AGR dues: Supreme Court lashes out at DoT, telcos; says must pay all dues

The Supreme Court on Wednesday once again came down heavily on the Department of Telecommunications (DoT), which had filed a petition seeking relief for telcos in paying the dues linked to adjusted gross revenue (AGR). The court shot down the DoT proposal that telecom companies might be permitted a 20-year staggered payment and exemption from penalties and interest in relation to the AGR dues.

A Bench of Justices Arun Mishra, S A Nazeer, and M R Shah refused to take up the Centre’s plea for allowing telecom firms to pay the AGR dues in 20 years, saying the application would be taken up after two weeks. The court was also critical of the companies for trying to evade the payment, while pulling up the media for not reporting facts as they were. The court has asked telcos to pay the full dues as assessed by the DoT and has agreed to look at the manner of payment. The court has summoned the DoT officials responsible for allowing telcos self-assessment of dues. It said neither the DoT nor the telcos would be spared.

It ordered the telecom department to immediately withdraw the move of allowing self-assessment of dues, while stating that the companies cannot “hoodwink” the court. If required, the managing directors of the telecom companies will be summoned and may even be sent to jail, it observed.

According to DoT estimates, the telecom industry was liable to pay Rs 1.47 trillion in AGR-linked dues following the SC order on October 24, 2019. Telecom firms however assessed their AGR dues at a fraction of what the government had calculated and paid to the government accordingly. SC has now questioned the very basis of self-assessment of the AGR dues by telcos. “Who permitted self-assessment without the permission of the court,” Mishra asked.

Mishra said no further objections would be allowed against payable dues and that the DoT’s demand had been confirmed by the court.

DoT, on its part, has time and again said that the telecom companies — Bharti Airtel, Vodafone Idea and Tata Teleservices — owe Rs 1.02 trillion. The Rs 1.47-trillion AGR bill is for a total of 16 telecom companies, many of which have gone out of business.

SC also said that its order had clearly spelt out the dues. The apex court added that the request of corroborating the self-assessed dues in eight to ten months cannot be allowed. The dues should be paid in accordance with its verdict given on October 24, 2019, according to the court.

Lashing out at the managing directors of telecom companies, the court said they would be personally responsible and would be held for contempt of court for any misleading media reports on the AGR subject.

Mishra said that newspapers were trying to influence the courts and the companies were trying to influence the SC through the media. The top court even threatened to recuse itself from the AGR case if the Centre took the matter lightly, saying it was “tantamount” to seeking a review of the SC judgment.

On Monday, the DoT had submitted a plea to the Supreme Court seeking significant concessions for telcos, changing the contours of the dispute over what constitutes AGR and the associated liabilities of the operators.

DoT had sought a 20-year staggered payment of the operators’ dues linked to AGR along with a waiver of interest and penalty.

In the October 2019 verdict, the SC had upheld the government's position on including revenue from non-core businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea accounted for about 60 per cent of the total.

DoT's test checks on telcos' AGR dues assessment may start soon: Report

The "test checks" as promised by the government on AGR-hit telecom companies' dues assessment could start this week for large telcos, according to a senior DoT official.

The government also wants Vodafone Idea to expedite its self-assessment, and Telecom Secretary Anshu Prakash is believed to have communicated DoT's views in this regard to VIL, CEO and MD Ravinder Takkar during a recent meeting on Friday evening.

A DoT official said that "test checks" of AGR calculation for a sample year would commence shortly and it could be as early as this week at least for large telecom companies.

On Saturday, telecom operator Bharti Airtel said it has made payment of Rs 8,004 crore towards adjusted gross revenue (AGR) dues to the government, an amount over and above Rs 10,000 crore it has already paid.

The amount of Rs 8,004 crore includes Rs 3,004 crore towards full and final settlement on AGR dues based on self assessment, and a deposit of buffer Rs 5,000 crore to cover DoT's reconciliation differences.

