the Company had
not entered into any such arrangements.






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3: | 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

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exposure are in Great Britain, the Netherlands,
Italy and Brazil. For its foreign subsidiaries, exchange rates
can have an impact on the U.S. dollar value of their reported
earnings and the intercompany transactions with the subsidiaries.


Approximately 62.8% of the Companys
revenues were generated outside the United States for the six
months ended June 30, 2003, the majority of which were in
Europe. In connection with the Companys recent
acquisitions and the increased availability of 3G equipment in
Europe, the Company anticipates continued growth of its
international operations, particularly in Europe, the Middle
East and Africa, in 2003 and beyond. As a result, fluctuations
in the value of foreign currencies against the U.S. dollar may
have a significant impact on the reported results of the
Company. Revenues and expenses denominated in foreign currencies
are translated monthly into United States dollars at the
weighted average exchange rate. Consequently, as the value of
the dollar strengthens or weakens relative to other currencies
in the Companys major markets the resulting translated
revenues, expenses and operating profits become lower or higher,
respectively.

Fluctuations in currency exchange rates also can
have an impact on the United States 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 June 30, 2003. The resulting translation
adjustments are recorded in shareholders equity as
accumulated other comprehensive loss. The Euro was stronger
relative to many of the foreign currencies at June 30, 2003
compared to June 30, 2002. Consequently, the accumulated
other comprehensive loss component of shareholders equity
decreased $1.1 million during the six months ended June 30,
2003. As of June 30, 2003, the total amount of long-term
intercompany receivable/payables in non-U.S. subsidiaries
subject to this equity adjustment, using the exchange rate as of
the same date, was approximately $12.4 million.

The Company is exposed to the impact of foreign
currency fluctuations due to the operations of short-term
intercompany transactions between its London office and 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 London operations at June 30, 2003
(denominated in Euros) include Italy in the amount of
$1.2 million and the Netherlands in the amount of
$0.6 million. These balances generated a foreign exchange
gain of $0.1 million included in the Companys
consolidated results at June 30, 2003. In addition, a
hypothetical 10% adverse change would result in a
$0.2 million reduction to operating losses generated
outside the United States. This was estimated using a 10%
deterioration factor to the average monthly exchange rates
applied to net income or loss for each of the subsidiaries in
the respective period. Foreign exchange gains and losses
recognized on any transactions are included in the Consolidated
Statements of Operations.

Although currency fluctuations can have an impact
on the Companys reported results and shareholders
equity, such fluctuations generally do not affect the
Companys cash flow or result in actual economic gains or
losses. The Company currently does not hedge any of these risks
in its foreign subsidiaries because: (1) the Companys
Brazilian subsidiary derives revenues and incurs expenses within
a single country, and consequently, does not incur currency
risks in connection with the conduct of its normal operations,
(2) the British pound sterling, U.S. dollar, and Euro are
relatively stable against each other, (3) other foreign
operations are minimal, and (4) the Company does not
believe that hedging transactions are justified by the current
exposure and cost at this time.




Item 4:     Controls
and Procedures

(a) Evaluation of disclosure controls and
procedures

The Companys Chief Executive Officer and
the Companys Chief Financial Officer carried out an
evaluation of the effectiveness of the Companys disclosure
controls and procedures (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of
June 30, 2003. Based on that evaluation, these officers
have concluded that the Companys disclosure controls and
procedures were adequate and designed to ensure that material
information relating to the Company and the Companys
consolidated subsidiaries would be made known to them by others
within those entities, particularly during the period ended
June 30, 2003.

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(b) Changes in internal controls

There were no significant changes in the
Companys internal controls or other factors that occurred
during the reporting period that could materially affect or
could significantly affect the Companys disclosure
controls and procedures.

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PART II: OTHER INFORMATION




Item 1:     Legal
Proceedings

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




Item 2:     Changes
in Securities

Not Applicable




Item 3:     Defaults
Upon Senior Securities

Not Applicable




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

The Annual Meeting of Shareholders was held on
May 22, 2003. All of the proposals for Shareholder
consideration at the Annual Meeting were approved. The following
is a tabulation of the voting on each proposal presented at the
Annual Meeting.

