Tower sale and leaseback deals

Operators around the world have sold their towers to specialist tower companies, releasing billions in cash. The accounting is less generous than the headline price suggests, because IFRS 16 limits the gain to the rights given up. This guide works through a tower deal and covers the judgements that decide how it is accounted for.

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

Short answer

In a tower sale and leaseback, an operator sells its towers to a tower company and leases back space on them for its antennas. Under IFRS 16, if the transfer is a sale under IFRS 15, the operator derecognises the towers, recognises a right-of-use asset for the share of the towers it keeps using, measured at that share of their previous carrying amount, and recognises a gain only on the rights actually transferred. In this guide's example, towers carried at 300 are sold for 900, giving a total gain of 600 of which 360 is recognised.

At a glance

First question
Is it a sale under IFRS 15?
Right-of-use asset
Share of old carrying amount retained
Gain
Only on rights transferred
Lease liability
PV of leaseback payments
If not a sale
A financing arrangement
Standard
IFRS 16, paragraphs 98 to 103
Tower sale and leaseback dealsFirst question: Is it a sale under IFRS 15?; Right-of-use asset: Share of old carrying amount retained; Gain: Only on rights transferred; Lease liability: PV of leaseback payments; If not a sale: A financing arrangement; Standard: IFRS 16, paragraphs 98 to 103.KEY FACTS AT A GLANCETower sale and leaseback dealsFirst questionIs it a sale under IFRS15?Right-of-use assetShare of old carryingamount retainedGainOnly on rightstransferredLease liabilityPV of leaseback paymentsIf not a saleA financing arrangementStandardIFRS 16, paragraphs 98 to103Tax BakersTower sale and leaseback dealsFirst question: Is it a sale under IFRS 15?; Right-of-use asset: Share of old carrying amount retained; Gain: Only on rights transferred; Lease liability: PV of leaseback payments; If not a sale: A financing arrangement; Standard: IFRS 16, paragraphs 98 to 103.KEY FACTS AT A GLANCETower sale and leaseback dealsFirst questionIs it a sale under IFRS 15?Right-of-use assetShare of old carrying amount retainedGainOnly on rights transferredLease liabilityPV of leaseback paymentsIf not a saleA financing arrangementStandardIFRS 16, paragraphs 98 to 103Tax Bakers
Key facts at a glance, as set out in this guide.

A tower sale and leaseback example

An operator sells 2,000 towers to a tower company for CU 900 million, their fair value, and leases back antenna space on all of them for 15 years. The towers' carrying amount is 300 million. The present value of the leaseback payments is 360 million.

From total gain to gain recognised (CU million)From total gain to gain recognised (CU million)900Sale price-300Carryingamount-240Gain on rightsretained360Gainrecognised
Only the gain on rights transferred to the tower company is recognised.
StepCU million
Total gain: 900 - 300600
Share of the towers' value retained through the leaseback: 360 / 90040%
Right-of-use asset: 300 x 40%120
Gain relating to rights retained: 600 x 40%, not recognised240
Gain recognised360

Journal entry: Dr Cash 900, Dr Right-of-use asset 120; Cr Towers 300, Cr Lease liability 360, Cr Gain 360. The right-of-use asset is depreciated over the 15-year leaseback and the liability unwinds with interest, so the deferred part of the gain effectively comes through as lower depreciation over the lease.

Is the transfer a sale?

The operator applies IFRS 15 to decide whether control of the towers passes to the tower company. A leaseback on its own does not prevent a sale. But if the operator has a substantive right to buy the towers back, the transfer is not a sale, the towers stay on the operator's balance sheet, and the cash received is a financial liability. Deals where the operator keeps a large stake in the tower company also need analysis, because the operator may keep control of the towers through the investee.

Is leasing antenna space a lease?

An operator leases defined space on each tower for its equipment. Many operators conclude that this is a lease of an identified, physically distinct portion of the tower, so IFRS 16 applies. Where the tower company can move the equipment freely, or the arrangement is for a capacity service rather than specific space, it may be a service instead. The conclusion affects both the sale and leaseback accounting and the ongoing lease liability.

What if the price is not fair value?

If the sale price is above fair value, the excess is additional financing from the tower company; if below, the shortfall is a prepayment of lease payments. Both adjustments are made before calculating the gain, which is why tower deals priced well above independent valuations need particular care.

What is disclosed about a tower deal?

The gain or loss on the sale and leaseback, the terms of the leaseback, the right-of-use assets and lease liabilities arising, and any significant judgements, such as whether the transfer was a sale and whether the leased space is an identified asset. Deals that also involve taking a stake in the tower company need additional disclosures about that investment.

What are the ongoing effects?

Operating costs fall as tower maintenance moves to the tower company, but the operator now carries a large lease liability, depreciation and interest. Reported EBITDA usually rises, because lease costs fall below EBITDA under IFRS 16, while net debt including leases also rises. See sale and leaseback under IFRS 16, IFRS 16 for telecom sites and telecom accounting.

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Questions people ask

How is a tower sale and leaseback accounted for under IFRS 16?

If it is a sale under IFRS 15, the operator derecognises the towers, recognises a right-of-use asset for the share retained, a lease liability, and a gain only on the rights transferred.

Why is only part of the gain recognised in a tower deal?

Because the operator keeps using part of the towers through the leaseback; the gain on that retained part is not recognised.

When is a tower sale not a sale?

When control does not pass under IFRS 15, for example if the operator has a substantive right to buy the towers back.

Is leasing space on a tower a lease?

Often, if the space is an identified, physically distinct portion of the tower; otherwise it may be a service.

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.

IFRS 16Sale and leaseback under IFRS 16TelecomIFRS 16 for telecom sites, towers and fibreTelecomTelecom accounting: the key IFRS issues

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