This is one of the components of the OS and is involved in implementing Wi-Fi calling/texting. It needs to be able to detect information about the cellular plan and region.
https://android.googlesource.com/platform/packages/services/Iwlan/+/refs/tags/android-13.0.0_r23
Location permission means access to location data in general, not location services specifically.
It doesn't make much sense to go through the system components that the OS is built from and get concerned that they have access to user-facing permissions. The most powerful access is unavailable to regular apps and is entirely under the hood. It's very questionable that Android even makes these kinds of OS components partially user facing in this way.