Proposal
1 Election of Directors

|                        |  |         |      |        |  |            |               |             |  |              |            |  |  |  |      |  |  |  |      | 
|----------------------- |  | ------- | ---- | ------ |  | ---------- | ------------- | ----------- |  | ------------ | ---------- |  |  |  | ---- |  |  |  | ---- | 
|                        |  | Term    |      | Votes  |  | Votes      |               | Votes       |  | Broker      
|Elected Director        |  | Expires |      | For(1) |  | Against(1) |               | Withheld(1) |  | Non-Votes(1)
|                        |  |         |      |        |  |            |               |             |  |             
|C. Thomas Faulders, III |  |         | 2004 |        |  |            | 12,278,930(A) |             |  |              | 49,303(A)  |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 
|Mark D. Ein             |  |         | 2004 |        |  |            | 12,278,930(A) |             |  |              | 49,303(A)  |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 
|Steven J. Gilbert       |  |         | 2004 |        |  |            | 12,278,930(A) |             |  |              | 49,303(A)  |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 
|Susan Mayer             |  |         | 2004 |        |  |            | 12,278,930(A) |             |  |              | 49,303(A)  |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 
|Susan Ness              |  |         | 2004 |        |  |            | 12,278,930(A) |             |  |              | 49,303(A)  |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 
|Rajendra Singh          |  |         | 2004 |        |  |            | 11,791,784(A) |             |  |              | 536,449(A) |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 
|Neera Singh             |  |         | 2004 |        |  |            | 11,791,784(A) |             |  |              | 536,449(A) |  |  |  | 0(A) |  |  |  | 0(A) | 
|                        |  |         |      |        |  |            | 63,188,740(B) |             |  |              | 0(B)       |  |  |  | 0(B) |  |  |  | 0(B) | 

Proposal
2 Ratification of the
appointment of KPMG LLP as the independent auditors of the
Company for the fiscal year ended December 31, 2003.

|       |               |            |  |               |           |              |  |  |          |  |  |  |      | 
|------ | ------------- | ---------- |  | ------------- | --------- | ------------ |  |  | -------- |  |  |  | ---- | 
|Votes  |               | Votes      |  | Votes         |           | Broker      
|For(1) |               | Against 1) |  | Abstaining(1) |           | Non-Votes(1)
|       |               |            |  |               |           |             
|       | 12,277,841(A) |            |  |               | 41,467(A) |              |  |  | 8,925(A) |  |  |  | 0(A) | 
|       | 63,188,740(B) |            |  |               | 0(B)      |              |  |  | 0(B)     |  |  |  | 0(B) | 



---



|          |                                                                                                                                                                                                                  
|--------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note (1): | The shareholders are entitled to vote as a single
    class, with each share of the Companys Class A Common
    Stock having one vote and each share of the Companys
    Class B Common Stock having ten votes.

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Item 5:     Other
Information

Not Applicable




Item 6:     Exhibits
and Reports on Form 8-K

(a) Exhibits

| |      |  |  |   |  |                                                                                                               
| | ---- |  |  | - |  | --------------------------------------------------------------------------------------------------------------
| | 11   |  |  |  |  | Calculation of Net Income Per Share                                                                           
| | 31.1 |  |  |  |  | Written Certification of Chief Executive Officer
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | 31.2 |  |  |  |  | Written Certification of Chief Financial Officer
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | 32.1 |  |  |  |  | Written Statement of Chief Executive Officer
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
| | 32.2 |  |  |  |  | Written Statement of Chief Financial Officer
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    

(b) Reports on Form 8-K

On May 12, 2003, the Company filed a Current
Report on Form 8-K, which reported that the Company on
May 12, 2003, issued a press release announcing its first
quarter results for 2003.

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Signature

Pursuant to the requirements 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. and Subsidiaries
|
| | /s/ GRAHAM B. PERKINS                   
| |                                         
| | Graham B. Perkins                       
| | Senior Vice President, Chief Financial  
| | Officer and Treasurer                   
| | (Principal Financial Officer and        
| | Principal Accounting Officer)           

Date: August 12, 2003


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