The privatisation of Australian phone monopoly Telstra has taken a leap forward, after the government cleared it over complaints about its service standards.

An independent report into Telstra services in rural Australia showed significant improvements had been made, Prime Minister John Howard said.

But the report also pointed up 39 recommendations for reforms - notably improvements to fixed-line services and internet speeds - before the sale can go ahead.

The government hopes to raise about 30bn Australian dollars (�10.8bn; US$16.5bn) by the sale of its 50% stake in Telstra, the last major state-owned companies in Australia.

Opponents of privatisation, meanwhile, worry that service standards will slip, especially in vulnerable, remote and unprofitable rural districts.

Political problems

Mr Howard said Telstra had made a significant improvement in the past couple of years, after extra money was poured into services in remote areas following a critical report in 2000.

Telstra said it was capable of meeting the report's recommendations without significant impact on its costs.

The privatisation plan, which has been dragging on for years, is now approaching its final hurdle.

The government still has to win over a group of independent senators who hold the balance of power in parliament's upper house and who have always voted against privatisation.

Separately, Telstra is being investigated by the industry regulator over allegations that it mishandled complaints from a group of small business customers calling themselves Casualties of Telstra.

The group, based in the north-eastern city of Brisbane, claims poor Telstra service ruined their businesses.