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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2002

OR

Commission File Number 333-4128

BOSTON COMMUNICATIONS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code:  (781) 904-5000

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

None

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

Common Stock, par value $.01 per share

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    YES  x    NO  ¨

The approximate aggregate value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price of such stock quoted on the Nasdaq National Market on June 28, 2002 was $123,861,973. The number of shares outstanding of the Registrant’s common stock, $.01 par value per share, as of March 20, 2003 was 17,644,706.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of registrant’s definitive proxy statement for its 2003 Annual Meeting of Stockholders are incorporated by reference into Part III (Items 10, 11, 12 and 13) of this Annual Report on Form 10-K.

This Annual Report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including without limitation, statements regarding our continued investment in our payment services business, the expected increase in subscriber base, average minutes of use and billing and transaction processing services revenues, the increase in minutes of use resulting in increased volume discounts for carriers, billing and transaction processing services gross margins, decreases in roaming services revenues, prepaid systems revenues and gross margins estimates, increases in engineering, research and development expenditures, increases in sales and marketing expenses, decreases in general and administrative expenses, legal expenses for the Freedom Wireless lawsuit, increases in depreciation and amortization expense, decreases in interest income and our income tax rate and increases in capital investments. These statements are based on the beliefs and assumptions of management.

Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “intend,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words.

A number of important factors could cause actual events or our actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Certain Factors That May Affect Future Results”, “Quantitative and Qualitative Disclosures About Market Risk” and those set forth in Items 1 and 3 of Part I of this Annual Report on Form 10-K. The factors discussed herein do not reflect the potential future impact of any mergers, acquisitions or dispositions. We do not assume any obligation to update any forward-looking statements made herein.

Item 1.    BUSINESS

GENERAL

Boston Communications Group, Inc. (“bcgi” or the “Company”) has provided services to wireless carriers since our incorporation in Massachusetts in 1988. Since 1991, we have offered our real-time subscriber management solutions through a combination of proprietary software applications, a carrier-class hosted environment and high quality service and support. One or more of our services are provided to more than 70 wireless carriers and resellers, including five out of the six largest national wireless carriers by number of subscribers—Verizon Wireless, Cingular Wireless, AT&T Wireless, Nextel Communications and Sprint PCS.

HISTORY OF OUR SERVICE OFFERINGS

In 1991, we launched our bcgi ROAMERplus^TM service to wireless carriers. This solution provides wireless carriers with the ability to better serve their subscribers by offering unregistered roamers the ability to complete calls. This service has generated over $85 million in revenues for carriers since 1991.

We introduced our bcgi Prepaid Wireless Services offering in mid-1994. Since then, this offering has become the cornerstone of our real-time subscriber management capabilities. Domestically, we offer prepaid wireless on an outsourced service bureau basis to wireless carriers, similar to an application service provider business model. Our solution provides several critical features to carriers and enables them to rapidly and cost-effectively deploy prepaid wireless services to their customers. Our nationwide prepaid roaming capability, a feature that many carriers and competitors do not offer, allows our carrier customers to offer prepaid services that mirror their postpaid coverage area. We currently provide prepaid wireless services, branded as Prepaid Wireless for large operators and Prepaid Connection for regional carriers, to several U.S. carriers, including Verizon Wireless, Cingular Wireless, Nextel Communications, Alltel Corporation, Cincinnati Bell Wireless, Dobson Cellular Systems, Inc., and more than 20 wireless carriers and resellers. Our existing contracts to provide prepaid wireless services generally have terms of two to three years.

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In international markets, we offer prepaid wireless as a turnkey solution sold by our prepaid systems business. The platform used for our international turnkey offering shares most components with our domestic service bureau, including components acquired through our purchase of Voice Systems Technology, Inc., in 1996.

In July 2002, we launched bcgi Payment Services, a suite of end-to-end, integrated solutions for real-time, assisted and self-serve payment transactions including recharge of prepaid accounts through an ATM. For these solutions, we unite wireless carriers with multiple financial and content partners and take financial and operational responsibility for the transactions.

In October 2002, we acquired Infotech Solutions Corporation, a provider of outsourced billing services to wireless carriers. This acquisition provides us with our voyager billing and customer care solution, an end-to-end solution for wireless billing and customer care.

Please refer to Note 8 of our Consolidated Financial Statements for financial information regarding each of these segments.

BILLING AND TRANSACTION PROCESSING SERVICES

Our proprietary software, proven infrastructure and deep wireless expertise across all of our products help carriers reach new market segments, increase subscriber loyalty, build new revenue streams and lower the cost of serving customers. We provide our offerings primarily under the bcgi TOTALsource model. Our TOTALsource model provides an end-to-end outsourced environment for the deployment of our solutions, allowing carriers to get to market quickly and without large capital investment. With TOTALsource, carriers can deploy new services by leveraging our expertise as a leading provider of outsourced real-time subscriber management solutions. In a typical TOTALsource relationship, we take responsibility for all aspects of our solution’s performance including project implementation, ongoing operation and upgrades to the carrier’s application.

bcgi TOTALsource includes:

Our billing and transaction processing services business line offers three primary services to provide real-time subscriber management capabilities to wireless carriers. These three services are bcgi Prepaid Wireless Services, bcgi Voyager Billing and Customer Care and bcgi Payment Services, all of which are available under the bcgi TOTALsource model. Our billing and transaction processing services allow wireless carriers throughout the United States to utilize our network and real-time billing and transaction processing capabilities, enabling such carriers to offer prepaid wireless calling to their subscribers, various ways to replenish their accounts and purchase digital content and to provide their subscribers with a monthly postpaid wireless bill.

