Telstra's exit for what it claimed this morning was a "trivial reason" has also sent its share price tumbling because it was seen as the biggest risk to the company.

Shares in Telstra slumped almost 6pc, or 24 cents, to a two-year low of $3.89 this morning, in a market which soared more than 3pc.

Investors have viewed the telecom as the best placed to build a network reaching 98pc of the population.

The surprise departure leaves just three consortia - including Optus - with plans to build a national network at the negotiating table.

Two other bids are state- and territory-based proposals.

The network roll-out was one of Labor's key promises at the last election.

Telstra today accused the Government of excluding its 13-page proposal for the "trivial reason" of not including a plan to involve small businesses.

Citi analysts have estimated up to $10 billion could be wiped from Telstra's market value if it does not compete for the network build - a scenario that would leave in tatters the plans unveiled by chief excecutive Sol Truijillo three years ago to transform the company by 2010.

"The decision to exclude us from the [tender] is the Commonwealth's decision to make," Telstra's chairman, Donald McGauchie, said.

"But Telstra is the only company to have submitted a proposal with a real financial commitment of $5 billion."

Late last month Telstra increased the brinkmanship with the Government by submitting a proposal that failed to meet some tender guidelines.

Telstra has been at loggerheads with the Government for months because it wanted a guarantee that a new network would not split its business.

But Communications Minister, Stephen Conroy, has repeatedly refused to give the assurances Telstra demands.

In a statement released this afternoon, Sen. Conroy confirmed Telstra's bid was no longer under consideration, leaving Acacia, Axia, Optus-Terria, TransACT and the Tasmanian Government as the bidders which correctly met the conditions for participation.

"There was nothing to stop Telstra from submitting a complete proposal and competing vigorously with other proponents in this process," Sen. Conroy said.

"Instead, the Telstra Board failed to comply with the mandatory requirements.

"Telstra's Board will have to explain to its shareholders why it has decided to sideline itself from a process that will shape the Australian communications sector for the next decade."