7. LEASES:
We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building space, tower space, and equipment. We do not separate non-lease components from our building and tower leases for the purposes of measuring our lease liabilities and assets. Our leases consist of operating leases and finance leases which are presented separately in our consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of the future lease payments over the lease term discounted using our incremental borrowing rate. Implicit interest rates within our lease arrangements are rarely determinable. Right of use assets also include, if applicable, prepaid lease payments and initial direct costs, less incentives received.
We recognize operating lease expense on a straight-line basis over the term of the lease within operating expenses. Expense associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right of use assets. The interest component is recorded in interest expense and amortization of the finance lease asset is recognized on a straight-line basis over the term of the lease in depreciation of property and equipment.
Our leases do not contain any material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.
The following table presents lease expense we have recorded in our consolidated statements of operations for the years ended December 31, 2025, 2024, and 2023 (in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Finance lease expense: | | | | | |
| Amortization of finance lease asset | $ | 6 | | | $ | 4 | | | $ | 4 | |
| Interest on lease liabilities | 3 | | | 3 | | | 2 | |
| Total finance lease expense | 9 | | | 7 | | | 6 | |
| Operating lease expense (a) | 37 | | | 37 | | | 38 | |
| Total lease expense | $ | 46 | | | $ | 44 | | | $ | 44 | |
(a)Includes variable lease expense of $7 million for the year ended December 31, 2025 and $6 million for each of the years ended December 31, 2024 and 2023.
The following table summarizes our outstanding operating and finance lease obligations as of December 31, 2025 (in millions):
| | | | | | | | | | | | | | | | | |
| Operating Leases | | Finance Leases | | Total |
| 2026 | $ | 32 | | | $ | 10 | | | $ | 42 | |
| 2027 | 29 | | | 8 | | | 37 | |
| 2028 | 25 | | | 6 | | | 31 | |
| 2029 | 19 | | | 6 | | | 25 | |
| 2030 | 19 | | | 5 | | | 24 | |
| 2031 and thereafter | 42 | | | 5 | | | 47 | |
| Total undiscounted obligations | 166 | | | 40 | | | 206 | |
| Less imputed interest | (30) | | | (7) | | | (37) | |
| Present value of lease obligations | $ | 136 | | | $ | 33 | | | $ | 169 | |
The following table summarizes supplemental balance sheet information related to leases as of December 31, 2025 and December 31, 2024 (in millions, except lease term and discount rate):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | |
| Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases | |
| Lease assets, non-current | $ | 110 | | | $ | 24 | | (a) | $ | 123 | | | $ | 30 | | (a) |
| | | | | | | | |
| Lease liabilities, current | $ | 24 | | | $ | 8 | | | $ | 22 | | | $ | 8 | | |
| Lease liabilities, non-current | 112 | | | 25 | | | 130 | | | 34 | | |
| Total lease liabilities | $ | 136 | | | $ | 33 | | | $ | 152 | | | $ | 42 | | |
| | | | | | | | |
| Weighted average remaining lease term (in years) | 6.39 | | 5.03 | | 7.14 | | 5.62 | |
| Weighted average discount rate | 6.4 | % | | 7.9 | % | | 6.3 | % | | 8.0 | % | |
(a)Finance lease assets are reflected in property and equipment, net in our consolidated balance sheets.
The following table presents other information related to leases for the years ended December 31, 2025, 2024, and 2023 (in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
| Operating cash flows from operating leases | $ | 32 | | | $ | 33 | | | $ | 33 | |
| Operating cash flows from finance leases | $ | 3 | | | $ | 3 | | | $ | 2 | |
| Financing cash flows from finance leases | $ | 8 | | | $ | 7 | | | $ | 7 | |
| Leased assets obtained in exchange for new operating lease liabilities | $ | 8 | | | $ | 5 | | | $ | 25 | |
| Leased assets obtained in exchange for new finance lease liabilities | $ | — | | | $ | 22 | | | $ | — | |