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bcgi Prepaid Wireless Services

According to the Cellular Telecommunications & Internet Association, nearly 50% of the U. S. population is estimated to own wireless phones as of December 2002. Postpaid wireless subscribers currently make up about 90% of the wireless subscribers in the U. S., according to the Yankee Group. The greatest number of new net subscribers was added in 2000 and overall growth levels have slowed since then. As a result, we believe that wireless carriers are looking for new ways to expand their offerings to under-penetrated market segments. Prepaid services enable wireless carriers to target the youth, budget conscious and credit challenged segments, which we believe are under-penetrated segments of the wireless market. The Yankee Group estimates that 35% of net wireless subscriber additions will be prepaid beginning in 2004, growing to 66% by 2006. The Yankee Group also estimates that total prepaid subscribers will grow from approximately 15 million at the end of 2002 to over 37 million by the end of 2006. Since we provide prepaid wireless services to three of the six national U. S. carriers, we believe we are well positioned to take advantage of growth opportunities in these untapped segments.

Our prepaid wireless services enable wireless carriers to provide their subscribers with the ability to make wireless calls on a prepaid basis. Using our service, subscribers can establish an account with the carrier by prepaying a specific dollar amount that is credited toward future service. The wireless carrier then routes signaling information for each call that the subscriber initiates or receives to our network, which is linked to the transaction-processing platform that houses information regarding the status of that subscriber’s prepaid account. Before each call and prior to the end of each call, the subscriber may elect to receive a voice message informing the subscriber of his or her prepaid balance. The call is completed and the subscriber’s account is debited and rated on a real-time basis by our platform, in accordance with the carrier’s instructions.

Subscribers are able to recharge their accounts by purchasing additional prepaid service from the carrier by credit card through our automated replenishment feature or at any of the carrier’s affiliated retail outlets, including those established through our payment services distribution technology partnership program.

Our real-time subscriber management solutions combine intelligent networking architecture, which enables efficient call routing using Signaling System 7 or SS7. We combine this network capability with our transaction processing infrastructure that includes Web-based customer care tools, a deployed network of voice resources to play voice messages and open application programming interfaces to integrate with the existing infrastructure of wireless carriers including their billing systems and distribution outlets. Our end-to-end, hosted solutions are relatively easy to implement and integrate into existing carrier networks and billing infrastructures since we utilize existing versions of SS7 network signaling (an industry standard) and advanced XML-based tools. Additionally, our proprietary software, expertise and our use of recognized vendor technologies, including Sun Microsystems, EMC, Oracle, Tekelec and Cisco, enable us to deliver a premium, high quality and competitive service.

Specific features offered within prepaid wireless services include:

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We generate revenue for prepaid wireless services principally by charging carriers for each minute of use processed through our network. We record prepaid wireless services revenues net of outage penalties that we may incur based on contracted service level agreements with the carrier. Minutes of use continue to be an important metric for our prepaid wireless business and, in the fourth quarter of 2002, our billed prepaid wireless minutes of use grew to 105 minutes per subscriber per month from 79 minutes per subscriber per month in the fourth quarter of 2001. These minutes of use compare to industry averages, comprised mostly of postpaid subscribers, of approximately 500 minutes per subscriber per month according to Legg Mason. We believe that the increase in usage is a result of more competitive pricing plans and more robust digital features offered by our carrier customers. We also generate revenues from other transactions processed, including Short Message Service. Additionally, we generate revenue from certain software licenses, implementations and special development services which we generally recognize over the period of the contract. As minutes of use increase and carriers achieve higher volumes, incremental rates we charge the carriers decrease, yielding lower average rates per minute of use. Increased volume has allowed us to reduce incremental pricing as our ability to leverage our scale and fixed cost infrastructure has produced high incremental gross margins.

In 2002, we signed prepaid wireless contracts with several new customers including two major wireless carriers, Nextel Communications and Alltel Corporation. Our multi-year contract with Nextel, in association with BOOST Mobile^™, supports the launch of BOOST Mobile’s pay-as-you-go, feature-packed product that is targeted to the youth market. The product is being trialed in California and Nevada using the all-digital Nextel^® National Network.

Our multi-year contract with Alltel Corporation also provides enhanced features to support Alltel’s launch of Simple Freedom, a national digital wireless service distributed at more than 1,500 Wal-Mart stores nationwide. Using our national network and existing carrier customer relationships, Simple Freedom gives subscribers access to a local calling area that covers more than 90 percent of the U.S. population. ALLTEL, with more than 7 million wireless customers, is the seventh largest wireless carrier in the U.S. and the largest regional carrier in the country.

During 2002, we also renewed our relationship with Cingular Wireless by signing a multi-year contract that expanded the number of TDMA markets that we serve. This market expansion resulted in subscriber conversions to our platform in the latter part of 2002 from Cingular Wireless markets that were previously served by competitor’s platforms. In the fall of 2002, Cingular launched its new national prepaid offering under the brand name KIC, or Keep In Contact.

We also provide service to the largest U.S. carrier, Verizon Wireless, for their national prepaid offering, [FREEUP]. This feature rich prepaid service was launched in the fall of 2001, targeting the late teen/young adult marketplace. Verizon’s [FREEUP] program is currently one of the leading prepaid offerings in the United States.

We continue to expand the features and rating capabilities of our prepaid wireless services to offer additional functionality to our carrier customers and their prepaid subscribers, and we generally release two major software upgrades per year. Such expanded features include short messaging service billing, billing for push to talk services, additional application program interface support for legacy system integration, introduction of SS7/ISUP event control, and flexible web and voice-based self care environments. We work closely with carriers’ marketing departments to develop sophisticated features and functionality to enable carriers to quickly modify the way they market and sell prepaid services to remain competitive.

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In addition to providing the technology and payment infrastructure enabling prepaid wireless services, we offer a flexible customer care application environment that allows carriers to either outsource customer care or provide it in-house. We license our proprietary software to enable carriers to access their subscriber data using web-based care or through various application program interfaces.

