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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number: 0-21213

LCC International, Inc.

Registrant’s Telephone Number, Including Area Code:

(703) 873-2000

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

Not Applicable

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

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

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

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

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

      Based upon the closing price of the registrant’s common stock as of June 30, 2003, the aggregate market value of the common stock held by non-affiliates of the registrant is $23,698,543.*

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

DOCUMENTS INCORPORATED BY REFERENCE

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

      (1) Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 26, 2004 (the “Proxy Statement”) are incorporated by reference into Part III, Items 10 – 14 of this Form 10-K.

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

TABLE OF CONTENTS

      This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. These statements can be identified by the use of forward looking terminology, such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue” or the negative thereof or other variations thereon or comparable terminology. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Form 10-K. See the “Risk Factors” section of Item 1 “Business” for cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from results referred to in forward-looking statements.

PART I

Item 1.     Business

Overview

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

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

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

Industry Background

      Wireless networks are telecommunications systems built using radio-based systems that allow a telephone set or data terminal to communicate without a metallic or optical cord or wire equipment. The life cycle of a wireless network continually evolves and consists of several phases including strategic planning, design, deployment, expansion, and operations and maintenance. During the strategic planning phase, operators pursue the licenses necessary to build out a wireless system and make decisions about the type of technology and equipment to be used, where it will be located and how it will be configured. Technical planning and preliminary engineering designs are often required to decide on a deployment strategy and determine construction costs and the revenue generating ability of the wireless system.

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

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

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

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

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

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

	•	The issuance of new or additional licenses to wireless service providers. After receiving new or additional licenses necessary to build out their wireless systems, wireless service providers must make decisions about what type of technology and equipment will be used, where it will be located and how it will be configured. In addition, detailed site location designs must be prepared and radio frequency engineers must review interference to or from co-located antennae. Construction and equipment installation then must be performed and professional technicians must install and commission the new radio equipment, test and integrate it with existing networks and tune the components to optimize performance. Recently we have seen increased spending by wireless service providers as a result of license swaps by providers seeking to maximize spectrum use and increase coverage. For example, after U.S. Cellular received spectrum licenses from AT&T Wireless in August 2003, U.S. Cellular engaged us to provide turnkey design and deployment services for its wireless networks in several cities covered by these licenses. This project will involve the development of a design by our radio frequency, or RF, engineers that meets U.S. Cellular’s requirements, the acquisition of rights to existing wireless sites or the development of new sites to match the design, the preparation of these sites as necessary to receive U.S. Cellular’s radio equipment, and the installation, powering and testing of the equipment to ensure that it meets U.S. Cellular’s expectations.
	•	The introduction of new services or technologies. Although wireless service providers traditionally have relied upon their internal engineering workforces to address a significant portion of their wireless

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

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

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

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The LCC Solution

      We help wireless service providers around the world address the issues they face in developing networks to meet subscriber demand, reduce their costs and add new services and functionality. In addressing these issues and the need for wireless service providers, telecommunications equipment vendors and others to outsource an increasing portion of their wireless network services, we believe that we distinguish ourselves through several competitive advantages:

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

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

	•	Speed to market. Our expertise, global presence and processes enable us to respond quickly to support our customers’ deployment objectives. Members of our technical, design and deployment teams often work together with the customer at the initial stage of a project in order to plan an effective and efficient solution for the customer’s needs.
	•	Worldwide depth of resources. Our system deployment professionals collectively have experience deploying networks in the major markets in the United States as well as many countries throughout the world. As of December 31, 2003, approximately 45% of our billable employees were employed outside the United States and represented 49 different nationalities. During the past 20 years, our professionals have designed wireless networks employing all major technologies in North America, Europe, Asia, Latin America, the Middle East and Africa. Our professional staff is highly educated with many of our engineering professionals holding masters degrees or doctorates.

LCC Services

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

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      Applying our extensive technical and operational expertise and experience, we may be initially engaged by a wireless customer to analyze the engineering and technology issues related to a proposed network deployment project. From assisting customers with evaluating their business plans, to licensing and application support, technology assessments and defining and refining implementation strategies, our team of senior wireless professionals focuses on providing our customers with key insights into all aspects of wireless communications and the impact that a new technology, device or application might have on the industry. We also provide training to our engineers and our customers through our Wireless Institute, which covers the latest technologies developed and employed throughout the world. Over the past four years, our Wireless Institute has taught over 500 classes worldwide.

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

      In addition, because most wireless calls are ultimately routed through a wireline network, traffic from wireless networks must be connected with switching centers within wireline networks. Our fixed network engineers determine the most effective method to connect cell sites to the wireline backbone. We also provide services to cover the core network including interconnect, switching and microwave engineering for all access technologies, including connection into the telecommunications infrastructures of competitive local exchange carriers, or CLECs, and incumbent local exchange carriers, or ILECs.

      Competitive benchmarking. We provide system analyses to our wireless customers for the measurement of network performance, including “benchmarking” versus competitors based upon an extensive set of parameters such as call quality, drop call rates, signal strength and coverage.

