Changes in property and equipment account for the years ended December 31, 2022, 2021 and 2020 are as follows:


	Cable and wire facilities			Central equipment			Network facilities			Buildings			Vehicles, furniture and other network equipment			Information origination and termination equipment			Land improvements			IT systems and platforms			Security platforms			Property under construction			Total
	(in million pesos)
December 31, 2020
Cost		205,338			3,134			298,169			23,647			41,856			46,885			4,427			23,868			104			50,060			697,488
Accumulated depreciation, impairment and amortization		(147,048	)		(2,585	)		(186,566	)		(18,674	)		(35,260	)		(29,545	)		(279	)		(16,651	)		(12	)		—			(436,620	)
Net book value		58,290			549			111,603			4,973			6,596			17,340			4,148			7,217			92			50,060			260,868
December 31, 2020
Net book value at beginning of the year		58,290			549			111,603			4,973			6,596			17,340			4,148			7,217			92			50,060			260,868
Additions (Note 4)		1,306			906			141			145			570			5,678			43			23			145			80,026			88,983
Disposals/Retirements		(9	)		(1	)		(81	)		(27	)		(52	)		—			(163	)		—			—			—			(333	)
Reclassifications		—			1,850			—			2,795			55			—			—			—			—			(4,554	)		146
Impairment losses recognized during the year (Note 5)		(27	)		—			(121	)		—			—			—			—			—			—			—			(148	)
Transfers and others		22,641			—			30,328			629			195			10,077			145			4,900			107			(69,022	)		—
Translation differences charged directly to cumulative translation adjustments		—			—			1			—			(1	)		—			—			1			—			—			1
Adjustments		8			—			—			(8	)		—			—			—			—			—			—			—
Depreciation and amortization		(10,676	)		(552	)		(23,282	)		(1,091	)		(2,124	)		(5,245	)		(10	)		(3,635	)		(166	)		—			(46,781	)
Net book value at end of the year		71,533			2,752			118,589			7,416			5,239			27,850			4,163			8,506			178			56,510			302,736
December 31, 2021
Cost		229,160			5,896			327,195			26,838			40,586			62,595			4,451			27,099			355			56,510			780,685
Accumulated depreciation, impairment and amortization		(157,627	)		(3,144	)		(208,606	)		(19,422	)		(35,347	)		(34,745	)		(288	)		(18,593	)		(177	)		—			(477,949	)
Net book value		71,533			2,752			118,589			7,416			5,239			27,850			4,163			8,506			178			56,510			302,736
December 31, 2022
Net book value at beginning of the year		71,533			2,752			118,589			7,416			5,239			27,850			4,163			8,506			178			56,510			302,736
Additions (Note 4)		194			265			3,656			31			731			6,389			28			8			—			85,508			96,810
Telecom assets additions subject to subsequent sale and leaseback from tower companies		—			—			16,841			—			—			—			—			—			—			—			16,841
Disposals/Retirements		(5	)		—			(6,529	)		(1	)		(158	)		—			(7	)		(20	)		—			(7,976	)		(14,696	)
Reclassifications		11			—			—			—			—			—			—			—			—			(11	)		—
Reclassifications to assets held-for-sale		—			—			(12,372	)		—			—			—			—			—			—			(3,641	)		(16,013	)
Impairment losses recognized during the year (Note 5)		(112	)		—			(66	)		—			(131	)		—			—			—			—			—			(309	)
Transfers and others		32,323			666			24,155			724			412			8,445			120			8,092			21			(74,958	)		—
Translation differences charged directly to cumulative translation adjustments		—			—			—			—			1			—			—			1			—			—			2
Adjustments		7			512			—			(2	)		(240	)		—			—			—			—			(5	)		272
Acquisition through business combinations		—			—			—			23			77			—			—			—			—			—			100
Depreciation and amortization (Note 3)		(32,994	)		(589	)		(42,311	)		(1,545	)		(1,774	)		(7,898	)		(32	)		(5,789	)		(66	)		—			(92,998	)
Net book value at end of the year		70,957			3,606			101,963			6,646			4,157			34,786			4,272			10,798			133			55,427			292,745
December 31, 2022
Cost		261,429			7,338			328,729			26,788			40,572			77,429			4,591			35,095			377			55,427			837,775
Accumulated depreciation, impairment and amortization		(190,472	)		(3,732	)		(226,766	)		(20,142	)		(36,415	)		(42,643	)		(319	)		(24,297	)		(244	)		—			(545,030	)
Net book value		70,957			3,606			101,963			6,646			4,157			34,786			4,272			10,798			133			55,427			292,745

Interest capitalized to property and equipment that qualified as borrowing costs amounted to Php1,748 million, Php1,582 million and Php1,597 million for the years ended December 31, 2022, 2021 and 2020, respectively. See Note 5 – Income and Expenses – Financing Costs – Net and Note 29 – Notes to the Statements of Cash Flows. The average interest capitalization rate used was approximately 4% for each of the years ended December 31, 2022, 2021 and 2020, respectively.