Within our real time subscriber management solutions we specifically brand two distinct prepaid offerings. Our Prepaid Wireless solution provides services to national carriers and our Prepaid Connection is offered to regional carriers. While the underlying features of the services are similar, the architecture of Prepaid Connection is specifically designed to cost-effectively provide connectivity and service to regional carriers. Both of these solutions can also be deployed in conjunction with payment services solutions to greatly improve the economics of prepaid through our network of recharge or m-commerce partners, thereby enhancing the overall economics of prepaid.

bcgi Payment Services

Our Payment Services solution provides a link between carriers and financial and content networks. Using these links, carriers can provide their subscribers with a choice of convenient payment and recharge options using cash, debit or credit cards that can be accessed via the internet, ATMs and self-serve kiosks. These options include recharge of prepaid subscriber balances at ATM machines, providing point-of-sale solutions to activate subscribers or replenishing through credit cards over the phone. In addition, carriers can benefit from additional subscriber revenue utilizing bcgi payment services’ products to bill for other services, such as downloading content and ring tones to subscribers’ phones. We unite carriers with multiple financial and content partners, taking financial and operational responsibility for the transactions. We generate revenue by charging carriers a transaction fee for the services performed and paying the financial and content partners a fee for enabling the transaction. While payment services leverages our existing infrastructure, we do not expect to generate any material revenues from this service in 2003. We expect to invest approximately $300,000 to $500,000 per quarter for the next several quarters on our payment services business until it reaches profitability.

Payment services currently offers its services through the following end-to-end solutions:

bcgi Voyager Billing and Customer Care

We acquired our voyager billing and customer care solution from Infotech Solutions Corporation in October, 2002. This solution currently serves small, regional carriers for full postpaid billing and operational support services. Our billing and customer care solution integrates with the carrier network to collect usage data, rate events and allow carriers to generate monthly subscriber invoices. We generate revenue by charging our carrier customers a per subscriber fee for each monthly bill that is produced.

Voyager enables carriers to control every aspect of customer management—network provisioning, inter-carrier relations, billing, invoicing, customer care, inventory management and retail operations—within one comprehensive system. Voyager provides user environments for all levels of carrier personnel, including an interface for the creation of new services and easy to use interfaces for customer service representatives. It provides a total retail management system, allowing the carrier to utilize voyager to manage its entire

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point-of-sale access, including number inventory, equipment, accessories and cash drawer. Voyager also offers robust reporting and decision support tools, allowing new views of customer usage and a better understanding of customer behavior throughout the carrier organization.

The key features of voyager are as follows:

PREPAID SYSTEMS

Our prepaid systems revenue is generated primarily though the sale of turnkey prepaid wireless solutions that enable our international customers to own and operate their own prepaid wireless calling service. Our prepaid systems customers have operations throughout the world and we have implemented systems in El Salvador, Nigeria, Guam, Gibraltar, Venezuela, Ecuador, Guatemala and several other countries in Central America and the Caribbean. In addition, the prepaid systems business develops and assembles voice resource hardware and software that make up components of our voice resource network.

ROAMING SERVICES

Traditionally, unregistered roaming subscribers have posed processing challenges for carriers. These unregistered “roamers” attempting to place calls in the serving carrier’s territory are automatically switched to our proprietary ROAMERplus network which enables payment for and completion of calls. When an unregistered roamer places a call in the carrier’s service area, the carrier’s mobile switching center forwards the call, at our expense, to our proprietary digital call processing system. The roamer may complete the call by charging the call to a telephone calling card, a commercial credit card, a prepaid account or as a collect call. We remit a portion of the fee charged to the unregistered roamer to the serving carrier. Our roaming service is currently being used by over 50 wireless carriers in the United States and Canada and we service 4 out of the 6 largest national wireless carriers, by number of subscribers, in the United States.

The revenue decline experienced by ROAMERplus is primarily attributable to consolidation in the industry and advancements in network and handset technology that have improved registered roaming capabilities. We anticipate that these trends will continue and, therefore, roaming services revenues will continue to decrease over time.

Engineering, Research and Development

We have developed proprietary software and interfaces to the existing infrastructure of wireless carriers, enabling us to perform all real-time event management and subscriber management functions associated with our prepaid, postpaid and other services. These software applications and interfaces include:

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We believe that one of our key competitive advantages is our proprietary software. Our future success will depend in large part on our ability to continue to enhance existing services and develop new services in response to changing market, customer and technological requirements of the wireless industry. An important factor in the future success of our billing and transaction processing services will be our ability to provide, at competitive prices, more functionality and features than those available in other competitive offerings.

We spent $12.0 million in 2002, $11.4 million in 2001 and $9.9 million in 2000 on engineering, research and development, including capitalized software costs. We expect to continue to devote significant resources to our engineering, research and development activities in future years.

Sales and Marketing

Our sales strategy focuses on establishing and maintaining long-term relationships with our customers. Our business development directors and their support teams utilize a consultative sales process to understand and define customer needs and to determine how our services can address their needs. Each business development director capitalizes on his or her in-depth knowledge of the carrier and our service offerings to cross-sell our products in his or her territory. Our sales cycle can be six to 12 months, or longer.

Our direct sales strategy is complemented by a marketing program that includes participation in industry trade shows and conferences, speaking engagements and public relations. Because our target customers are wireless carriers and resellers, we seek to gain broad industry recognition through carefully selected events and activities specific to the wireless industry.

