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Leases
 12 Months Ended
Dec. 31, 2023
Presentation of leases for lessee [abstract]  
Leases
10.
Leases

Group as a Lessee

We have lease contracts for various items of sites, buildings, leased circuits and poles used in our operations. We considered in the lease term the non-cancellable period of the lease together with the periods covered by an option to extend and option to terminate the lease.

Our consolidated estimated useful lives of ROU assets as at December 31, 2023 are as follows:

 

Sites

 

1 – 30 years

International leased circuits(1)

 

2 – 20 years

Poles(2)

 

1 – 12 years

Domestic leased circuits

 

1 – 10 years

Office buildings

 

1 – 25 years

Co-located sites(3)

 

3 – 11 years

 

(1)
As at December 31, 2022, the estimated useful life ranges from 1-11 years.
(2)
As at December 31, 2022, the estimated useful life ranges from 2-12 years.
(3)
As at December 31, 2022, the estimated useful life ranges from 3-7 years.

Our consolidated rollforward analysis of ROU assets as at December 31, 2023 and 2022 are as follows:

 

 

Sites

 

 

International
Leased
Circuits

 

 

Poles

 

 

Domestic
Leased
Circuits

 

 

Office
Buildings

 

 

Co-located
Sites

 

 

Sale and Leaseback Adjustment

 

 

Total

 

 

 

(in million pesos)

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at beginning of the year

 

 

23,093

 

 

 

4,257

 

 

 

3,631

 

 

 

1,732

 

 

 

1,669

 

 

 

10

 

 

 

—

 

 

 

34,392

 

Additions (Note 28)

 

 

32,735

 

 

 

402

 

 

 

116

 

 

 

851

 

 

 

165

 

 

 

5

 

 

 

—

 

 

 

34,274

 

Business combination

 

 

90

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

90

 

Currency translation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

1

 

Disposals

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5

)

 

 

—

 

 

 

—

 

 

 

(5

)

Asset retirement obligation

 

 

(1,412

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(95

)

 

 

—

 

 

 

—

 

 

 

(1,507

)

Modifications

 

 

(7

)

 

 

(106

)

 

 

432

 

 

 

(8

)

 

 

1

 

 

 

—

 

 

 

(12,776

)

 

 

(12,464

)

Terminations

 

 

(12,188

)

 

 

(294

)

 

 

—

 

 

 

(139

)

 

 

(316

)

 

 

—

 

 

 

—

 

 

 

(12,937

)

Balances at end of the year

 

 

42,311

 

 

 

4,259

 

 

 

4,179

 

 

 

2,436

 

 

 

1,420

 

 

 

15

 

 

 

(12,776

)

 

 

41,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at beginning of the year

 

 

(8,666

)

 

 

(2,014

)

 

 

(1,629

)

 

 

(966

)

 

 

(1,030

)

 

 

(6

)

 

 

—

 

 

 

(14,311

)

Terminations

 

 

4,923

 

 

 

150

 

 

 

—

 

 

 

71

 

 

 

293

 

 

 

—

 

 

 

—

 

 

 

5,437

 

Charge from asset retirement obligation

 

 

1,545

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

103

 

 

 

—

 

 

 

—

 

 

 

1,648

 

Disposals

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5

 

 

 

—

 

 

 

—

 

 

 

5

 

Currency translation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

(1

)

Modifications

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(10

)

 

 

—

 

 

 

—

 

 

 

(10

)

Business combination

 

 

(33

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(33

)

Depreciation from continuing operations (Notes 2 and 3)

 

 

(3,803

)

 

 

(832

)

 

 

(875

)

 

 

(475

)

 

 

(313

)

 

 

(3

)

 

 

640

 

 

 

(5,661

)

Depreciation from discontinued operations (Notes 2 and 3)

 

 

(21

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(34

)

 

 

—

 

 

 

—

 

 

 

(55

)

Balances at end of the year

 

 

(6,055

)

 

 

(2,696

)

 

 

(2,504

)

 

 

(1,370

)

 

 

(987

)

 

 

(9

)

 

 

640

 

 

 

(12,981

)

Net book value as at December 31, 2022

 

 

36,256

 

 

 

1,563

 

 

 

1,675

 

 

 

1,066

 

 

 

433

 

 

 

6

 

 

 

(12,136

)

 

 

28,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at beginning of the year

 

 

42,311

 

 

 

4,259

 

 

 

4,179

 

 

 

2,436

 

 

 

1,420

 

 

 

15

 

 

 

(12,776

)

 

 

41,844

 

Additions (Note 28)

