Poor customer service by Australian telcos is often caused by outsourcing, Telecommunications Industry Ombudsman John Pinnock has said.

Releasing the 2005 annual report for the telecoms industry, Pinnock said complaints have risen by a third, with phone companies providing Australia's worst customer service.

This includes selling faulty handsets and not tackling serious billing problems.

The ombudsman handled more than 100,000 separate complaints in the last financial year, from almost 79,000 calls.

Pinnock said an increase in "industry activity" was pushing complaints up in all areas, as new products, services and billing schemes entered the market.

Customer service was a widespread problem, often caused by outsourcing, he said.

"In the mobile area, faults have gone up by almost 100 percent, billing complaints have gone up by 112 percent and customer service complaints by 145 percent," Pinnock said.

He said many of the complaints related to handset faults, particularly in 3G (third-generation) mobile phone technology.

In landline and internet use, bad customer service was also a standout.

"It's the customer service increase that we're worried about, and this generally reflects people's inability to get things done by their provider," he said. "When you outsource, it's just one step further removed from your customer base.

"No matter how well you try to control that by various protocols with your agents, there's a loss of customer knowledge or an absence of customer knowledge, even within Australia.

"Across the board, all of the large companies have problems with customer enquiries and customer complaints."

Pinnock gave Telstra, Optus, AAPT, Primus, Vodafone and Hutchison as examples.

However, Telstra was the target of about 36 percent of the 100,800 complaints - a relatively small amount for its market share. "Telstra, actually, relatively speaking, is quite a good performer," he said.

One frequent cause of complaint was companies not properly itemising their charges.

Pinnock said complaints were consistently much higher in the telecoms industry than in banking, insurance and finance.

Australian Mobile Telecommunications Association CEO Graham Chalker said the number of mobile phone subscribers in Australia is nearing 19 million, and argued that the report should be looked at in context.

"The TIO's annual report says there were 40,254 complaints about mobile phones in 2004-05. This is 0.2 per cent of total subscribers," he said.

Chalker added that the industry has developed a new code to make contracts simpler and fairer and is working on a new credit management code.