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Leasing Arrangements

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leasing Arrangements

Note 6. Leasing Arrangements

We enter into various lease arrangements for network equipment including towers, distributed antenna systems, small cells, real estate and connectivity mediums including dark fiber, equipment, and other various types of assets for use in our operations. Our leases have remaining lease terms ranging from 1 year to 30 years, some of which include options that we can elect to extend the leases term for up to 25 years, and some of which include options to terminate the leases. For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease or not terminate the lease. Therefore, as of the lease commencement date, our lease terms generally do not include these options. We include options to extend the lease when it is reasonably certain that we will exercise that option.

During March 2015, we completed a transaction with American Tower Corporation (American Tower) pursuant to which American Tower acquired the exclusive rights to lease and operate approximately 11,300 of our wireless towers for an upfront payment of $5.0 billion. We have subleased capacity on the towers from American Tower for a minimum of 10 years at current market rates in 2015, with options to renew. We continue to include the towers in Property, plant and equipment, net in our consolidated balance sheets and depreciate them accordingly. In addition to the rights to lease and operate the towers, American Tower assumed the interest in the underlying ground leases related to these towers. While American Tower can renegotiate the terms of and is responsible for paying the ground leases, we are still the primary obligor for these leases and accordingly, the present value of these ground leases are included in our operating lease right-of-use assets and operating lease liabilities. We do not expect to be required to make ground lease payments unless American Tower defaults, which we determined to be remote.

The components of net lease cost were as follows:

						(dollars in millions)
Years Ended December 31,			Classification			2023						2022						2021
Operating lease cost(1)			Cost of services Selling, general and administrative expense			$	5,432					$	5,345					$	5,248
Finance lease cost:
Amortization of right-of-use assets			Depreciation and amortization expense			259						224						259
Interest on lease liabilities			Interest expense			69						36						34
Short-term lease cost(1)			Cost of services Selling, general and administrative expense			29						23						21
Variable lease cost(1)			Cost of services Selling, general and administrative expense			313						294						307
Sublease income			Service revenues and other			(210)						(199)						(193)
Total net lease cost						$	5,892					$	5,723					$	5,676

(1) All operating lease costs, including short-term and variable lease costs, are split between Cost of services and Selling, general and administrative expense in the consolidated statements of income based on the use of the facility or equipment that the rent is being paid on. See Note 1 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.

Supplemental disclosure for the statements of cash flows related to operating and finance leases were as follows:

			(dollars in millions)
Years Ended December 31,			2023						2022						2021
Cash Flows from Operating Activities
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases			$	(4,929)					$	(4,490)					$	(4,658)
Operating cash flows for finance leases			(69)						(36)						(34)
Cash Flows from Financing Activities
Financing cash flows for finance leases			(612)						(449)						(394)
Supplemental lease cash flow disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities			2,634						2,392						9,778
Right-of-use assets obtained in exchange for new finance lease liabilities			968						832						461

Supplemental disclosures for the balance sheet related to finance leases were as follows:

			(dollars in millions)
At December 31,			2023						2022
Assets
Property, plant and equipment, net			$	1,459					$	1,138
Liabilities
Debt maturing within one year			$	753					$	565
Long-term debt			1,338						1,167
Total Finance lease liabilities			$	2,091					$	1,732

The weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows:

At December 31,			2023						2022
Weighted-average remaining lease term (years)
Operating leases			8						8
Finance leases			3						4
Weighted-average discount rate
Operating leases			3.6		%				3.2		%
Finance leases			2.9		%				2.5		%

The following table presents the maturity analysis of operating and finance lease liabilities as of December 31, 2023:

									(dollars in millions)
Years			Operating Leases						Finance Leases
2024			$	4,763					$	793
2025			4,416						665
2026			4,065						424
2027			3,744						217
2028			2,406						94
Thereafter			9,008						61
Total lease payments			28,402						2,254
Less interest			4,134						163
Present value of lease liabilities			24,268						2,091
Less current obligation			4,266						753
Long-term obligation at December 31, 2023			$	20,002					$	1,338

As of December 31, 2023, we have contractually obligated lease payments amounting to $1.7 billion primarily for office facility operating leases and small cell colocation and fiber operating leases that have not yet commenced. We have legally obligated lease payments for various other operating leases that have not yet commenced for which the total obligation was not significant. We have certain rights and obligations for these leases, but have not recognized an operating lease right-of-use asset or an operating lease liability since they have not yet commenced.