 

 

14,942

 

 

 

341

 

 

 

66

 

 

 

99

 

 

 

255

 

 

 

56

 

 

 

—

 

 

 

15,759

 

Asset retirement obligation

 

 

93

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(26

)

 

 

—

 

 

 

—

 

 

 

67

 

Modifications

 

 

(35

)

 

 

(46

)

 

 

(851

)

 

 

(326

)

 

 

(149

)

 

 

(18

)

 

 

—

 

 

 

(1,425

)

Terminations

 

 

(2,117

)

 

 

(249

)

 

 

(30

)

 

 

(208

)

 

 

(341

)

 

 

—

 

 

 

(1,449

)

 

 

(4,394

)

Reclassification to ROU assets classified as held-for-sale

 

 

(2,508

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,508

)

Balances at end of the year

 

 

52,686

 

 

 

4,305

 

 

 

3,364

 

 

 

2,001

 

 

 

1,159

 

 

 

53

 

 

 

(14,225

)

 

 

49,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at beginning of the year

 

 

(6,055

)

 

 

(2,696

)

 

 

(2,504

)

 

 

(1,370

)

 

 

(987

)

 

 

(9

)

 

 

640

 

 

 

(12,981

)

Modifications

 

 

23

 

 

 

—

 

 

 

278

 

 

 

147

 

 

 

236

 

 

 

6

 

 

 

—

 

 

 

690

 

Charge from asset retirement obligation

 

 

16

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17

 

 

 

—

 

 

 

—

 

 

 

33

 

Terminations

 

 

1,292

 

 

 

220

 

 

 

10

 

 

 

208

 

 

 

183

 

 

 

—

 

 

 

(129

)

 

 

1,784

 

Depreciation from continuing operations (Notes 2 and 3)

 

 

(5,493

)

 

 

(822

)

 

 

(940

)

 

 

(617

)

 

 

(332

)

 

 

(36

)

 

 

1,342

 

 

 

(6,898

)

Depreciation from discontinued operations (Notes 2 and 3)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(19

)

 

 

—

 

 

 

—

 

 

 

(19

)

Reclassification to ROU assets classified as held-for-sale

 

 

765

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

765

 

Balances at end of the year

 

 

(9,452

)

 

 

(3,298

)

 

 

(3,156

)

 

 

(1,632

)

 

 

(902

)

 

 

(39

)

 

 

1,853

 

 

 

(16,626

)

Net book value as at December 31, 2023

 

 

43,234

 

 

 

1,007

 

 

 

208

 

 

 

369

 

 

 

257

 

 

 

14

 

 

 

(12,372

)

 

 

32,717

 

The following amounts are recognized in our consolidated income statements for the years ended December 31, 2023, 2022 and 2021:

 

 

 

2023

 

 

2022

 

 

2021

 

 

 

 

 

(in million pesos)

 

 

Depreciation expense of ROU assets from continuing operations (Note 3)

 

 

6,898

 

 

 

5,661

 

 

 

5,330

 

Depreciation expense of ROU assets from discontinued operations (Notes 2 and 3)

 

 

19

 

 

 

55

 

 

 

58

 

Interest expense on lease liabilities from continuing operations (Note 5)

 

 

3,266

 

 

 

2,057

 

 

 

1,158

 

Interest expense on lease liabilities from discontinued operations

 

 

2

 

 

 

7

 

 

 

12

 

Variable lease payments (included in general and administrative expenses)
   from continuing operations

 

 

656

 

 

 

587

 

 

 

780

 

Variable lease payments (included in general and administrative expenses)
   from discontinued operations

 

 

(2

)

 

 

2

 

 

 

(9

)

Expenses relating to short-term leases
   (included in general and administrative expenses) (Note 5)

 

 

714

 

 

 

1,440

 

 

 

1,459

 

Expenses relating to leases of low-value assets
   (included in general and administrative expenses) (Note 5)

 

 

2

 

 

 

2

 

 

 

1

 

Total amount recognized in consolidated income statements

 

 

11,555

 

 

 

9,811

 

 

 

8,789

 

 

Our consolidated rollforward analysis of lease liabilities as at December 31, 2023 and 2022 are as follows:

 

 

 

2023

 

 

2022

 

 

 

(in million pesos)

 

Balances at beginning of the year

 

 

42,435

 

 

 

21,686

 

Additions (Note 28)

 

 

15,759

 

 

 

34,277

 

Accretion on lease liabilities from continuing operations (Note 5)

 

 

3,266

 

 

 

2,057

 

Accretion on lease liabilities from discontinued operations

 