Customers

We provide services to wireless carriers and resellers of varying size, expertise and capabilities. We currently provide one or more of our services to over 70 wireless carriers and resellers in the United States and Canada, including five out of the six largest national wireless carriers in the United States, by number of subscribers. Historically, a significant portion of our total revenues in any particular period has been attributed to a limited number of customers. Net revenues attributable to our ten largest customers accounted for approximately 92% of our total revenues in 2002, 90% of our total revenues in 2001 and 93% of our total revenues in 2000. Verizon Wireless accounted for 49% of total revenues in 2002 and 33% of total revenues in 2001. Cingular Wireless accounted for 25% of total revenues in 2002 and 28% of total revenues in 2001.

Competition

The market for providing services to wireless carriers is highly competitive and subject to rapid change. A number of companies currently offer one or more of the services we provide. In addition, many wireless carriers are providing, or can provide in-house, the services we offer. Demand for our services could be affected by

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trends in the wireless industry, including greater consolidation, technological changes and/or other developments. These developments can make it easier or more cost-effective for wireless carriers to provide certain services themselves and could make it more difficult for us to offer a cost-effective alternative to a wireless carrier’s in-house capabilities. In addition, we anticipate the entrance of new competitors in the wireless carrier services market in the future. In addition to the in-house capabilities of the wireless carriers themselves, the following is a list of key competitors by line of business:

We believe that our competitive advantages in the wireless carrier services industry include the ability to easily integrate with all switch types, wireless system types (GSM, TDMA, CDMA, 2.5G, 3G, etc.) and billing systems. This integration is critical since industry consolidation has resulted in carriers operating multiple different switch types and billing systems across their footprints, requiring prepaid systems to integrate with all technologies in order to offer nationwide programs. Other competitive advantages include.

In spite of these factors, there can be no assurance that we will be able to continue to compete successfully with our existing competitors or with new competitors.

Government Regulation

The Federal Communications Commission, under the terms of the Communications Act of 1934, as amended, including the Telecommunications Act of 1996, regulates interstate communications and the use of radio spectrum, including entry, exit, rates and terms of operation. Presently, we do not operate any facilities utilizing radio spectrum and we do not have any facilities-based services involving interstate communications.

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Consequently, we are not required to and do not hold any licenses or other authorizations issued by the Federal Communications Commission for interstate operations. One of our subsidiaries, Cellular Express, Inc., has been granted a license by the Federal Communications Commission to provide international telecommunications services.

Our wireless carrier customers are regulated at both the federal and state levels. Proposals to intensify or reduce government regulations continue to be discussed at both the federal and state levels. Such changes may decrease the growth of the wireless telephone industry, result in new competitors or industry consolidation, limit the number of potential customers for our services or impede our ability to offer competitive services to the wireless market or otherwise have a material adverse effect on our business and results of operations.

Employees

As of December 31, 2002, we had a total of 330 full-time and part-time employees. Of these employees, 10 served in our roaming services call center and related functions, 234 served in technical operations and software development, 34 served in sales, marketing, product and client relations and 52 served in administration and management. None of our employees are represented by a labor union. We believe that our employee relations are good.

Backlog

As of December 31, 2002, there was $180,000 in backlog of firm orders for the prepaid systems business compared to $1.2 million as of December 31, 2001. We include in backlog only those orders for which we have received completed purchase orders and for which delivery has been specified within 12 months. Most orders are subject to cancellation by the customer. Because of the possibility of customer changes in delivery schedules, cancellation of orders and potential delays in product shipments, our backlog as of any particular date may not be representative of actual sales for any succeeding period.

Available Information

We maintain an internet website at www.bcgi.net. The contents of our website are not part of this annual report on Form 10-K, and our internet address is included in this document as an inactive textual reference only. We make available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and each amendment to these reports as soon as reasonably practical after we file such material with, or furnish it to, the Securities and Exchange Commission. Each such report is posted on our website or available via a direct link to our filings on the Securities and Exchange Commission EDGAR system.

Item 2.    PROPERTIES

We lease space at our principal location in Woburn, Massachusetts and our Westbrook, Maine location. We own the facility at our Tulsa, Oklahoma location. In February 2003, we purchased a 97,477 square foot building in Bedford, Massachusetts that will principally serve as our redundant data center site. We believe this new building will also accommodate our anticipated growth and data center space needs, as well as additional office space requirements for the next several years.

Our Woburn location currently houses our billing and transaction processing services data and network operations center and our roaming services operations center, as well as our executive headquarters, engineering and software development, sales and marketing, human resources, finance and administrative personnel. The Westbrook facility houses our support functions for our voyager product, including software development and sales support. The Tulsa facility is used for the assembly of systems and houses other support functions for the

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prepaid systems business such as software development, product management and sales support. We also have 31 other leased facilities throughout the United States that house a portion of our voice nodes and certain equipment for our network.

The following list comprises our significant leased facilities:

Item 3.    LEGAL PROCEEDINGS

In March 2000, Freedom Wireless, Inc. filed a suit against us and a number of wireless carriers. The suit is being tried in the United States District Court in Massachusetts and alleges that the defendants infringe two patents held by Freedom Wireless, Inc. and seeks damages in an unspecified amount as well as injunctive relief. A ruling that we infringed the Freedom Wireless patents could significantly restrict our ability to conduct business. In addition, we have an obligation to indemnify the other defendants for damages they may incur with respect to any infringement. The suit is still in the discovery phase. We do not believe that we infringe these patents and we believe that we have meritorious defenses to the action.

We recorded a special charge in the fourth quarter of 2000 of $2.6 million, in the third quarter of 2001 of $3.6 million and in the first quarter of 2002 of $3.3 million, principally to accrue for legal expenses estimated by our outside counsel to be incurred in the defense of the patent infringement suit brought by Freedom Wireless. The lengthy and unpredictable discovery process has made it difficult for us to reasonably estimate legal costs in this suit. As a result, we are now accounting for Freedom Wireless legal costs as incurred rather than accruing the entire amount of such costs when they become probable. For the fourth quarter of 2002, we recorded $998,000 in legal charges associated with the Freedom Wireless suit. We also expect to continue to spend up to $1 million per quarter for legal costs until the Freedom Wireless matter is resolved. There can be no assurances that our expenses to defend the Freedom Wireless suit will not exceed our estimate. If Freedom Wireless prevails in this case, the amount of damages could be substantial and our business, financial condition and results of operations would be materially adversely affected.