"Based on the aforesaid payment we have now complied with AGR judgement and the directions in the order of the Supreme Court dated October 24, 2019," Airtel said in a regulatory filing.

According to the Department of Telecom (DoT) estimates, however, Airtel owes nearly Rs 35,000 crore.

DoT is also asking three telecom companies Bharti Airtel, Vodafone Idea and Tata Teleservices to provide substantiating documents to support their claims on AGR arithmetic.

Once substantiating documents are filed by the companies, the telecom department will initiate random 'test checks' on the AGR calculation in a time-bound manner.

The 'test check' will be done for any one year (of telcos' dues) to examine the deviation between telecom companies' assessment and the government's own calculation of AGR liabilities.

In all, 15 entities owe the government Rs 1.47 lakh crore in unpaid statutory dues -- Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges.

Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea account for about 60 per cent.

These dues arose after the Supreme Court, in October last year, upheld the government's position on including revenue from non-core businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

The Supreme last month rejected a plea by mobile carriers such as Bharti Airtel and Vodafone Idea for extension in the payment schedule and asked companies to deposit their past dues for spectrum and licences.

Since then, telecom firms and the telecom ministry had been doing separate maths on the actual dues.

Vodafone Idea, which is confronted with Rs 53,000 crore in statutory dues as per DoT's calculation, has so far paid only seven per cent of those dues in two tranches. Airtel has paid over Rs 18,000 crore out of its DoT estimated liability of over Rs 35,000 crore.

Tata Teleservices has paid Rs 2,197 crore, the entire outstanding it believes to have arisen after the October ruling of the apex court for calculating dues.

Both Bharti Airtel Chairman Sunil Mittal and Vodafone Idea Chairman Kumar Mangalam Birla continued to meet top government functionaries over the last few days to seek prompt measures that would offer a breather to the troubled sector.

Mittal has urged the government for reduction in levies and taxes, as he termed the AGR "an unprecedented crisis for industry".

Even as the AGR-crisis has pushed telcos to the brink, the crucial meeting of Digital Communications Commission (DCC) on Friday discussed options on relief to the distressed telecom sector but could not arrive at a decision, as government officials said more details are required for reconciliation of data on statutory dues.

Telecom companies have been desparately waiting for a bailout package from the Government after an SC-order on statutory dues, and all eyes were on the DCC meet for the much-needed breather to fix the AGR imbroglio.

AGR dues: DoT seeks Rs 7,608 cr from GAIL for FY18, doesn't press for full

The DoT has sought Rs 7,608 crore in dues from GAIL India for 2017-18 as the department appeared to be not pressing for immediate payment of Rs 1.83 trillion in past dues it had previously assessed from the state-owned gas utility.

The Department of Telecommunications (DoT) sent a notice to GAIL soon after the February 14 hearing in the Supreme Court on dues owned by telecom companies such as Bharti Airtel, Vodafone Idea, sources privy to the development said.

The dues now being sought from GAIL include a penalty for late payment, they said.

The Supreme Court's original ruling in October last year led the DoT to demand Rs 1.47 trillion in unpaid dues on licence fees and spectrum usage charges from telecom companies such as Bharti Airtel and Vodafone Idea.

Its demand related to a 14-year-old dispute regarding the definition of adjusted gross revenue (AGR), which the Supreme Court agreed should include all kinds of income generated by the telcos.

Alongside, the DoT also raised a demand of over Rs 3 trillion from non-telecom PSUs such as GAIL, Oil India and PowerGrid for telecom licences these firms had primarily acquired for internal communication purposes.

For GAIL, the DoT assessed an outstanding of Rs 1,83,076 crore towards annual licence fee in respect of IP-II Licence. This included interests and penalty, sources said.

GAIL and other non-telecom firms felt the October 2019 ruling of the Supreme Court did not apply to them and filed petitions seeking clarification from the apex court.

On February 14, the Supreme Court rejected telcos' petition regarding relaxation in the payments. To non-telecom firms, it asked to approach appropriate forums for redressal of their grievance.

