By PETER GRIFFIN

Australian telecommunications analyst Paul Budde has delivered his strongest criticism yet of Telecom's Australian business AAPT, predicting a decline "in the footsteps of Ansett" due to "poor Kiwi management."

Budde said in a report that staff morale at AAPT was at an all-time low after headcount cuts and restructuring across the company.

His comments come as AAPT head David Bedford confirms he will leave the company, probably at the close of the financial year ending June 30.

"I have always been here on a two to three-year term [starting December 2000] and I have been open with my staff about that," Bedford told the Australian newspaper.

Budde said there was an inherent conflict between the strategies of third-ranked AAPT and its owner Telecom that was dragging the company down.

"[Telecom] swamped AAPT with managers who were accustomed to operating within an incumbent organisation, not a competitive one."

He questioned whether AAPT would hold on to the VicOne project it was working on with the state Government of Victoria.

"If it can't win this contract on profitable conditions, the result will be nothing less than disastrous."

AAPT had missed the boat in getting into broadband internet provision and had largely "abandoned" the residential market by hitting uneconomical customers with a 15 per cent levy. Customer numbers fell by around 20 per cent as a result to 470,000.

AAPT was competing in the crowded business market with around a dozen or so carriers chasing the same top-400 customers, added Budde. "To me it appears to be downhill all the way in the footsteps of Ansett, which also collapsed because of poor Kiwi management."

AAPT broke even in the September quarter and was $38 million in the black at the operating level, thanks largely to cost cutting.

Hundreds of staff have been trimmed, especially in the business and internet division, which had 656 staff at the end of September, down from 933 a year earlier.

AAPT spokeswoman Deborah Prior said about 60 staff at the Sydney call centre were deciding whether to take redundancy or move to other AAPT call centres in Queensland and Victoria. AAPT's network operations centre has been run from Hamilton for some time.

But AAPT, said Budde, had redeeming features. Its mobile arm AAPT Mobile was among the most successful mobile resale businesses in Australia, though growth prospects were low and questions hang over the Hutchison 3G venture in which Telecom has invested A$400 million ($432 million).

AAPT's wholesale internet business Connect, which Bedford acknowledges as the "crown jewels" of the business, was also praised.

Meanwhile, Telstra has brought on board Kerry Purcell, former Telecom New Zealand Australia strategy manager and a key player in the winning of the A$500 million Commonwealth Bank deal in 2000. Purcell is likely to play a major role for Telstra in pitching for some major upcoming contracts, including one for the New South Wales Government expected to be worth A$330 million a year.