 

2

 

 

 

7

 

Business combination

 

 

—

 

 

 

46

 

Reclassification to lease liabilities classified as held-for-sale

 

 

(1,503

)

 

 

(1,668

)

Foreign exchange gains – net

 

 

1

 

 

 

215

 

Lease modifications

 

 

(933

)

 

 

317

 

Termination

 

 

(774

)

 

 

(6,171

)

Settlement of obligations

 

 

(10,707

)

 

 

(8,331

)

Balances at end of the year (Notes 3 and 28)

 

 

47,546

 

 

 

42,435

 

Less current portion of lease liabilities (Note 27)

 

 

5,921

 

 

 

10,477

 

Noncurrent portion of lease liabilities (Note 27)

 

 

41,625

 

 

 

31,958

 

 

We had total cash outflows for leases of Php10,707 million, Php8,331 million and Php6,547 million for the years ended December 31, 2023, 2022 and 2021, respectively. We had non-cash additions to ROU assets of Php15,759 million and Php34,274 million and lease liabilities of Php15,759 million and Php34,277 million both as at December 31, 2023 and 2022, respectively. The future cash outflows relating to leases that have not yet commenced are disclosed in Note 28 – Notes to the Statements of Cash Flows.

We have entered into several lease contracts that include automatic extension and termination options. These options are negotiated by us to provide flexibility in managing the leased-asset portfolio and align with our business needs. However, in some of these lease contracts, we did not impute the renewal period in our assessment of the lease terms of these contracts since said renewal period is not yet reasonably estimable at the time of transition or commencement date of the lease, see Note 3 – Managements Use of Accounting Judgments, Estimates and Assumptions – Determining the lease term of contracts with renewal and termination options – Company as a Lessee.

As disclosed in Note 9 – Property and Equipment, on the sale and leaseback of telecom towers, Smart and DMPI signed Sale and Purchase Agreements with the TowerCos in connection with the sale of 7,569 telecom towers and related passive telecom infrastructure, with the concurrent execution of MSAs with the TowerCos where Smart has agreed to leaseback the towers sold in the transaction for a period of 10 years.

In 2022 and in 2023, the MSAs covering the leaseback arrangements of 4,665 and 998 telecom towers, respectively, became effective. As a result, we recognized cumulative lease liability of Php23,696 million and cumulative ROU assets of Php22,418 million as at December 31, 2023. The difference between lease liability and ROU assets represents the rights retained by the PLDT Group over the telecom assets leased back from the tower companies.

Including the related accounts on Unity and Frontier, the ROU assets relating to leasehold land with net book value of Php1,844 million and Php1,646 million, and the related lease liabilities amounting to Php1,779 million and Php1,738 million were respectively reclassified as “Assets classified as held-for-sale” under current assets and “Liabilities associated with assets classified as held-for-sale” under current liabilities in our consolidated statement of financial position as at
December 31, 2023 and 2022, respectively.

Common Tower Pilot, or CTP, Program

The CTP Program, established by Smart in January 2020, in partnership with several TowerCos duly-accredited by the Department of Information and Communications Technology aims to accelerate new site roll-outs and reduce upfront capital expenditure (CAPEX)spending.

Under the MSAs the TowerCos will handle site acquisition and permitting, site development works, construction and permanent electrification of the towers. Effective 30 days after the sites are Ready For Telecommunication Installation, or RFTI, Smart will be liable to settle a monthly fixed fee covering rental and maintenance costs for a contract term of 15 years. The monthly fee will be subject to agreed escalation rates with the TowerCos. As anchor tenant, Smart will also be entitled to colocation discounts when additional tenants come on board.

Upon launching of the program, the original CTP commitment covered 200 sites. This was later on increased to 936 BTS sites. As at December 31, 2022, Smart has issued service orders, or SOs, corresponding to 464 BTS sites.

As at December 31, 2023, a total of 388 BTS sites are classified as RFTI, out of which 236 BTS sites are ready for service.

Group as a Lessor

We have entered into operating leases on our investment property portfolio consisting of certain office buildings and business offices. See Note 13 – Investment Properties. These leases have term of five years. All leases include a clause to enable upward revision of the rental charge on annual basis according to prevailing market conditions. The lessee is also required to provide a residual guarantee on the properties. Rental income recognized by us amounted to Php57 million, Php51 million and Php48 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Future minimum rentals receivable under non-cancellable operating leases expected within one year amounted to
Php59 million and Php57 million and after one year but not more than five years amounted to Php125 million and nil both as at December 31, 2023 and 2022, respectively.