Refusing to comment on the DoT demand, GAIL Chairman and Managing Director Manoj Jain said the Supreme Court on February 14 allowing the non-telecom firms to withdraw their petition is indicative enough that "our case is different" than telcos'.

"We are working on what appropriate forum should we go to for an appeal against the DoT order," he said. "We have already paid whatever was due and according to us there is no outstanding."

On the Rs 1.83 trillion assessment by the DoT, GAIL had previously in a regulatory filing stated that these were unrelated to the terms and conditions of its IP-II Licence.

"Based on the legal option sought in this regard and facts of the case, the company is of the view, that the amount assessed in provisional assessment orders is legally not tenable," it had said.

The DoT had computed dues of non-telecom PSUs by simply taking all their revenues earned such as oil and gas operations and levying licence fees.

Sources said while the DoT had sought Rs 48,489 crore in past dues from Oil India on the surplus bandwidth capacity it had leased to third parties, Power Grid Corp was slapped with Rs 21,953.65 crore liability. Gujarat Narmada Valley Fertilizers & Chemicals faces a payout of Rs 15,019.97 crore.

On February 14, the Supreme Court had pulled up the DoT for not enforcing its October 24 order that gave telcos three months' time to pay dues. Hours later, the DoT sent notices to Airtel and Vodafone Idea asking them to clear dues immediately.

OIL, the nation's second-biggest state-owned oil producer, holds a National Long Distance Service Licence (NLD) with the primary objective of monitoring and operation of its pipeline network.

The surplus bandwidth capacity available with the company was leased out to telecom operators/other users, on which the company regularly paid the applicable licence fee to the telecom department (DoT).

PowerGrid, which holds NLD and Internet Service Provider (ISP) licences, was asked to pay Rs 21,953.65crore (including interest and penalty) for 2012-13 to 2017-18 by adding revenue related to power transmission and consultancy as 'miscellaneous income' in adjusted grossrevenue, sources said.

Gujarat Narmada Valley Fertilizers & Chemicals, which had a Very Small Aperture Terminal (VSAT) and a Category 'A' ISP, was asked to pay Rs 15,019.97 crore for 2005-06 to 2018-19.

DoT's test checks on telcos AGR dues standard audit procedure: COAI

Terming 'test checks' proposed by the government on telcos' AGR arithmetic as standard audit procedure, Industry body COAI has said the DoT needs to ensure consistency among its different circles on calculation of dues to minimise any differences.

Cellular Operators' Association of India (COAI) also cautioned that any decision to encash bank guarantees will be "disastrous" for the telecom industry, which only has three private players.

"Any move to encash bank guarantees will precipitate an already precarious situation," COAI Director General, Rajan Mathews told PTI.

Mathews termed the 'test checks' being proposed by the telecom department to examine deviation in calculation of dues by companies as a "standard audit procedure".

He pointed out that while amounts need to be finalised as soon as possible, operators too should be given a fair opportunity to explain the deviations in calculation.

"There should be consistency amongst all LSAs (Licensed Service Areas) of the DoT (Department of Telecommunications) on how the amounts are calculated, so the differences are minimised," Mathews added.

The government has made it clear that it will verify the companies' claims on AGR math and examine any deviations from its own calculation, through random 'test checks' before March 17.

The government will conduct 'test check' for any one year (of telcos' dues) to examine variances between telecom companies' assessment and the government's own calculation of AGR liabilities.

The test check will happen for all telecom firms, but could start with those, which have already claimed they have made full and final settlement towards their statutory liabilities, like Tata Teleservices.

In all, as many as 15 entities owe the government Rs 1.47 lakh crore -- Rs 92,642 crore in unpaid licence fee and another Rs 55,054 crore in outstanding spectrum usage charges.

