Leases

12 Months Ended

Dec. 31, 2023

Note 10 Leases

Lessee Agreements

TDS’ most significant leases are for land and tower spaces, network facilities, retail spaces, and offices. Nearly all of TDS’ leases are classified as operating leases, although it does have a small number of finance leases.

TDS has agreements with both lease and nonlease components, which are accounted for separately. As part of the present value calculation for the lease liabilities, TDS uses an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on TDS' unsecured rates, adjusted to approximate the rates at which TDS would be required to borrow on a collateralized basis over a term similar to the recognized lease term. TDS applies the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. The cost of nonlease components in TDS’ lease portfolio (e.g., utilities and common area maintenance) are not typically predetermined at lease commencement and are expensed as incurred at their relative standalone price.

Variable lease expense occurs when, subsequent to the lease commencement, lease payments are made that were not originally included in the lease liability calculation. TDS’ variable lease payments include lease payment escalations that are tied to an index, real estate taxes, and additional payments linked to performance. The incremental changes are recorded as variable lease expense and are not included in the right-of-use assets or lease liabilities.

The identified lease term determines the periods to which expense is allocated and is also utilized in the right-of-use asset and liability calculations. Many of TDS’ leases include renewal and early termination options. At lease commencement, the lease terms include options to extend the lease when TDS is reasonably certain that it will exercise the options. The lease terms do not include early termination options unless TDS is reasonably certain to exercise the options. TDS has applied the portfolio approach in cases where asset classes have similar lease characteristics including tower space, retail, and certain ground lease asset classes.

The following table shows the components of lease cost included in the Consolidated Statement of Operations:


Year Ended December 31,	2023		2022		2021
(Dollars in millions)
Operating lease cost	$	207	$	206	$	198




Variable lease cost	13		12		10

Total	$	220	$	218	$	208

The following table shows supplemental cash flow information related to lease activities:


Year Ended December 31,	2023		2022		2021
(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	213	$	204	$	204


Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	168	$	125	$	188

The table below shows a weighted-average analysis for lease terms and discount rates for operating leases:


December 31,	2023		2022

Weighted Average Remaining Lease Term	12 years		12 years



Weighted Average Discount Rate	4.3	%	3.9	%

The maturities of lease liabilities are as follows:


	Operating Leases
(Dollars in millions)
2024	$	187
2025	178
2026	143
2027	120
2028	97
Thereafter	696
Total lease payments1	$	1,421
Less: Imputed interest	384
Present value of lease liabilities	$	1,037

1 Lease payments exclude $28 million of legally binding lease payments for leases signed but not yet commenced.

Lessor Agreements

TDS’ most significant lessor leases are for tower space and colocation space. All of TDS’ lessor leases are classified as operating leases. A lease is generally present in a contract if the lessee controls the use of identified property, plant, or equipment for a period of time in exchange for consideration. TDS’ lessor agreements with lease and nonlease components are generally accounted for separately; however, certain service agreements with insignificant lease components are accounted for as nonlease transactions.

The identified lease term determines the periods to which revenue is allocated over the term of the lease. Many of TDS’ leases include renewal and early termination options. At lease commencement, lease terms include options to extend the lease when TDS is reasonably certain that lessees will exercise the options. Lease terms would not include periods after the date of a termination option that lessees are reasonably certain to exercise.

Variable lease income occurs when, subsequent to the lease commencement, lease payments are received that were not originally included in the lease receivable calculation. TDS’ variable lease income is primarily a result of leases with escalations that are tied to an index. The incremental increases due to the index changes are recorded as variable lease income.

The following table shows the components of lease income which are included in Service revenues in the Consolidated Statement of Operations:


Year Ended December 31,	2023		2022		2021
(Dollars in millions)
Operating lease income	$	127	$	120	$	109

The maturities of expected lease payments to be received are as follows:


	Operating Leases
(Dollars in millions)
2024	$	97
2025	88
2026	67
2027	37
2028	22
Thereafter	25
Total future lease maturities	$	336