In December 1999, Crystal, Inc., a former supplier of one of our subsidiaries, filed a suit against us in the United States District Court for the Northern District of Iowa. We signed a purchase contract with Crystal for an unspecified number of components in 1997, pursuant to which Crystal became our sole supplier for a certain system component in 1997 and early 1998. We subsequently changed suppliers. Currently, the suit alleges that we breached the confidentiality clause of the contract and made fraudulent misrepresentations to Crystal. The court granted our motion for summary judgment dismissing Crystal’s breach of contract claim, but did not dismiss the fraudulent misrepresentation claim. Crystal has alleged actual damages of approximately $12,000 and seeks punitive damages in an amount to be determined. The trial is scheduled for May 2003.

On January 4, 2002, a carrier customer notified us that they believed we should indemnify them with respect to certain claims pending in a patent infringement case brought by Ronald A. Katz Technology Licensing, L.P. (“Katz”) against the carrier customer in the United States District Court for the Eastern District of Pennsylvania. In the suit, the plaintiff claimed infringement of fourteen patents by the defendants, and sought damages in an unspecified amount. Katz and the carrier customer settled the suit in February 2003. No demand on us has been made by the carrier customer. At this stage it is not possible to determine whether there is a valid claim for indemnification, or the likely outcome of such claim.

On July 26, 2002, a carrier customer sent a letter to us notifying us of a pending lawsuit brought by Philip S. Jackson against the carrier customer and seven other companies in the United States District Court for

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the Northern District of Illinois. In the suit, the plaintiff alleges patent infringement by the defendants in using, selling or offering to sell automated interactive telephone systems, voice messaging services or answering devices. The letter asserts that we must indemnify the carrier customer to the extent any of the claims in the complaint relate to the services provided by us to the carrier customer pursuant to the prepaid wireless calling service agreement and any other agreements between the carrier customer and us. The suit seeks damages in an unspecified amount. We have retained outside counsel. At this stage it is not possible to determine whether there is a valid claim for indemnification, or the likely outcome of such claim.

From time to time, as a normal incidence of the nature of our business, various claims, charges and litigation are asserted or commenced against us arising from, or related to, contractual matters, patents, trademarks, personal injury, and personnel and employment disputes. As to such claims and litigation, we can give no assurance that we will prevail. However, we do not believe that these matters (other than as disclosed) will have a material adverse effect on our consolidated financial position, although an adverse outcome of any of these matters could have a material adverse effect on our consolidated results of operations or cash flows in future quarters or in the quarter or annual period in which one or more of these matters are resolved.

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders, through solicitation of proxies or otherwise, during the last quarter of the year ended December 31, 2002.

EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and their ages and positions are as follows:

Mr. Tobin has over 20 years experience in the telecommunications and wireless industry. Mr. Tobin is one of our founders and has served as our Chairman since 1988. Mr. Tobin also held the position of President from February 1990 until February 1996, and from April 1997 to February 1998. Prior to his tenure with us, Mr. Tobin served as President of Cellular One Boston/Worcester and Portsmouth, NH, and Regional Marketing Manager for Satellite Business Systems (a joint venture of IBM, Comsat and Aetna). Mr. Tobin began his career as a Securities Analyst at Chase Manhattan Bank after receiving his undergraduate degree in Economics from Stonehill College and his M.B.A. in Marketing/Finance from Northeastern University.

Mr. Snowden joined us as President and Chief Executive Officer in February 1998. Prior to that, he served as President and Chief Operating Officer of American Personal Communications, L.P. d/b/a Sprint Spectrum (“APC/Sprint Spectrum”), where he was responsible for the successful launch of the nation’s first Personal Communications Services (“PCS”) network. Before joining APC/Sprint Spectrum in 1994, Mr. Snowden served as an Area Vice President at Pacific Telesis Group, where he played an integral role in Pacific Bell’s entry into the PCS market through the development of the business plan for Pacific Bell Mobile Services. Previously, he served as Chief Executive Officer of Universal Optical Company, a manufacturer and marketer of designer eyewear. Mr. Snowden began his career as a Corporate Strategy Consultant and Manager with the

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Boston Consulting Group. In 2002, Mr. Snowden was elected to the Board of Directors of the Massachusetts Telecom Council. Mr. Snowden holds a B.S. degree in Mathematical Sciences from Stanford University and an M.B.A. from the Harvard Business School.

Ms. Walker joined us in 1993 as Corporate Controller. In August 1998, she became our Vice President of Finance and Administration, and in April 1999 she was promoted to the position of Chief Financial Officer. As CFO, Ms. Walker is responsible for overseeing finance, accounting, facilities and human resources. She also played an integral part in guiding us through our IPO and follow-on offering. Prior to joining us, Ms. Walker spent six years at Ernst & Young LLP, where she earned her C.P.A. and was a Manager in E&Y’s Entrepreneurial Services Group. Ms. Walker holds a B.S. degree in Accounting from Boston College.

Mr. Wessman has over 30 years of experience in the telecommunications industry. He began his career with us in April 1995, managing all product implementations, customer care initiatives and quality assurance operations. In February of 1997, Mr. Wessman was promoted to Vice President of Implementation and Account Management, where he was responsible for Prepaid Wireless Services implementations and Prepaid Account Management. In February 2000, he was promoted to Chief Technology Officer, expanding his role to include the management of all technical resources at bcgi. Prior to joining us, Mr. Wessman spent 24 years with NYNEX Corporation (now Verizon). At NYNEX, he held various positions primarily in Information Services where he managed the development of billing systems and became Director of Quality Assurance, responsible for managing system testing, quality assurance and customer billing support. He has been a member of the QuEST Forum since 1999 and served on their Board of Directors in 2000. QuEST is the Telecommunication Industry’s quality organization and responsible for the creation and maintenance of quality standards (TL9000). Mr. Wessman holds undergraduate and M.B.A. degrees from Northeastern University.

