Leasing Arrangements

12 Months Ended

Dec. 31, 2024

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 December 2024, we completed a transaction with Vertical Bridge REIT, LLC (Vertical Bridge) pursuant to which Vertical Bridge obtained the exclusive rights to lease, operate and manage over 6,000 wireless towers from Verizon in exchange for an upfront payment of $2.8 billion. Under the terms of the agreement, Vertical Bridge has exclusive rights to lease, operate and manage the towers over an average term of approximately 30 years, with the option to acquire the towers at the end of the lease terms. We have leased back a portion of the capacity on the towers from Vertical Bridge for an initial term of 10 years, with eight optional renewal terms of five years each, subject to certain early termination rights. We continue to include the towers in Property, plant and equipment, net in our consolidated balance sheets and depreciate them accordingly. The upfront payment, which is primarily included within Other liabilities on our consolidated balance sheet, is accounted for as prepaid rent and as a financing obligation. We recorded prepaid rent of $2.0 billion related to the portion of the towers for which the right-of-use has passed to Vertical Bridge, which is reflected in Cash flows from operating activities in our consolidated statements of cash flows. In addition, we recorded a financing obligation of $830 million related to the portion of the towers that we continue to occupy and use for network operations, which is reflected in Cash flows from financing activities in our consolidated statements of cash flows.

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, Vertical Bridge and American Tower assumed the interest in the underlying ground leases related to these towers. While Vertical Bridge and American Tower can renegotiate the terms of and are 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 Vertical Bridge or 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	2024		2023		2022
Operating lease cost(1)	Cost of services Selling, general and administrative expense	$	5,607	$	5,432	$	5,345
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization expense	329		259		224
Interest on lease liabilities	Interest expense	98		69		36
Short-term lease cost(1)	Cost of services Selling, general and administrative expense	21		29		23
Variable lease cost(1)	Cost of services Selling, general and administrative expense	310		313		294
Sublease income	Service revenues and other	(216)		(210)		(199)
Total net lease cost		$	6,149	$	5,892	$	5,723

(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,	2024		2023		2022
Cash Flows from Operating Activities
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	(5,067)	$	(4,929)	$	(4,490)
Operating cash flows for finance leases	(98)		(69)		(36)
Cash Flows from Financing Activities
Financing cash flows for finance leases	(794)		(612)		(449)
Supplemental lease cash flow disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	4,385		2,634		2,392
Right-of-use assets obtained in exchange for new finance lease liabilities	1,051		968		832

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

	(dollars in millions)
At December 31,	2024		2023
Assets
Property, plant and equipment, net	$	1,692	$	1,459
Liabilities
Debt maturing within one year	$	894	$	753
Long-term debt	1,455		1,338
Total Finance lease liabilities	$	2,349	$	2,091

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

At December 31,	2024		2023
Weighted-average remaining lease term (years)
Operating leases	8		8
Finance leases	3		3
Weighted-average discount rate
Operating leases	4.1	%	3.6	%
Finance leases	4.8	%	2.9	%

The following table presents the maturity analysis of operating and finance lease liabilities as of December 31, 2024:

			(dollars in millions)
Years	Operating Leases		Finance Leases
2025	$	5,013	$	954
2026	4,685		714
2027	4,392		457
2028	3,004		248
2029	2,505		116
Thereafter	9,451		53
Total lease payments	29,050		2,542
Less interest	4,707		193
Present value of lease liabilities	24,343		2,349
Less current obligation	4,415		894
Long-term obligation at December 31, 2024	$	19,928	$	1,455

As of December 31, 2024, we have contractually obligated lease payments amounting to $1.4 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 December 2024, we completed a transaction with Vertical Bridge REIT, LLC (Vertical Bridge) pursuant to which Vertical Bridge obtained the exclusive rights to lease, operate and manage over 6,000 wireless towers from Verizon in exchange for an upfront payment of $2.8 billion. Under the terms of the agreement, Vertical Bridge has exclusive rights to lease, operate and manage the towers over an average term of approximately 30 years, with the option to acquire the towers at the end of the lease terms. We have leased back a portion of the capacity on the towers from Vertical Bridge for an initial term of 10 years, with eight optional renewal terms of five years each, subject to certain early termination rights. We continue to include the towers in Property, plant and equipment, net in our consolidated balance sheets and depreciate them accordingly. The upfront payment, which is primarily included within Other liabilities on our consolidated balance sheet, is accounted for as prepaid rent and as a financing obligation. We recorded prepaid rent of $2.0 billion related to the portion of the towers for which the right-of-use has passed to Vertical Bridge, which is reflected in Cash flows from operating activities in our consolidated statements of cash flows. In addition, we recorded a financing obligation of $830 million related to the portion of the towers that we continue to occupy and use for network operations, which is reflected in Cash flows from financing activities in our consolidated statements of cash flows.

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, Vertical Bridge and American Tower assumed the interest in the underlying ground leases related to these towers. While Vertical Bridge and American Tower can renegotiate the terms of and are 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 Vertical Bridge or 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	2024		2023		2022
Operating lease cost(1)	Cost of services Selling, general and administrative expense	$	5,607	$	5,432	$	5,345
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization expense	329		259		224
Interest on lease liabilities	Interest expense	98		69		36
Short-term lease cost(1)	Cost of services Selling, general and administrative expense	21		29		23
Variable lease cost(1)	Cost of services Selling, general and administrative expense	310		313		294
Sublease income	Service revenues and other	(216)		(210)		(199)
Total net lease cost		$	6,149	$	5,892	$	5,723

(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,	2024		2023		2022
Cash Flows from Operating Activities
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	(5,067)	$	(4,929)	$	(4,490)
Operating cash flows for finance leases	(98)		(69)		(36)
Cash Flows from Financing Activities
Financing cash flows for finance leases	(794)		(612)		(449)
Supplemental lease cash flow disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	4,385		2,634		2,392
Right-of-use assets obtained in exchange for new finance lease liabilities	1,051		968		832

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

	(dollars in millions)
At December 31,	2024		2023
Assets
Property, plant and equipment, net	$	1,692	$	1,459
Liabilities
Debt maturing within one year	$	894	$	753
Long-term debt	1,455		1,338
Total Finance lease liabilities	$	2,349	$	2,091

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

At December 31,	2024		2023
Weighted-average remaining lease term (years)
Operating leases	8		8
Finance leases	3		3
Weighted-average discount rate
Operating leases	4.1	%	3.6	%
Finance leases	4.8	%	2.9	%

The following table presents the maturity analysis of operating and finance lease liabilities as of December 31, 2024:

			(dollars in millions)
Years	Operating Leases		Finance Leases
2025	$	5,013	$	954
2026	4,685		714
2027	4,392		457
2028	3,004		248
2029	2,505		116
Thereafter	9,451		53
Total lease payments	29,050		2,542
Less interest	4,707		193
Present value of lease liabilities	24,343		2,349
Less current obligation	4,415		894
Long-term obligation at December 31, 2024	$	19,928	$	1,455

As of December 31, 2024, we have contractually obligated lease payments amounting to $1.4 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.