“Diesel costs contribute roughly 8% to telecom companies’ operating expenses for running towers, generators etc….so, these can go up proportionately, but EBITDA (earnings before interest, tax,depreciation and amortization) will not see any dramatic change,” said an analyst who did not wish to be quoted.
Fuel prices including petrol and diesel have been skyrocketing for 9 straight-days across major cities in India, due to supply shortage in response to post-Covid return in demand. Petrol crossed the Rs 100 per litre mark on Friday, while diesel was retailing at Rs 80.6 per litre.
The telecom industry is reckoned to be a significant buyer of diesel after the Railways, and is estimated to run up annual spends of nearly Rs 9,000 crore to consume some 200 crore litres of the fuel for running 606,300 towers across the country.
Although diesel prices have remained highly volatile during the first three quarters of fiscal 2021, network operating costs have not responded in tandem, the above quoted person said.
“Despite sharp peaks and troughs in diesel prices in the last three quarters, network costs of telcos have gone up at a steady rate, meaning diesel is not the dominant factor in moving the costs,” he said.
An industry executive said that for tower companies like Indus Towers, diesel costs are a pass-through item which will be borne by the tenants and does not impact their energy margins which have already been negative for several quarters.
“The fact that Indian telcos are engaged in a unique passive infrastructure sharing model, they are somewhat able to mitigate the upside risks in fuel costs,” he said.
Telcos are also transitioning to alternate green energy resources such as solar cooling units, lithium batteries, simple power panels, fuel cells to free cooling units to cut dependency on diesel.
At press time, VIL, Airtel and Jio did not reply to ET’s queries.