Mr. von Mering has been involved with the telecommunications and wireless industries for 18 years. Mr. von Mering held the position of our Chief Financial Officer from June 1990, when he joined us, until April 1999. Since April 1999, Mr. von Mering has held the position of Vice President, Corporate Development. Prior to joining bcgi, Mr. Von Mering served as Regional Vice President and General Manager for Metromedia’s paging division, and held various positions at Coopers & Lybrand, where he earned his C.P.A. Mr. von Mering earned an undergraduate degree in Accounting from Boston College and an M.B.A. from Babson College.

Mr. Sullivan has over 25 years of wireless and communications experience. Mr. Sullivan has served as a Vice President since June 1990, and, in 1997, he assumed his current position of Vice President and General Manager of our roaming services business. From 1984 to 1989, Mr. Sullivan worked for Cellular One, where he was responsible for building the cellular systems in Boston, Worcester, and Portsmouth, NH. Prior to Cellular One, Mr. Sullivan spent 10 years as an Engineering Manager for Zip-Call, where he built New England’s largest paging network. Mr. Sullivan holds a graduate degree in Electrical Engineering from Northeastern University.

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PART II

Market Information for Common Stock

Our Common Stock is traded on the Nasdaq National Market, under the symbol BCGI. The following table sets forth the high and low sales prices for our Common Stock for each full quarterly period within fiscal years 2001 and 2002.

Holders

At January 23, 2003, there were approximately 3,500 holders of record of our Common Stock.

Dividends

We have never declared or paid a cash dividend on our Common Stock. We currently intend to retain all of our earnings to finance future growth and, accordingly, we do not anticipate declaring or paying any cash dividends in the foreseeable future.

Item 6.    SELECTED FINANCIAL DATA

The following tables should be read in conjunction with our Consolidated Financial Statements and the notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this report (in thousands, except per share data):

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Results for the year ended December 31, 2002 include a special charge for general & administrative legal expenses of $4.3 million to accrue for estimated legal expenses, primarily for the Freedom Wireless lawsuit.

Results for the year ended December 31, 2001 include a prepaid systems special charge of $538,000 for accruals, inventory write-downs and severance resulting from the discontinuance of the voice mail product, a special charge for general & administrative legal expenses of $3.6 million to accrue for estimated legal expenses, primarily for the Freedom Wireless lawsuit and a special charge of $894,000, principally for the permanent impairment of a cost-based investment.

Results for the year ended December 31, 2000 include an impairment of long-lived assets charge of $1.1 million for a write-down of assets no longer used to support our business, a special charge for general & administrative legal expenses of $2.6 million to accrue for estimated legal expenses for the Freedom Wireless lawsuit and additional depreciation of $1.7 million resulting from write-offs of certain retired equipment.

Results for the year ended December 31, 1999 include a special charge for cost of systems revenues of $1.8 million for reorganization of the prepaid systems business. The charge principally related to expenses associated with inventory write-downs to bring the level of inventory in line with the future sales strategy, as well as severance costs.

Results for the year ended December 31, 1998 include a special charge of $698,000 for impairment of long-lived assets no longer being used in our business.

Consolidated Results of Operations

Our total revenues increased 7% to $70.9 million in 2002 from $66.3 million in 2001. The increase was attributable to a 21% increase in our billing and transaction processing service business, partially offset by a 47% decline in roaming service revenues and to a lesser extent, a 2% decline in prepaid systems revenue. In 2001, total revenues declined 12% compared to 2000, primarily due to a 34% decline in roaming service revenues and an 8% decline in revenues from our billing and transaction processing service business, partially offset by a 25% increase in prepaid systems revenue.

Our operating income of $4.0 million for the year ended December 31, 2002 represents an increase from an operating loss of $143,000 for the year ended December 31, 2001 and operating income of $3.5 million for the year ended December 31, 2000. The increase in billing and transaction processing service revenues and our corresponding fixed infrastructure principally contributed to the increase in operating income in 2002 compared to 2001. The decline in billing and transaction processing service revenues, the decline in roaming service revenues and additional expenses related to Freedom Wireless contributed to the operating loss in 2001, compared to 2000. The specifics of each segment’s revenues and gross margin are discussed in greater detail below.

Our reportable operating segments consist of billing and transaction processing services, roaming services and prepaid systems. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in Note 2 of our Consolidated Financial Statements, except that the financial results for our operating segments have been prepared using a management approach. This approach is consistent with the basis and manner in which our management internally analyzes financial information for the purposes of assisting in making internal operating decisions. We evaluate performance based on the gross margin of each stand-alone business. Segment disclosure information is included in Note 8 of our Consolidated Financial Statements.

Our chief operating decision-maker is our President and Chief Executive Officer. Our operating segments are managed separately because each represents a strategic business unit that offers different products and serves

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unique markets within the wireless industry. However, the businesses complement each other by providing us with a strong suite of products and services to meet the needs of wireless carriers.

We believe that any impact from inflation is not material.

Segment Data

The gross margin for the Prepaid Systems business includes $147,000 of inventory write-downs in December 31, 2001.