Our net foreign exchange differences, which qualified as borrowing costs, amounted to Php351 million, Php29 million and nil for the years ended December 31, 2022, 2021 and 2020, respectively.

The cost of fully depreciated property and equipment that are still being used in the Group’s operations amounted to Php83,055 million and Php77,201 million as at December 31, 2022 and 2021, respectively.

See Note 3 – Management’s Use of Accounting Judgments, Estimates and Assumptions – Estimating useful lives of property and equipment.

On April 19, 2022, Smart and DMPI signed Sale and Purchase Agreements, or SPAs, with a subsidiary of Edotco Group and a subsidiary of EdgePoint, or the TowerCos, in connection with the sale of 5,907 telecom towers and related passive telecommunication infrastructure for Php77 billion. Out of the total towers, 2,973 towers located primarily in Luzon, Visayas and Mindanao were acquired by Edotco Towers, Inc., a subsidiary of Edotco Group, and 2,934 towers located in Luzon were acquired by Comworks Infratech Corp., subsidiary of EdgePoint.

Concurrent with the execution of the SPAs, Smart also entered into Master Service Agreements, or MSAs, with the TowerCos wherein Smart agreed to leaseback the towers sold in the transaction for a period of 10 years. In addition to space, the TowerCos are responsible for providing operations and maintenance services, as well as power to the sites. The sale and leaseback with the ToweCos is complemented by a commitment to place service orders for a total of 1,000 Build-To-Suit, or BTS, sites before December 31, 2025 and 50 comitted BTS sites each year for five years starting January 1, 2026, or another total of 500 BTS sites. Thus, total committed BTS sites with the TowerCos is 1,500. The closing of the agreements will be on a staggered basis depending on the satisfaction of closing conditions based on the number of towers transferred. The first closing commenced in June 2022, with the final closing in 2023.

On the same day that the telecom towers were sold, the MSAs covering the leaseback arrangements for those towers became effective. As at December 31, 2022, we have completed the sale of 4,665 telecom towers representing 79% of the towers portfolio subject to the sale. As a result, we received total proceeds of Php60,492 million, and recognized gain on sale and leaseback amounting to Php24,563 million (or Php18,783 million after tax) and treated this as a non-core income.

The remaining telecom towers with net book value of Php7,125 million, subject to sale and purchase agreement until 2023, were reclassified from “Property and equipment” to “Assets classified as held-for-sale” under current assets in our consolidated statement of financial position as at December 31, 2022.

On February 10, 2023 and March 15, 2023, we completed additional sale of 287 and 95 telecom towers for a consideration of Php4,054 million and Php1,133 million, respectively, increasing the total completed sale and leaseback transaction to date to 85% of the towers portfolio subject to the sale.

Meanwhile, on December 15, 2022 and March 16, 2023, Smart and DMPI signed a new set of SPAs, with Unity Digital Infrastructure, or Unity, and Frontier Tower Associates Philippines Inc., or Frontier, respectively, in connection with the sale of 1,662 telecom towers and related passive telecom infrastructure for a total of Php21,309 million. Out of the total towers, 650 towers located primarily in Visayas and Mindanao were acquired by Unity and 1,012 towers located in Luzon were acquired by Frontier.

Concurrent with the execution of the SPAs, Smart also entered into MSAs with Unity and Frontier wherein Smart has agreed to leaseback the towers sold in the transaction for a period of 10 years. In addition to space, Unity and Frontier will also be responsible for providing operations and maintenance services, as well as power to the sites. The sale and leaseback with Unity is complemented by a commitment to place service orders for a total of 220 BTS sites within the next two to four years. Meanwhile, the sale and leaseback with Frontier includes a commitment to place service orders for 550 points of service within the next three to four years, of which 400 are co-locations and the balance for new BTS sites. With these additional sites from Unity and Frontier, total commitment with all TowerCos is for 2,270 sites. The closing of the agreements will be on a staggered basis depending on the satisfaction of closing conditions based on the number of towers transferred. The first closing for both SPAs is expected to commence upon securing approval from the Philippine Competition Commission.