Online shopping has grown substantially, providing businesses with a lower cost sales channel. This growth is primarily a result of the convenience, broader selection and breadth of product information available on the Internet. In addition, continued improvements in payment security and growing access to high-speed Internet connections have made online shopping increasingly efficient and attractive to consumers. According to Forrester Research, Inc., an independent research company, online retail sales were estimated to reach $95.7 billion in 2003 and expected to grow at a compound annual growth rate of 19.2% to $229.9 billion in 2008, or approximately eight times faster than overall retail sales.

Online businesses have a number of competitive advantages over traditional businesses, including lower infrastructure costs, broader consumer reach and the potential for personalized low-cost customer interaction. In addition, online businesses can quickly and efficiently react to changing consumer tastes and preferences by adjusting content, shopping interfaces, the product and service offerings they feature on their websites and the pricing of those product and service offerings. Furthermore, online businesses can more easily compile demographic and behavioral data about consumers in order to increase opportunities for direct marketing and personalized services.

The Internet represents a fast growing and cost-effective distribution channel for wireless carriers, as well as a convenient way for consumers to shop for and purchase wireless services and devices at a lower price. Forrester Research estimates that online sales of consumer electronics, which includes sales of wireless devices, will increase from $4.7 billion in 2003 to $11.7 billion in 2008, growing from 7.5% in 2003 to 16.9% in 2008 of total consumer electronics sales, and representing a compound annual growth rate of 20.0%.

The Company also offers customers the ability to purchase wireless services and devices directly from websites that the Company operates under its own brands, such as Wirefly.com. The Company leverages the same e-commerce platform, operational infrastructure and wireless carrier relationships that the Company uses for marketer-branded websites to acquire customers through its own branded websites.

In August 2002, the Company launched Liberty Wireless, the Company’s MVNO service, to market and sell wireless services directly to consumers. The Company purchases wireless airtime minutes wholesale from Sprint, which owns and operates the underlying wireless network. Liberty Wireless is primarily marketed to those customers who order wireless and service plans devices through the Company’s websites, but do not accept traditional post-paid service on the security deposit terms required by the wireless carriers.

The Company plans to utilize the e-commerce platform, operational infrastructure and wireless carrier agreement the Company has in place for Liberty Wireless to extend the Company’s MVNO capabilities to marketers who want to offer branded wireless services to their customers without having to own or operate a wireless network or operational infrastructure.

Revenues from MVNO and data services increased 207% to $41.2 million for 2003, from $13.4 million for 2002.

Cost of revenues from wireless activation and services increased 51% to $45.4 million for 2003, from $30.1 million for 2002.

Cost of revenues from MVNO and data services increased 151% to $21.3 million for 2003, from $8.5 million for 2002.

General and administrative expenses increased 56% to $36.9 million for 2003, from $23.6 million for 2002.

Sales and marketing expenses increased 72% to $30.3 million for 2003, from $17.6 million for 2002.

Depreciation and amortization expenses increased 108% to $5.4 million for 2003, from $2.6 million for 2002.