QWEST CORPCTBB
QWEST CORP Leases Disclosure
Note 5—Leases
We primarily lease various office facilities, colocation facilities and equipment to or from third parties. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets; we recognize lease expense for these leases on a straight-line basis over the lease term.
We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease at the commencement date. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use 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 our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply 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. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.
Some of our lease arrangements contain lease components, non-lease components (including common-area maintenance costs) and executory costs (including real estate taxes and insurance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component.
Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless we determine that we are reasonably certain of renewing the lease. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not generally contain any material residual value guarantees or material restrictive covenants.
We lease various equipment, office facilities, retail outlets, and other network sites from third parties. These leases, with few exceptions, provide for renewal options and escalations that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured.
Lessee
Lease expense consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Operating and short-term lease cost | $ | 21 | 23 | 26 | |||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | 1 | 1 | 1 | ||||||||||||||
| Total finance lease cost | 1 | 1 | 1 | ||||||||||||||
| Total lease cost | $ | 22 | 24 | 27 | |||||||||||||
Supplemental consolidated balance sheet information and other information related to leases is included below:
December 31, | ||||||||||||||
| Leases (Dollars in millions) | Balance Sheet Classification | 2025 | 2024 | |||||||||||
| Assets | ||||||||||||||
| Operating lease assets | $ | 65 | 64 | |||||||||||
| Finance lease assets | 5 | 6 | ||||||||||||
| Total leased assets | $ | 70 | 70 | |||||||||||
| Liabilities | ||||||||||||||
| Current | ||||||||||||||
| Operating | $ | 14 | 15 | |||||||||||
| Noncurrent | ||||||||||||||
| Operating | 51 | 49 | ||||||||||||
| Finance | 2 | 3 | ||||||||||||
| Total lease liabilities | $ | 67 | 67 | |||||||||||
| Weighted-average remaining lease term (years) | ||||||||||||||
| Operating leases | 5.5 | 5.4 | ||||||||||||
| Finance leases | 8.7 | 8.4 | ||||||||||||
| Weighted-average discount rate | ||||||||||||||
| Operating leases | 10.24 | % | 10.52 | % | ||||||||||
| Finance leases | 4.90 | % | 5.05 | % | ||||||||||
Supplemental consolidated cash flow statement information related to leases is included below:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows for operating leases | $ | 22 | 24 | ||||||||
| Financing cash flows for finance leases | 1 | 1 | |||||||||
| Supplemental lease cash flow disclosures | |||||||||||
| Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | $ | 15 | 20 | ||||||||
As of December 31, 2025, maturities of lease liabilities were as follows:
| Operating Leases | Finance Leases | ||||||||||
| (Dollars in millions) | |||||||||||
| 2026 | $ | 19 | 1 | ||||||||
| 2027 | 18 | 1 | |||||||||
| 2028 | 15 | — | |||||||||
| 2029 | 11 | — | |||||||||
| 2030 | 7 | — | |||||||||
| Thereafter | 14 | — | |||||||||
| Total lease payments | 84 | 2 | |||||||||
| Less: interest | (19) | — | |||||||||
| Total | 65 | 2 | |||||||||
| Less: current portion | (14) | — | |||||||||
| Long-term portion | $ | 51 | 2 | ||||||||
As of December 31, 2025, we had no material operating or finance leases that had not yet commenced.
Lessor
We lease various data transmission capacity, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease revenue are included in operating revenue in the consolidated statements of operations. See "Revenue Recognition" in Note 1—Background and Summary of Significant Accounting Policies.
For the years ended December 31, 2025, 2024 and 2023, our gross operating lease revenue was $262 million, $273 million and $304 million, respectively which represents 6%, 5%, and 5% of our for the years ended December 31, 2025, 2024 and 2023, respectively.
Included in operating lease revenue is sublease revenue of $9 million, $9 million and $8 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 3, 2021 | |
| 2019 | Mar 5, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.