IFRS 16 for telecom sites, towers and fibre

An operator's lease book can run to tens of thousands of contracts, and small judgements on each one add up to hundreds of millions on the balance sheet. This guide explains which telecom arrangements are leases, how the lease term and discount rate are set across a large portfolio, and what IFRS 16 does to EBITDA and net debt.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. 3 minute read.

Short answer

Telecom leases under IFRS 16 cover thousands of network sites: land and rooftops for towers and antennas, space on towers owned by tower companies, shops, offices and some fibre arrangements. Each lease is recognised as a lease liability and a right-of-use asset. The biggest judgement is the lease term: because relocating a site is costly, operators often conclude they are reasonably certain to exercise renewal options. Extending a 10-year site lease by one five-year renewal, at 6,000 a year and 9%, raises its liability from 38,506 to 48,364.

At a glance

Typical leases
Land, rooftops, tower space, shops
Usually not leases
Lit capacity, colocation services
Key judgement
Lease term and renewals
Discount rate
Incremental borrowing rate by term
Volume
Thousands of contracts
Effect
Higher EBITDA and net debt
IFRS 16 for telecom sites, towers and fibreTypical leases: Land, rooftops, tower space, shops; Usually not leases: Lit capacity, colocation services; Key judgement: Lease term and renewals; Discount rate: Incremental borrowing rate by term; Volume: Thousands of contracts; Effect: Higher EBITDA and net debt.KEY FACTS AT A GLANCEIFRS 16 for telecom sites, towers and fibreTypical leasesLand, rooftops, towerspace, shopsUsually not leasesLit capacity, colocationservicesKey judgementLease term and renewalsDiscount rateIncremental borrowingrate by termVolumeThousands of contractsEffectHigher EBITDA and netdebtTax BakersIFRS 16 for telecom sites, towers and fibreTypical leases: Land, rooftops, tower space, shops; Usually not leases: Lit capacity, colocation services; Key judgement: Lease term and renewals; Discount rate: Incremental borrowing rate by term; Volume: Thousands of contracts; Effect: Higher EBITDA and net debt.KEY FACTS AT A GLANCEIFRS 16 for telecom sites, towersand fibreTypical leasesLand, rooftops, tower space, shopsUsually not leasesLit capacity, colocation servicesKey judgementLease term and renewalsDiscount rateIncremental borrowing rate by termVolumeThousands of contractsEffectHigher EBITDA and net debtTax Bakers
Key facts at a glance, as set out in this guide.

Which telecom arrangements are leases?

Common telecom arrangements under IFRS 16Common telecom arrangements under IFRS 16UsuallyWhyGround leasefor a towerLeaseSpecific landRooftop siteLeaseSpecific spaceSpace on athird-party towerLeaseDistinct portionDark fibre IRUOften a leaseSpecific fibresLit capacityServiceNo specific asset
Specific, identified assets point to a lease; capacity points to a service.

The test is the IFRS 16 definition: an identified asset that the operator has the right to direct and obtain substantially all the economic benefits from. Ground leases for towers and rooftop leases are clearly leases. Space on a third-party tower is usually a lease of a physically distinct portion. Capacity on someone else's lit fibre network is usually a service, because no specific fibre is identified. See indefeasible rights of use.

How is the lease term of telecom leases set?

Site leases often run for 5 to 10 years with renewal options. Moving a site means finding a new location, obtaining permits, building a new tower or mount and moving equipment, often with a gap in coverage, so operators frequently conclude that at least one renewal is reasonably certain.

One site: rent 6,000 a year, discount rate 9%Lease liability
Lease term 10 years, no renewal included38,506
Lease term 15 years, one renewal included48,364
Across 8,000 similar sites, the difference79 million

The renewal judgement alone moves the portfolio's liability by about 79 million. Operators usually set policies by site type, for example including renewals for macro sites with towers but not for small cells that are easy to move, and reassess when network plans change, such as site consolidation after a merger.

Which discount rate is used?

Site leases rarely state an implicit rate, so operators use their incremental borrowing rate, adjusted for the lease term, currency and the economic environment. A group with operations in several countries builds a rate curve for each currency and term band, rather than one rate for all leases.

How do operators manage thousands of leases?

  • Lease management systems that hold each contract's term, payments and options and calculate the IFRS 16 entries.
  • The portfolio approach for leases with similar characteristics, where the effect is not materially different.
  • Clear policies for variable payments, such as rent linked to inflation, which are remeasured when the index changes, and for payments for electricity or maintenance, which are service components.

What about shops, offices and data centres?

Retail shops and offices are standard property leases (see retail store leases), often with shorter terms and break clauses that need the same lease term judgement. Space in third-party data centres is a lease only if specific, physically distinct space, such as a dedicated cage, is identified; shared racks and power are usually services.

What are common mistakes with telecom leases?

Missing leases embedded in service contracts, such as tower sharing deals; applying one discount rate across very different terms and currencies; failing to reassess lease terms after a network consolidation or merger; and treating electricity and maintenance charges in site contracts as lease payments, which overstates the liability.

What does IFRS 16 do to telecom EBITDA?

Site rents that used to be operating costs are now depreciation and interest, which sit below EBITDA. For a large operator, that can raise EBITDA by several percentage points of revenue. Analysts often look at EBITDA after leases, deducting lease depreciation and interest, to compare with pre-2019 figures and with US peers under ASC 842, where most site leases stay as operating leases. See telecom KPIs, tower sale and leaseback, telecom accounting and the IFRS 16 lease term.

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Questions people ask

Are telecom site leases within IFRS 16?

Yes. Ground leases, rooftop leases and, usually, space on third-party towers are leases recognised as lease liabilities and right-of-use assets.

How do operators decide the lease term for site leases?

By assessing whether renewal options are reasonably certain to be exercised, considering the cost and disruption of relocating a site.

Is capacity on a fibre network a lease?

Usually not; without an identified fibre or wavelength it is a service. Dark fibre IRUs over specific fibres are often leases.

Why did IFRS 16 increase telecom EBITDA?

Because site rents moved to depreciation and interest, which are excluded from EBITDA.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 16 Leases

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

TelecomTower sale and leaseback dealsTelecomIndefeasible rights of use (IRUs)IFRS 16Lease term, extension and termination options under IFRS 16

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This guide is general information. It is not tax or legal advice for your situation.