These dues arose after the Supreme Court, in October last year, upheld the government's position on including revenue from non-core businesses in calculating the annual adjusted gross revenue (AGR) of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

The Supreme Court earlier this month rejected a plea by mobile carriers such as Bharti Airtel and Vodafone Idea Ltd for extension in the payment schedule and asked them to deposit an estimated Rs 1.47 lakh crore in past dues for spectrum and licences.

The apex court had warned that it will initiate contempt proceedings against top executives of these firms for non-payment.

Some telecom firms are already struggling with mounting losses and debt, and the additional liability has raised concerns of them defaulting on existing loans.

Of the estimated dues that include interest and penalty for late payments, Airtel and Vodafone Idea owe about 60 per cent.

Vodafone Idea is confronted with total AGR dues of over Rs 53,000 crore. Of this, it has so far paid only Rs 3,500 crore in two tranches earlier this week.

Airtel has so far paid Rs 10,000 crore out of its estimated liability of over Rs 35,000 crore.

Tata Teleservices has paid Rs 2,197 crore, the entire outstanding it believes to have arisen after the October ruling of the apex court for calculating dues.

Tata Teleservices and Tata Teleservices Maharashtra have submitted to the government the details of calculation in support of its payment, but sources in the DoT said that wide gap between the company's calculations and the department's assessment of about Rs 14,000 crore, will certainly be examined.

Govt approves merger of Indus Towers with Bharti Infratel: Report

The Department of Telecom (DoT) on Friday approved the merger of the country's largest mobile tower company Indus Towers with Bharti Infratel, according to official sources.

The combination of Bharti Infratel and Indus Towers will create a pan-India tower company with over 163,000 towers, operating across all 22 telecom service areas. The combined entity will be the largest tower company in the world outside China.

"DoT has approved merger of Indus Towers with Bharti Infratel," an official source told PTI.

Bharti Infratel and Vodafone hold 42 per cent stake each in Indus.

Vodafone Idea holds 11.15 per cent stake in the mobile tower firm.

As per the plans, the combined company, which would fully own the respective businesses of Bharti Infratel and Indus Towers, would change its name to Indus Towers Ltd and will continue to be listed on Indian stock exchanges.

The timely completion of the tower deal is critical for the companies, as it would allow Bharti and Vodafone Idea in offloading stake and raising funds.

In April 2018, Bharti Airtel, Idea Cellular, and Vodafone Group had announced an agreement for the merger of Indus Towers and Bharti Infratel to create the largest mobile tower operator in the world outside China.

According to the original deal structure, Vodafone was to be issued 783.1 million new shares in the merged entity in exchange for its 42 per cent stake in Indus Towers, and this could take its holding to 29.4 per cent in the new company, depending on the options finally taken by Idea and Providence.

Similarly, Airtel’s stake in the new combined tower behemoth was to be diluted to 37.2 per cent in the combined entity, from 53.5 per cent it currently holds in Bharti Infratel. The transaction at the time of the deal announcement valued Indus Towers at an enterprise value of Rs 71,500 crore.

DoT still working on final AGR dues due to varying accounting practices

The Department of Telecom is still working on final adjusted gross revenue dues that service providers have to pay as it has detected variation in accounting practices adopted by different circle offices, according to official sources.

The licence finance wing of the telecom department (DoT) on February 3 issued a letter with guidelines to all controller General of Communication Accounts to reconcile AGR dues and asked them to give 15 days time to operators for the submission of appeals and documents related to deductions they make in the final payment, sources said.

The letter was a follow up to a previous note sent by the licence finance wing on December 4 and a follow-up on December 13 to the circles for re-verification of debit voucher reports (DVR). "The department has been facing a challenge in carrying out the revised assessments due to various issues related to DVRs. Telecom operators, including Airtel and Vodafone Idea, have challenged many DVRs.

"Also, circle offices have not adopted uniform practice in accounting. The DoT has asked them to re-verify DVRs at the earliest in the light of Supreme Court judgement," an official source said.