Leasing Arrangements

Note 6. Leasing Arrangements

We enter into various lease arrangements for network equipment including towers, distributed antenna systems, small cells, real estate and connectivity mediums including dark fiber, equipment, and other various types of assets for use in our operations. Our leases have remaining lease terms ranging from 1 year to 30 years, some of which include options that we can elect to extend the leases term for up to 25 years, and some of which include options to terminate the leases. For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease or not terminate the lease. Therefore, as of the lease commencement date, our lease terms generally do not include these options. We include options to extend the lease when it is reasonably certain that we will exercise that option.

During March 2015, we completed a transaction with American Tower Corporation (American Tower) pursuant to which American Tower acquired the exclusive rights to lease and operate approximately 11,300 of our wireless towers for an upfront payment of $5.0 billion. We have subleased capacity on the towers from American Tower for a minimum of 10 years at current market rates in 2015, with options to renew. We continue to include the towers in Property, plant and equipment, net in our consolidated balance sheets and depreciate them accordingly. In addition to the rights to lease and operate the towers, American Tower assumed the interest in the underlying ground leases related to these towers. While American Tower can renegotiate the terms of and is responsible for paying the ground leases, we are still the primary obligor for these leases and accordingly, the present value of these ground leases are included in our operating lease right-of-use assets and operating lease liabilities. We do not expect to be required to make ground lease payments unless American Tower defaults, which we determined to be remote.

The components of net lease cost were as follows:

						(dollars in millions)
Years Ended December 31,			Classification			2023						2022						2021
Operating lease cost(1)			Cost of services Selling, general and administrative expense			$	5,432					$	5,345					$	5,248
Finance lease cost:
Amortization of right-of-use assets			Depreciation and amortization expense			259						224						259
Interest on lease liabilities			Interest expense			69						36						34
Short-term lease cost(1)			Cost of services Selling, general and administrative expense			29						23						21
Variable lease cost(1)			Cost of services Selling, general and administrative expense			313						294						307
Sublease income			Service revenues and other			(210)						(199)						(193)
Total net lease cost						$	5,892					$	5,723					$	5,676

(1) All operating lease costs, including short-term and variable lease costs, are split between Cost of services and Selling, general and administrative expense in the consolidated statements of income based on the use of the facility or equipment that the rent is being paid on. See Note 1 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.

Supplemental disclosure for the statements of cash flows related to operating and finance leases were as follows:

			(dollars in millions)
Years Ended December 31,			2023						2022						2021
Cash Flows from Operating Activities
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases			$	(4,929)					$	(4,490)					$	(4,658)
Operating cash flows for finance leases			(69)						(36)						(34)
Cash Flows from Financing Activities
Financing cash flows for finance leases			(612)						(449)						(394)
Supplemental lease cash flow disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities			2,634						2,392						9,778
Right-of-use assets obtained in exchange for new finance lease liabilities			968						832						461

Supplemental disclosures for the balance sheet related to finance leases were as follows:

			(dollars in millions)
At December 31,			2023						2022
Assets
Property, plant and equipment, net			$	1,459					$	1,138
Liabilities
Debt maturing within one year			$	753					$	565
Long-term debt			1,338						1,167
Total Finance lease liabilities			$	2,091					$	1,732

The weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows:

At December 31,			2023						2022
Weighted-average remaining lease term (years)
Operating leases			8						8
Finance leases			3						4
Weighted-average discount rate
Operating leases			3.6		%				3.2		%
Finance leases			2.9		%				2.5		%

The following table presents the maturity analysis of operating and finance lease liabilities as of December 31, 2023:

									(dollars in millions)
Years			Operating Leases						Finance Leases
2024			$	4,763					$	793
2025			4,416						665
2026			4,065						424
2027			3,744						217
2028			2,406						94
Thereafter			9,008						61
Total lease payments			28,402						2,254
Less interest			4,134						163
Present value of lease liabilities			24,268						2,091
Less current obligation			4,266						753
Long-term obligation at December 31, 2023			$	20,002					$	1,338

As of December 31, 2023, we have contractually obligated lease payments amounting to $1.7 billion primarily for office facility operating leases and small cell colocation and fiber operating leases that have not yet commenced. We have legally obligated lease payments for various other operating leases that have not yet commenced for which the total obligation was not significant. We have certain rights and obligations for these leases, but have not recognized an operating lease right-of-use asset or an operating lease liability since they have not yet commenced.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

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-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
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-URI https://asc.fasb.org//842-20/tableOfContent

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The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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