Billing and Transaction Processing Services

Billing and transaction processing services revenues increased 21% to $58.9 million in 2002 from $48.7 million in 2001 and decreased 8% in 2001 from $53.2 million in 2000. Billing and transaction processing revenues increased in 2002 due primarily to the increase in average billed minutes of use per subscriber per month to 105 for the fourth quarter of 2002 from 79 for the fourth quarter of December 31, 2001. The higher billed minutes of use resulted primarily from an increase in the number of digital subscribers on our network and increased average usage as our carrier customers promoted more competitively priced and full-featured prepaid offerings. In addition, the increase in our subscriber base to 2.89 million at December 31, 2002 from 1.75 million at December 31, 2001 contributed to the revenue increase. The increase in the subscriber base resulted from the additional subscriber growth of our existing carrier customers who competitively promoted and priced their offerings, subscriber conversions from Cingular Wireless markets that were previously served by competitors’ platforms and, to a lesser extent, subscribers from new carrier customers added to the service in the fourth quarter. These increases were offset by a 23% decrease in our average billed rate per minute as carriers availed themselves of our volume pricing discounts. The decrease in revenues during 2001 resulted from a reduction in subscribers principally from the losses of Rogers AT&T and AT&T Wireless as customers. The decrease was partially offset by subscriber growth from our existing customers. Our subscriber base totaled 2.59 million at December 31, 2000.

In 2003, we expect that our billing and transaction processing revenues will increase compared to 2002 as we expand our prepaid wireless services subscriber base. We expect that the average billed minutes of use per subscriber per month will increase as our carrier customers aggressively market their prepaid offerings and as our new carrier customers, who launched in the latter part of 2002, build their subscriber bases. We expect that the anticipated revenue growth will be tempered, however, as carriers who generate higher minutes of use avail themselves of contracted volume pricing discounts.

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Gross margins for billing and transaction processing services increased to 71% of billing and transaction processing services revenues in 2002 from 69% of such revenues in 2001. Gross margins for billing and transaction processing services decreased in 2001 compared to 74% in 2000. The improvement in gross margin from 2001 to 2002 resulted from the significant increase in billing and transaction processing service revenues that leveraged our predominantly fixed cost infrastructure. The decrease in gross margins from 2000 to 2001 was primarily due to lower revenues. We expect that gross margins will show modest increases for 2003, compared to 2002 as revenues grow and we leverage our predominantly fixed infrastructure which will be partially offset by our investment in our payment services business and gross margins for voyager that are lower than prepaid services.

Roaming Services

Roaming services revenues decreased 47% to $6.2 million in 2002 from $11.7 million in 2001 and decreased 34% in 2001 from $17.7 million in 2000. The decrease in roaming services revenues was primarily attributable to consolidation in the industry and advancements in handset technology that have improved registered roaming capabilities and therefore decreased the need for this service. We anticipate that these trends will continue, and therefore, roaming services revenues are expected to continue to decrease about 38% in 2003 compared to the prior year.

Gross margins for roaming services decreased to 5% of roaming services revenues in 2002 from 14% of such revenues in 2001 and decreased in 2001 from 19% in 2000. The decreases in 2002 and 2001 resulted primarily from lower revenues and the resulting lower absorption of fixed costs.

Prepaid Systems

Prepaid systems revenues decreased 2% to $5.8 million in 2002 from $5.9 million in 2001 and increased 25% in 2001 from $4.7 million in 2000. Prepaid systems revenues decreased in 2002 due to a slight decrease in sales of prepaid systems to international customers. Sales in 2001 increased compared to 2000 as we sold more international systems and experienced a corresponding increase in maintenance revenue.

Gross margins for prepaid systems increased to 56% of prepaid systems revenues in 2002 from 49% of such revenues in 2001 and decreased in 2001 from 53% of such revenues in 2000. The increase in gross margins in 2002 primarily resulted from an increase in expansion sales to existing customers, which typically yield higher margins. The decrease in 2001 principally resulted from the special charge of $147,000 recorded in the fourth quarter of 2001 for accruals, inventory write-offs and severance resulting from the discontinuance of our voice mail product. In 2003, prepaid systems gross margins are expected to decrease slightly, as we expect a greater percentage of our system sales to be made to new customers that typically yield lower margins.

We currently price and sell all of our systems to international customers in U.S. dollars. All payments are received in U.S. dollars, which minimizes our need to hedge against foreign currency risk.

Operating Data

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Engineering, research and development expenses

Engineering, research and development expenses primarily include the salaries and benefits for software development and engineering personnel associated with the development, implementation and maintenance of existing and new services. Engineering, research and development expenses were 13% of total revenues in 2002, 12% of total revenues in 2001 and 11% of total revenues in 2000. The increases in absolute dollars and as a percentage of total revenue in 2002 resulted from additional resources devoted to expanding and enhancing the features and functionality of our billing and transaction processing services business. The increase as a percentage of revenue in 2001 compared to 2000 was a result of lower revenues without a corresponding reduction in research and development investment. Engineering, research and development expenses are expected to increase in 2003 since we will incur a full year of expenses from our October 31, 2002 Infotech acquisition and we intend to continue to increase expenditures to support ongoing and future development and enhancements of our prepaid and other wireless services and systems.

Sales and marketing expenses

Sales and marketing expenses include direct sales and product management salaries, commissions, travel and entertainment expenses, in addition to the cost of trade shows, direct mail and other promotional expenses. Sales and marketing expenses declined to 6% of total revenues in 2002 from 7% of total revenues in 2001. This decrease resulted from consistency in our staffing and sales strategy and approach as well as our success in effectively managing costs. Sales and marketing expenses remained consistent at 7% in 2001 and 2000 while decreasing in absolute dollars in 2001 compared to 2000 due to reductions in travel costs and other promotional expenses. Sales and marketing expenses are expected to increase in absolute dollars in 2003 due to the full year of expenses from our Infotech acquisition and to support our increased investment in the payment services business in addition to our overall growth.