Telecom operators have been submitting two separate audited details of deduction towards interconnection usage charges and roaming fee to the DoT. In one set, deductions have been claimed by telecom operators on a paid basis while on an accrual basis on the other.

"DoT noticed that many Controllers of Communication Accounts have been cherry picking the figures claimed by telecom operators in their final DVRs. In some cases, DoT guidelines regarding deduction verification issued in 2014, 2015 and 2016 have not been followed. There have been cases where one CCA has allowed one kind of deduction and another has disallowed," the source said.

According to estimates prepared by the DoT, Airtel owes nearly Rs 35,586 crore, including licence fee and spectrum usage charges, to the government.

Vodafone Idea is staring at dues worth Rs 53,000 crore, which includes up to Rs 24,729 crore of spectrum dues and another Rs 28,309 crore in licence fee. Tata Teleservices owes around Rs 13,800 crore, BSNL Rs 4,989 crore and MTNL Rs 3,122 crore.

While the deadline to make AGR payment ended on January 23, 2020 as per Supreme Court order, the DoT has been following up with circle offices to verify DVRs of 10 years starting from 2006-2007 which involve around millions of entries in a quarter and then start verification for 2017-18 and 2018-19.The DoT on December 13, 2019, gave 15 days time to submit the re-verified accounts but the same could not be done in absence of uniform guidelines.

"The headquarters will also need time to check DVRs once they are submitted by the circle office. Thereafter notice will be sent to telecom operators for submitting appeals and documents related to claims that are not admissible," the source said. The apex court on February 14 came down heavily on the telecom department for not taking steps to recover statutory dues, estimated to be around Rs 1.47 lakh crore, from operators including Bharti Airtel, Vodafone Idea, Tata Teleservices, among others. Of Rs 1.47 lakh crore, around Rs 1.13 lakh crore is likely to be recovered, as other companies, which are liable to pay AGR dues, have shut down their businesses.

Reliance Communications and Aircel are going through insolvency proceedings. Of the total demand raised, Bharti Airtel, Vodafone Idea and Tata Group have made part payment of about Rs 10,000 crore, Rs 2,500 crore and Rs 2,197 crore, respectively. The next hearing of the case is listed for March 17.

AGR dues: DoT talks tough on deadline, telecom companies sit on the fence

The Department of Telecommunications (DoT) will begin issuing notices to telecom companies after the January 24 deadline for payment of AGR (adjusted gross revenue) dues, set by the Supreme Court, lapses, a senior official said.

This comes even as the apex court on Tuesday agreed to list the “modification petition” filed by Bharti Airtel, Vodafone Idea and Tata Group for “sometime next week”. The firms have sought a change to the 90-day deadline for payment of Rs 1.47 trillion worth of AGR dues, and permission to engage with the DoT on the terms and timing of payment.

It is learnt that the DoT will issue notices in compliance with the apex court’s October 24, 2019, order that stated that the AGR-related dues need to be paid by January 24.

“We cannot go against the SC. Therefore, we have to recover dues from the companies according to their order,” an official said. He added that if the companies get any relief from SC next week, their payments will be adjusted for any future settlement.

Meanwhile, leading telecom companies are holding hectic parleys as they consider skipping the deadline for payment of AGR dues.

Rajan S Mathew, director general of Cellular Operators Association of India (COAI), said: “I understand that most of the telcos may wait till the hearing of the new petition before they make the payment.”

Mathew said there were enough judicial precedents, where the court had not executed its order, pending further adjudication in the same court. He said that they will continue to hold talks with DoT and are hopeful that no coercive action will be taken, though there has been no official communication to that effect.

chartThis view was echoed by the lawyer Shally Bhasin, who represented Vodafone Idea. Bhasin told TV channels that no one was going to pay the AGR dues and that telcos have requested the court to let them discuss the matter with DoT and finalise the payment plan.

However, Bharti Airtel declined to comment on the issue, and it is not clear whether it will pay some money upfront or follow the same line as Vodafone Idea.

