Leasing Arrangements

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Leasing Arrangements

Note 5. 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 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.

In April 2021, Verizon executed agreements that modified the tenure and payment terms for certain existing cell tower operating leases to support the build out of our fifth generation wireless network.

The components of net lease cost were as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(dollars in millions)	Classification	2021		2020		2021		2020
Operating lease cost (1)	Cost of services Selling, general and administrative expense	$	1,332	$	1,279	$	3,917	$	3,766
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization expense	65		9		198		300
Interest on lease liabilities	Interest expense	9		9		26		29
Short-term lease cost (1)	Cost of services Selling, general and administrative expense	7		5		16		17
Variable lease cost (1)	Cost of services Selling, general and administrative expense	75		74		234		226
Sublease income	Service revenues and other	(47)		(72)		(144)		(216)
Total net lease cost		$	1,441	$	1,304	$	4,247	$	4,122

(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 condensed consolidated statements of income based on the use of the facility or equipment that the rent is being paid on. Refer to the consolidated financial statements included in Verizon's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.

The Company's maturity analysis of operating and finance lease liabilities as of September 30, 2021 were as follows:

			(dollars in millions)
Years	Operating Leases		Finance Leases
Remainder of 2021	$	1,085	$	107
2022	4,233		399
2023	4,017		337
2024	3,760		268
2025	3,380		149
Thereafter	14,661		111
Total lease payments	31,136		1,371
Less interest	4,023		70
Present value of lease liabilities	27,113		1,301
Less current obligation	3,606		393
Long-term obligation at September 30, 2021	$	23,507	$	908

Leasing Arrangements

Note 5. 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 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.

In April 2021, Verizon executed agreements that modified the tenure and payment terms for certain existing cell tower operating leases to support the build out of our fifth generation wireless network.

The components of net lease cost were as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(dollars in millions)	Classification	2021		2020		2021		2020
Operating lease cost (1)	Cost of services Selling, general and administrative expense	$	1,332	$	1,279	$	3,917	$	3,766
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization expense	65		9		198		300
Interest on lease liabilities	Interest expense	9		9		26		29
Short-term lease cost (1)	Cost of services Selling, general and administrative expense	7		5		16		17
Variable lease cost (1)	Cost of services Selling, general and administrative expense	75		74		234		226
Sublease income	Service revenues and other	(47)		(72)		(144)		(216)
Total net lease cost		$	1,441	$	1,304	$	4,247	$	4,122

(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 condensed consolidated statements of income based on the use of the facility or equipment that the rent is being paid on. Refer to the consolidated financial statements included in Verizon's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.

The Company's maturity analysis of operating and finance lease liabilities as of September 30, 2021 were as follows:

			(dollars in millions)
Years	Operating Leases		Finance Leases
Remainder of 2021	$	1,085	$	107
2022	4,233		399
2023	4,017		337
2024	3,760		268
2025	3,380		149
Thereafter	14,661		111
Total lease payments	31,136		1,371
Less interest	4,023		70
Present value of lease liabilities	27,113		1,301
Less current obligation	3,606		393
Long-term obligation at September 30, 2021	$	23,507	$	908