v3.20.2
Leases
 6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases
Note 16 - Leases

Lessee

We are a lessee for non-cancelable operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities with contractual terms that generally extend through 2029. Additionally, we lease dark fiber through non-cancelable operating leases with contractual terms that generally extend through 2041. The majority of cell site leases have an initial non-cancelable term of five to ten years with several renewal options that can extend the lease term from five to thirty-five years. In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of two to five years; the financing leases do not have renewal options and contain a bargain purchase option at the end of the lease.

Through the Merger, we acquired leases of real property, including cell sites, switch sites, dark fiber, retail stores and office facilities and recorded lease liabilities and associated right-of-use assets based on the discounted lease payments. Lease terms that are favorable or unfavorable to market terms were recorded as an adjustment to lease right-of-use assets on our Condensed Consolidated Balance Sheets. Favorable and unfavorable leases are amortized on a straight-line basis over the associated remaining lease term.

The components of lease expense were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2020201920202019
Operating lease expense$1,139  $634  $1,823  $1,236  
Financing lease expense:
Amortization of right-of-use assets180  117  325  230  
Interest on lease liabilities20  20  40  40  
Total financing lease expense200  137  365  270  
Variable lease expense71  58  133  123  
Total lease expense$1,410  $829  $2,321  $1,629  

Information relating to the lease term and discount rate is as follows:
June 30, 2020
Weighted Average Remaining Lease Term (Years)
Operating leases6
Financing leases3
Weighted Average Discount Rate
Operating leases4.0 %
Financing leases3.5 %

Maturities of lease liabilities as of June 30, 2020, were as follows:
(in millions)Operating LeasesFinance Leases
Twelve Months Ending June 30,
2021$4,771  $1,094  
20224,104  805  
20233,363  445  
20242,782  92  
20252,249  63  
Thereafter5,021  85  
Total lease payments22,290  2,584  
Less imputed interest2,639  128  
Total$19,651  $2,456  

Interest payments for financing leases were $20 million and $21 million for the three months ended June 30, 2020 and 2019, respectively, and $40 million and $41 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we have additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $340 million.

As of June 30, 2020, we were contingently liable for future ground lease payments related to certain tower obligations. These contingent obligations are not included in the above table as the amounts owed are contractually owed by Crown Castle International Corp. based on the subleasing arrangement. See Note 9 - Tower Obligations for further information.

Lessor

Our leasing programs (“Leasing Programs”), which include JUMP! On Demand and the Sprint Flex Lease program acquired through the Merger, allow customers to lease a device (handset or tablet) over a period of, generally, 18 months and upgrade it for a new device when eligibility requirements are met. At the end of the initial term, customers are given the opportunity to return the device, purchase the device or extend the lease on a month-to-month basis. Upon device upgrade or at lease end, customers must return or purchase their device. The purchase price of the device is established at lease commencement and is based on the type of device leased and any down payment made. The Leasing Programs do not contain any residual value guarantees or variable lease payments, and there are no restrictions or covenants imposed by these leases. Leased wireless devices are included in Property and equipment, net in our Condensed Consolidated Balance Sheets.

Through the Merger, we acquired leased wireless devices with a fair value of $5.8 billion as of April 1, 2020.

The components of leased wireless devices under our Leasing Programs were as follows:
(in millions)Average Remaining Useful LifeJune 30, 2020December 31, 2019
Leased wireless devices, gross
12 months
$7,605  $1,139  
Accumulated depreciation(984) (407) 
Leased wireless devices, net$6,621  $732  

For equipment revenues from the lease of mobile communication devices, see Note 10 - Revenue from Contracts with Customers.

Future minimum payments expected to be received over the lease term related to leased wireless devices, which exclude optional residual buy-out amounts at the end of the lease term, are summarized below:
(in millions)Total
Twelve Months Ending June 30,
2021$2,848  
2022297  
Total$3,145  
Leases
Note 16 - Leases

Lessee

We are a lessee for non-cancelable operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities with contractual terms that generally extend through 2029. Additionally, we lease dark fiber through non-cancelable operating leases with contractual terms that generally extend through 2041. The majority of cell site leases have an initial non-cancelable term of five to ten years with several renewal options that can extend the lease term from five to thirty-five years. In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of two to five years; the financing leases do not have renewal options and contain a bargain purchase option at the end of the lease.

Through the Merger, we acquired leases of real property, including cell sites, switch sites, dark fiber, retail stores and office facilities and recorded lease liabilities and associated right-of-use assets based on the discounted lease payments. Lease terms that are favorable or unfavorable to market terms were recorded as an adjustment to lease right-of-use assets on our Condensed Consolidated Balance Sheets. Favorable and unfavorable leases are amortized on a straight-line basis over the associated remaining lease term.

The components of lease expense were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2020201920202019
Operating lease expense$1,139  $634  $1,823  $1,236  
Financing lease expense:
Amortization of right-of-use assets180  117  325  230  
Interest on lease liabilities20  20  40  40  
Total financing lease expense200  137  365  270  
Variable lease expense71  58  133  123  
Total lease expense$1,410  $829  $2,321  $1,629  

Information relating to the lease term and discount rate is as follows:
June 30, 2020
Weighted Average Remaining Lease Term (Years)
Operating leases6
Financing leases3
Weighted Average Discount Rate
Operating leases4.0 %
Financing leases3.5 %

Maturities of lease liabilities as of June 30, 2020, were as follows:
(in millions)Operating LeasesFinance Leases
Twelve Months Ending June 30,
2021$4,771  $1,094  
20224,104  805  
20233,363  445  
20242,782  92  
20252,249  63  
Thereafter5,021  85  
Total lease payments22,290  2,584  
Less imputed interest2,639  128  
Total$19,651  $2,456  

Interest payments for financing leases were $20 million and $21 million for the three months ended June 30, 2020 and 2019, respectively, and $40 million and $41 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we have additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $340 million.

As of June 30, 2020, we were contingently liable for future ground lease payments related to certain tower obligations. These contingent obligations are not included in the above table as the amounts owed are contractually owed by Crown Castle International Corp. based on the subleasing arrangement. See Note 9 - Tower Obligations for further information.

Lessor

Our leasing programs (“Leasing Programs”), which include JUMP! On Demand and the Sprint Flex Lease program acquired through the Merger, allow customers to lease a device (handset or tablet) over a period of, generally, 18 months and upgrade it for a new device when eligibility requirements are met. At the end of the initial term, customers are given the opportunity to return the device, purchase the device or extend the lease on a month-to-month basis. Upon device upgrade or at lease end, customers must return or purchase their device. The purchase price of the device is established at lease commencement and is based on the type of device leased and any down payment made. The Leasing Programs do not contain any residual value guarantees or variable lease payments, and there are no restrictions or covenants imposed by these leases. Leased wireless devices are included in Property and equipment, net in our Condensed Consolidated Balance Sheets.

Through the Merger, we acquired leased wireless devices with a fair value of $5.8 billion as of April 1, 2020.

The components of leased wireless devices under our Leasing Programs were as follows:
(in millions)Average Remaining Useful LifeJune 30, 2020December 31, 2019
Leased wireless devices, gross
12 months
$7,605  $1,139  
Accumulated depreciation(984) (407) 
Leased wireless devices, net$6,621  $732  

For equipment revenues from the lease of mobile communication devices, see Note 10 - Revenue from Contracts with Customers.

Future minimum payments expected to be received over the lease term related to leased wireless devices, which exclude optional residual buy-out amounts at the end of the lease term, are summarized below:
(in millions)Total
Twelve Months Ending June 30,
2021$2,848  
2022297  
Total$3,145