Connect with us

Headlines of the Day

Telcos network costs to increase due to diesel price hike

The recent increase in diesel rates for bulk industrial users is likely to inflate the overall network costs of India’s top telcos, Reliance Jio, Bharti Airtel and Vodafone Idea (Vi), denting operating margins by around 100 basis points (bps) in the June quarter.

One basis point is 0.01%.

Payouts toward diesel are a key component of a telco’s overall network costs, which are around 22-24% of sales. Diesel costs form part of a telco’s energy bill that also includes electricity costs (for grid support) and battery costs.

Earlier this week, diesel prices went up by a massive ₹25 per litre for bulk industrial users.

Analysts said the impact of the increase in fuel prices would be manifest in the June quarter that is expected to, otherwise, see decent revenue and operating income growth on the back of recent tariff increases.

“The jump in diesel rates for bulk industrial users will increase overall network costs of telcos and reduce their operating income (Ebitda) growth in the June quarter by around 1-2 percentage points, compared with what they would have reported under normal circumstances had diesel rates not risen,” a sector analyst at a leading global brokerage said.

Another industry analyst said that “higher telco payouts toward diesel would also negatively impact operating margins in the June quarter by an estimated 50-100 bps.” The big three private carriers were earlier estimated to report around 4-5% sequential expansion in revenue and slightly higher Ebitda growth in the April-June quarter, FY23, but those numbers could dip modestly following the fuel price increase. Telecom sector revenues had risen by 4.5% and 4.2% sequentially in the second and third quarters, respectively, of FY22.

Analysts, though, said higher diesel rates won’t have any impact on current quarter earnings, with telcos estimated to report much higher sequential revenue growth of around 10% and even higher operating income growth, helped by the full beneficial impact of last November’s tariff increases.

Jio’s Ebitda and Ebitda margin stood at ₹9,514 crore and 49.2%, respectively, in the December quarter. Airtel’s India business and Vi, in turn, reported Ebitda of ₹10,407 crore and ₹3,816.5 crore, respectively in the December quarter. Likewise, the operating margins of Airtel’s India business and Vi’s stood at 49.8% and 39.3%, respectively, in the fiscal third quarter. Pehal News

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!