Leases

12 Months Ended

Dec. 31, 2025

Presentation of leases for lessee [abstract]

10.

Leases

Group as a Lessee

We have lease contracts for various items of sites, buildings, leased circuits and poles used in our operations. We considered in the lease term the non-cancellable period of the lease together with the periods covered by an option to extend and option to terminate the lease.

Our consolidated estimated useful lives of ROU assets as at December 31, 2025 are as follows:


Sites		1 – 30 years
International leased circuits(1)		2 – 19 years
Poles(2)		2 – 12 years
Domestic leased circuits		2 – 10 years
Office buildings		1 – 25 years
Co-located sites(3)		4 – 7 years

(1)

As at December 31, 2024, the estimated useful life ranges from 1-19 years.

(2)

As at December 31, 2024, the estimated useful life ranges from 1-12 years.

(3)

As at December 31, 2024, the estimated useful life ranges from 2-11 years.

Our consolidated roll forward analysis of ROU assets as at December 31, 2025 and 2024 are as follows:


	Sites			International Leased Circuits			Poles			Domestic Leased Circuits			Office Buildings			Co-located Sites			Total
	(in million pesos)
December 31, 2025
Costs:
Balances at beginning of the year		44,047			5,055			5,336			2,637			1,301			61			58,437
Additions (Note 28)		16,227			2,535			1,079			596			371			—			20,808
Asset retirement obligation		73			—			—			—			24			—			97
Modifications		8			96			164			4			(6	)		—			266
Terminations		(2,504	)		(1,964	)		(411	)		(318	)		(326	)		(3	)		(5,526	)
Reclassification to ROU assets classified as held-for-sale		(255	)		—			—			—			—			—			(255	)
Balances at end of the year		57,596			5,722			6,168			2,919			1,364			58			73,827

Accumulated depreciation and amortization:
Balances at beginning of the year		(11,608	)		(3,110	)		(1,739	)		(1,810	)		(1,010	)		(49	)		(19,326	)
Modifications		6			—			—			—			19			—			25
Terminations		1,321			1,307			405			231			305			18			3,587
Depreciation (Note 3)		(6,419	)		(907	)		(1,196	)		(420	)		(328	)		(11	)		(9,281	)
Reclassification to ROU assets classified as held-for-sale		(55	)		—			—			—			—			—			(55	)
Balances at end of the year		(16,755	)		(2,710	)		(2,530	)		(1,999	)		(1,014	)		(42	)		(25,050	)
Net book value at the end of the year		40,841			3,012			3,638			920			350			16			48,777

December 31, 2024
Costs:
Balances at beginning of the year		38,461			4,305			3,364			2,001			1,144			53			49,328
Additions (Note 28)		8,683			1,546			4,273			763			334			8			15,607
Asset retirement obligation		571			—			—			—			5			—			576
Modifications		(1,180	)		266			173			135			27			—			(579	)
Terminations		(2,350	)		(1,062	)		(2,474	)		(262	)		(209	)		—			(6,357	)
Reclassification to ROU assets classified as held-for-sale		(138	)		—			—			—			—			—			(138	)
Balances at end of the year		44,047			5,055			5,336			2,637			1,301			61			58,437

Accumulated depreciation and amortization:
Balances at beginning of the year		(7,599	)		(3,298	)		(3,156	)		(1,632	)		(887	)		(39	)		(16,611	)
Modifications		108			(12	)		(3	)		(75	)		(20	)		—			(2	)
Terminations		361			1,028			2,474			262			192			—			4,317
Depreciation (Note 3)		(4,763	)		(828	)		(1,054	)		(365	)		(295	)		(10	)		(7,315	)
Reclassification to ROU assets classified as held-for-sale		285			—			—			—			—			—			285
Balances at end of the year		(11,608	)		(3,110	)		(1,739	)		(1,810	)		(1,010	)		(49	)		(19,326	)
Net book value at the end of the year		32,439			1,945			3,597			827			291			12			39,111

The following amounts are recognized in our consolidated income statements for the years ended December 31, 2025, 2024 and 2023:


	2025		2024		2023
	(in million pesos)
Depreciation expense of ROU assets from continuing operations		9,281		7,315		6,898
Depreciation expense of ROU assets from discontinued operations		—		—		19
Interest expense on lease liabilities from continuing operations		4,579		3,935		3,266
Interest expense on lease liabilities discontinued operations		—		—		2
Variable lease payments (included in general operating costs) from continuing operations		895		829		656
Variable lease payments (included in general operating costs) from discontinued operations		—		—		(2	)
Expenses relating to short-term leases (included in general operating costs)		516		569		714
Expenses relating to leases of low-value assets (included in general operating costs)		2		—		2
Total amount recognized in consolidated income statements		15,273		12,648		11,555