In the case of Jio, which was not part of the review petitions, it is expected to pay by the deadline. Jio declared in its recent financial results that it has estimated the liability for the period from 2010-11 to 2018-19 at Rs 177 crore for licence fee and spectrum user charges (SUC), in view of the SC judgment.

Earlier, some of the telcos were thinking of paying part of the sum due — up to 20 per cent — before the deadline, as non-payment would allow DoT to encash on their bank guarantees.

Advocate C A Sundaram, who is representing a telco, said companies were not disputing the payment to be made, rather they wanted to work out a fresh schedule. The telcos also pushed for an open court hearing, but the CJI said that would be decided by the Bench concerned.

The court, on October 24, had ordered telecom companies to pay their licence fee and SUC dues within 90 days. Failure to pay the dues could lead to contempt of court. However, a senior executive of one of the telcos pointed out: “We don’t expect any coercive action from DoT if we wait for the hearing to happen next week, which is after the deadline.”

The plea, apart from putting the telcos’ plan for a curative petition on the backburner, is aimed at not only getting more time for payment, but also, if permitted by the apex court, to negotiate with the DoT for a staggered payment scheme, just like it was able to get for spectrum.

The news that telcos might get more time led to a boost for Vodafone Idea, which has the largest bill to pay. There are fears that the firm might be forced to close shop if there is no relief. However, with the firm’s lawyers saying the company wants to stay in the business, its share price closed up 22.68 per cent at Rs 5.95 on the bourses. The shares of Bharti Airtel, however, fell marginally by 0.07 per cent to close at Rs 508.35.

Govt approves raising FDI in Bharti Airtel to 100% from 49% allowed earlier

The Department of Telecom (DoT) has approved raising of foreign direct investment in Bharti Airtel to 100 per cent from 49 per cent allowed earlier, a stock exchange filing of the company said on Tuesday.

The company also has the approval of the Reserve Bank of India (RBI) that allowed foreign investors to hold up to 74 per cent stake in the company.

"Bharti Airtel Limited has received the approval from the Department of Telecommunications (DoT) vide its letter dated January 20, 2020, for increasing the limit of foreign investment up to 100 per cent of the paid-up capital of the company," the filing said.

The approval comes few days before the company has to clear statutory liabilities of up to nearly Rs 35,586 crore, of which Rs 21,682 crore is licence fee and another Rs 13,904.01 crore is spectrum dues (excluding the dues of Telenor and Tata Teleservices).

"...the aforesaid approval read together with the RBI approval dated July 3, 2014 granted to the company allows the FPIs/FIIs to invest upto 74 per cent of the paid up capital of the company," it said.

AGR dues: DoT's total demand from non-telcos twice that from telcos

The Department of Telecommunications (DoT) has slapped a Rs 15,019-crore demand notice on Gujarat Narmada Valley Fertilizers & Chemicals Ltd, taking the total amount it has sought from non-telecom companies to Rs 3.13 trillion following a Supreme Court ruling.

While the DoT has sought Rs 1.47 trillion from Bharti Airtel, Vodafone Idea Ltd and other telecom companies after the Supreme Court's ruling on revenues that need to be taken into consideration for payment of government dues, its demand notices on non-telecom companies now total at more than double of the telecom firms.

In a regulatory filing, Gujarat Narmada Valley Fertilizers & Chemicals Ltd said it has received a December 23, 2019, demand notice from the Office of Controller of Communication Accounts in DoT, Ministry of Communications, seeking payment of over Rs 15,019 crore before January 23, 2020, "in respect of financial years from 2005-06 to 2018-19 in connection with V-SAT and ISP licences held by the company."

"The company is presently examining the said demand notice and judgment of Supreme Court of India by seeking expert legal advice in the matter," it said. "Based on the legal advice, the company will decide the future course of actions."

DoT had previously sought Rs 1.72 trillion from India's largest natural gas marketer, GAIL, and another Rs 1.25 trillion from PowerGrid, which had both national long distance as well as internet licence.