General and administrative expenses

General and administrative expenses include salaries and benefits of employees and other expenses that provide our administrative support. Total general and administrative expenses remained consistent at 9% of total revenues for the years ended December 31, 2002, 2001 and 2000. The decrease in absolute dollars from 2000 to 2001 was a result of less headcount and lower bonuses earned in 2001. General and administrative expenses are expected to decrease as a percentage of revenues in 2003 as we continue to leverage our overhead as our revenues increase.

General and administrative expenses—legal charges

General and administrative legal expenses consist of special charges of $4.3 million in 2002, $3.6 million in 2001 and $2.6 million in 2000 primarily for legal expenses to defend the patent infringement suit initiated by Freedom Wireless. These legal expenses are expected to cost up to $1 million per quarter until the Freedom Wireless matter is resolved.

Depreciation and amortization expense

Depreciation and amortization expense includes depreciation of telecommunications systems, building, furniture and equipment and leasehold improvements. We provide for depreciation using the straight-line method over the estimated useful lives of the assets, which range from three to twenty years. Depreciation and amortization expense increased to 25% of total revenues for 2002 from 24% of total revenues in 2001 and remained consistent at 24% of total revenues in 2000. The increase from 2001 to 2002 primarily resulted from additional equipment and software purchased and developed to support our growth. The decrease in absolute dollars in 2001 compared to 2000 was due to fewer capital additions needed as our revenues decreased and to many assets becoming fully depreciated in late 2000 and 2001. We expect that depreciation and amortization will increase in 2003 for the following reasons: more capital deployed to support the anticipated growth and

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continued enhancements in billing and transaction processing services, a full year of amortization of the intangible assets from the Infotech acquisition and additional depreciation related to the purchase of our Bedford, Massachusetts facility.

Impairment of long-lived assets

We recognized pre-tax charges of $280,000 in 2001 and $1.1 million in 2000. The charge for 2001 was related to the write-down of hardware and software no longer used in our prepaid systems business as a result of the discontinuance of our voice mail system product. The charge for 2000 was related to the write-down of equipment no longer being used to support our billing and transaction processing services business, as such assets were not expected to generate any additional cash flows.

Interest income, net

Interest income decreased to $1.6 million in 2002 compared to $2.4 million in 2001 and increased in 2001 from $2.0 million in 2000. Interest income was earned primarily from investments which were purchased using the cash generated from operations, the sale of our teleservices business in 2000 and the proceeds from our public offerings. The decrease in interest income in 2002 was due to lower interest rates in the marketplace. The increased cash generated from operations and the sale of our teleservices business yielded additional interest income in 2001 that was partially offset by lower interest rates in 2002 and a $5.2 million decrease in our cash and short-term investments balance compared to 2001. Although we expect to continue to generate cash from operations in 2003, our purchase of the building and the lower interest rates compared to 2002 are expected to result in a decrease in interest income in 2003.

Other expense

A non-recurring charge of $894,000 for the year ended December 31, 2001 resulted primarily from the permanent impairment of a cost based investment.

Provision for income taxes

The effective income tax rate for the years ended December 31, 2002 and 2001 was 40%, which approximates the statutory rate. The effective income tax rate for the year ended December 31, 2000 was 33% principally due to the reversal of valuation allowance resulting from our utilization of net operating losses in 2000. Our income tax rate is expected to decrease slightly to about 39% in 2003 primarily due to a lower overall state income tax rate.

Income from discontinued operations

Our teleservices business, consisting primarily of customer service call center operations, was sold to Teletech Holdings, Inc. on November 7, 2000 for $15 million including the assumption of certain liabilities. The sale was reported as a discontinued operation in 2000. The gain on disposal of the teleservices business was $5.0 million, net of income taxes of $2.5 million.

Acquisition

In October 2002, the Company completed the acquisition of Infotech Solutions Corporation (ISC), a privately held provider of billing software solutions for the wireless marketplace, providing the Company with an outsourced billing product to provide postpaid and prepaid billing services for wireless carriers. The Company paid $3.5 million in cash to acquire substantially all of the assets and certain liabilities of ISC. Additional contingent cash consideration of up to $3.5 million may be paid to ISC, based on attaining certain defined annual revenue targets from 2003 through 2005. Any contingent consideration payments will be accounted for as additional goodwill. The excess of the purchase price over the fair value of the net assets acquired has been allocated to goodwill. The fair values were determined based on fair values as of the date of acquisition. Identifiable intangible assets are comprised of acquired technology and customer contracts and are being amortized over five years. The results of operations of ISC are included in the Company’s consolidated statement of income from the date of acquisition.

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Selected Quarterly Operating Results

The following table sets forth certain unaudited quarterly results of our operations for the eight quarters in the two-year period ended December 31, 2002, including such amounts expressed as a percentage of total revenues. This quarterly information is unaudited, prepared on the same basis as the audited Consolidated Financial Statements and, in the opinion of our management, reflects all necessary adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the information for the periods presented. The quarterly operating results are not necessarily indicative of future results of operations which you should read in conjunction with the audited Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K.

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Results for the three months ended December 31, 2002 include $998,000 in legal expenses incurred in defense of Freedom Wireless.

Results for the three months ended March 31, 2002 include a special charge of $3.3 million primarily for estimated legal expenses in the defense of the Freedom Wireless suit.

Results for the three months ended December 31, 2001 include special charges principally resulting from the discontinuance of our voice mail product of $280,000 for impairment of long-lived assets, including hardware and software no longer used in our business, $147,000 in cost of services consisting of accruals and inventory write-offs and $111,000 in general and administrative expenses for receivable write-offs and severance costs.

Results for the three months ended September 30, 2001 include a special charge in general and administrative—legal of $3.6 million primarily for estimated legal expenses in the defense of the Freedom Wireless suit and a special charge of $894,000 primarily for the permanent impairment of a cost-based investment.