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

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

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

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

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

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

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

Geographic Organization

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

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

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

Business Strategy

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

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

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

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

Customers and Backlog

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

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

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

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

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Sales and Marketing

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

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

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

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

Competition

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

	•	internal staffs of wireless and wireline service providers;
	•	telecommunications equipment vendors, such as Ericsson and Nortel, which frequently provide design and deployment services as part of an equipment sale;
	•	independent service companies, such as Wireless Facilities, Inc., which provide a full range of wireless network services, and a large number of other companies that provide limited wireless services;

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

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

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

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

Employees

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

Recent Developments

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

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

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

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International Operations

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

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

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

Government Regulation

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

Risk Factors

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      Our contracts typically have provisions that permit customers to terminate their contracts under various circumstances, including termination for convenience. We also believe that intense competition and the current trend in industry contracting toward shorter-term contracts that provide increased grounds for customer termination may result in increased frequency of customer termination or renegotiation. If large projects, or a number of projects that in the aggregate account for a material amount of our revenues, are suspended for any significant length of time or terminated, we may encounter difficulty replacing such revenues and our operating results would decline as a result of our decreased revenues.

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

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

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

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

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

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

      We may not be able to reduce our expenses in order to timely correspond with any decrease in our revenues and our failure to do so would decrease our gross profits. Efforts to reduce costs may include a restructuring of our business, reduction in headcount, office closings and the reduction or elimination of other administrative functions. Costs of compliance with domestic and international regulations associated with such headcount reductions, particularly in Europe, the Middle East and Africa, where we anticipate considerable growth, could be significant. Our efforts to reduce expenses could give rise to significant accounting charges and the payment of certain separation or severance benefits. In 2002, we experienced difficulties reducing general and administrative expenses at the same rate and in the same proportion as our revenues decreased in that year. Any significant decrease in our revenues may have an immediate and material adverse effect on our net margins.

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

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

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

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

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

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

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

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

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

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

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

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

	•	the effects of terrorism;
	•	the general economic and political conditions in each country;
	•	the effect of applicable foreign tax structures, including tax rates that may be higher than tax rates in the United States;
	•	tariff and trade regulations;
	•	management of a geographically diverse organization;
	•	difficulties and increased expenses in complying with a variety of foreign laws and regulations, including labor, employment and immigration laws; and
	•	changes in the applicable industry regulatory environments in foreign countries, including delays in deregulation or privatization affecting the pace at which wireless licenses are awarded.

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

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

      Although we generally incur project expenses in the same currency in which payments are received under the contract, we do not currently engage in additional currency hedging activities to limit the risk of exchange rate fluctuations. Therefore, fluctuations in the currency exchange rate could have a negative impact on the profitability of our operations particularly if: (i) we cannot incur project expenses in the same currency in which payments are received under the contract; and (ii) there is a negative impact when converting back to United States dollars. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Quantitative and Qualitative Disclosures About Market Risk and Foreign Exchange Risk.”

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

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

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

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

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

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

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

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

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

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

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

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

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

      As a service business our success depends significantly on our ability to attract, train and retain engineering, system deployment, managerial, marketing and sales personnel who have excellent technical skills, particularly as technology changes, as well as the interpersonal skills crucial to fostering client satisfaction. Competition within the wireless industry for employees with the required range of skills fluctuates, depending on customer needs, and can be intense, particularly for radio frequency engineers. At

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

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

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

      We have made three acquisitions since December 2001 and may make additional acquisitions in the future. The three companies acquired are small, regional operations that are highly dependent on the relationships between the principals of such companies and our customers.

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

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

      We may make future acquisitions of, or investments in, other companies or technologies. Any future acquisitions or investments may require additional debt or equity financing, or the issuance of shares, which could be dilutive to our existing stockholders. In addition, our operating results may suffer as a result of any acquisition-related costs or impairment of goodwill and other intangible assets acquired in connection with an acquisition (please see note 11 to our consolidated financial statements on page 51). In addition, acquisitions could expose us to a number of other risks and challenges, including:

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

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

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

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

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

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

   Government regulations may adversely affect our business.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      None.

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PART II

      Since completion of our initial public offering in September 1996, our class A common stock has been quoted on the NASDAQ National Market under the trading symbol “LCCI.” As of March 22, 2004, there were 103 stockholders of record of the class A common stock and one stockholder of record of the class B common stock. As of March 22, 2004, we estimate there were in excess of 5,000 beneficial holders of class A common stock. The following table summarizes the high and low sales prices of the class A common stock by fiscal quarter for 2002 and 2003 as reported on the NASDAQ National Market:

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

Equity Compensation Plan Information

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

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

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Item 6.     Selected Financial Data

      Set forth below are selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2003, which have been derived from our consolidated financial statements. The selected consolidated financial data set forth below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included in this Form 10-K.

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

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

Overview

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

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

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

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

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

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

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

      Our primary sources of revenues are from engineering design and system deployment services. Revenues from services are derived both from fixed price and time and materials contracts. We recognize revenues from fixed price service contracts using the percentage-of-completion method and therefore recognize revenues based on the ratio of individual contract costs incurred to date on a project compared with total estimated costs. Anticipated contract losses are recognized as they become known and estimable. We recognize revenues on time and materials contracts as the services are performed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Results of Operations

      The discussion below provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and accompanying notes thereto included elsewhere herein.

Revenues, Cost of Revenues and Gross Margins

Americas

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

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

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

EMEA

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

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

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

Asia and other

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

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

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Operating Expenses

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

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

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

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

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

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

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Other Income and Expense

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

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

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

Tax Benefit or (Expense)