From GAIL, it sought Rs 1,72,655 crore on IP-1 and IP-2 licences as well as internet service provider (ISP) licence. In response, GAIL has told DoT that it owes nothing more than what it has already paid to the government.

The firm told DoT that it had obtained ISP licence in 2002 for 15 years, which expired in 2017. But, GAIL never did any business under the licence and since no revenue was generated, it cannot pay any amount.

On IP-1 and IP-2 licences, GAIL has told DoT that it generated Rs 35 crore of revenue since 2001-02 and not Rs 2,49,788 crore that has been considered for levying past dues.

PowerGrid says it has an adjusted gross revenue (AGR) of Rs 3,566 crore since 2006-07 and after adding penalty, it comes to Rs 22,168 crore.

The Supreme Court had on October 24 ruled that non-telecom revenues earned by firms using spectrum or airwaves allocated by the government will be considered for calculating statutory dues.

While telcos such as Bharti Airtel and Vodafone Idea may have had non-telecom revenues generated from using the government licence and spectrum, firms such as GAIL had no such revenue.

Sources said DoT estimates that the telecom operators owe Rs 55,054.51 crore as spectrum usage charges as on October 31, 2019, while the figure for licence fees stands at Rs 92,642 crore.

American Airlines-Qantas joint venture wins final approval from US DOT

US Department of Transportation (DOT) on Friday granted American Airlines Group and Qantas Airways final approval to operate a joint venture after a prior effort was rejected in 2016.

The department last month had issued an order tentatively approving the agreement and granting antitrust immunity to the airlines covering international service.

US Transportation Secretary Elaine Chao announced the approval on Friday afternoon, noting it was the first completed review of an airline joint venture proposal during the Trump administration.

Reuters was the first to report on the planned announcement earlier on Friday.

An application for a joint venture covering the United States, Australia and New Zealand was rejected in November 2016 by former President Barack Obama’s DOT. It tentatively concluded after a 17-month review that the venture “would reduce competition and consumer choice.”

The deal will allow the airlines to coordinate planning, pricing, sales and frequent flyer programs, with new options and customer service improvements. The two OneWorld alliance carriers are planning up to three new routes within the first two years as well as increased capacity on existing routes, the department has said.

American Airlines did not immediately comment on Friday, but Chief Executive Doug Parker said last month the joint venture would also create new jobs in the airlines and industries.

In June, JetBlue Airways Corp told the DOT that it took no position on the alliance, but said it would “substantially reduce competition in relevant markets and concentrate a huge level of market share and power in the hands of immunised alliances.”

It also said the three major global airline alliances — OneWorld, SkyTeam and StarAlliance — will control 86 per cent of the US-Australia market.

US regulators in 2001 approved similar joint venture agreements for United Airlines and Air New Zealand Ltd, and in 2011 for Delta Air Lines Inc and Virgin Australia.

The US DOT is, however, requiring American and Qantas to perform a self-assessment of the venture’s impact on competition seven years after it takes effect and report their findings to the government.

Regulators in Australia and New Zealand approved the first application for the joint venture before it was initially rejected by the US DOT.

American and Qantas in February 2018 made a second attempt to gain US regulatory permission under President Donald Trump’s administration for a venture that would let them coordinate prices and schedules. They threatened to cancel services if it was rejected and argued it could “unlock” up to $310 million annually in consumer benefits.

The revised application made significant changes, including removing a provision that would have barred either carrier from code-sharing with other carriers. Code-sharing allows two or more carriers to publish and advertise a single flight under their own flight number.

The airlines argued in their 2018 application that the venture would lead to lower fares and higher capacity as a “more viable third competitor,” and drive other carriers to improve quality, schedules and prices.

Qantas said last year the joint venture would allow the two airlines to “significantly improve service” and “stimulate demand.”

The airlines said the agreement could generate up to 180,000 new trips between the United States and Australia and New Zealand annually.