Our consolidated roll forward analysis of lease liabilities as at December 31, 2025 and 2024 are as follows:


	2025			2024
	(in million pesos)
Balances at beginning of the year		54,038			47,546
Additions (Note 28)		20,800			15,607
Accretion on lease liabilities (Note 5)		4,579			3,935
Reclassification to lease liabilities classified as held-for-sale		(20	)		(87	)
Foreign exchange gains – net		33			100
Lease modifications		287			(121	)
Termination		(1,216	)		(863	)
Settlement of obligations		(14,328	)		(12,079	)
Balances at end of the year (Notes 3 and 28)		64,173			54,038
Less: Current portion of lease liabilities (Note 27)		8,897			7,335
Noncurrent portion of lease liabilities (Note 27)		55,276			46,703

We had total cash outflows for leases of Php14,328 million, Php12,079 million and Php10,707 million for the years ended December 31, 2025, 2024 and 2023, respectively. We had non-cash additions to ROU assets of Php20,808 million and Php15,607 million and lease liabilities of Php20,800 million and Php15,607 million both as at December 31, 2025 and 2024, respectively. The future cash outflows relating to leases that have not yet commenced are disclosed in
Note 28 – Notes to the Statements of Cash Flows.

We have entered into several lease contracts that include automatic extension and termination options. These options are negotiated by us to provide flexibility in managing the leased-asset portfolio and aligning with our business needs. However, in some of these lease contracts, we did not impute the renewal period in our assessment of the lease terms of these contracts since said renewal period is not yet reasonably estimable at the time of transition or commencement date of the lease. See Note 3 – Managements Use of Accounting Judgments, Estimates and Assumptions – Determining the lease term of contracts with renewal and termination options – Company as a Lessee.

As disclosed in Note 9 – Property and Equipment, on the sale and leaseback of telecom towers, Smart and DMPI signed Sale and Purchase Agreements with the TowerCos in connection with the sale of 7,569 telecom towers and related passive telecom infrastructure, with the concurrent execution of MSAs with the TowerCos where Smart has agreed to lease back the towers sold in the transaction for a period of 10 years.

In 2022, 2023, 2024 and 2025, the MSAs covering the leaseback arrangements of 4,665, 1,705, 356 and 89 telecom towers, respectively, became effective. As a result, we recognized cumulative lease liability of Php40,824 million and cumulative ROU assets of Php24,759 million as at December 31, 2025.

The ROU assets relating to leasehold land with net book value of Php2,258 million and Php1,954 million, and the related lease liabilities amounting to Php1,625 million and Php1,615 million, were respectively reclassified as “Assets classified as held-for-sale” under current assets and “Liabilities associated with assets classified as held-for-sale” under current liabilities in our consolidated statement of financial position as at December 31, 2025 and 2024, respectively.

Common Tower Pilot, or CTP, Program

The CTP Program, established by Smart in January 2020, in partnership with several TowerCos duly accredited by the DICT aims to accelerate new site rollouts and reduce upfront the capital expenditures spending.

Under the MSAs, TowerCos will handle site acquisition and permitting, site development works, construction and permanent electrification of the towers. Effective 30 days after the sites are Ready For Telecommunication Installation, or RFTI, Smart will be liable to settle a monthly fixed fee covering rental and maintenance costs for a contract term of 15 years. The monthly fee will be subject to agreed escalation rates with TowerCos. As anchor tenant, Smart will also be entitled to colocation discounts when additional tenants come on board.

Upon launching of the program, the original CTP commitment covered 200 sites. As at December 31, 2025, Smart has issued service orders, or SOs, corresponding to 434 sites. As at December 31, 2025 and 2024, 433 and 422 sites are ready for service, respectively. All are classified as RFTI.

Group as a Lessor

We have entered into operating leases on our investment property portfolio consisting of certain office buildings and business offices. See Note 13 – Investment Properties. These leases have a term of five years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. The lessee is also required to provide a residual guarantee on the properties. Rental income recognized amounted to Php62 million, Php59 million and Php57 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Future minimum rentals receivable under non-cancellable operating leases expected within one year both amounted to
Php62 million, and after one year but not more than five years amounted to nil and Php62 million as at December 31, 2025 and 2024, respectively.