"Telstra could have been banned on a whole list of things. [Telstra's] bid was a deliberate attempt to undermine the process and bully the government."

Conroy's office confirmed Telstra's exclusion from the bid was due solely to its failure to submit an SME plan, and not for the 18 percent broadband coverage shortfall between its proposal and the tender objectives.

Telstra's McGauchie said in a written statement the government decision to exclude it from the bid was an excuse to remove what has been an intransigent duelling partner on a range of issues during the tender process.

"Telstra provided its SME Plan to the Government in early December and, in Telstra's view, in accordance with the RFP," McGauchie said.

"The Commonwealth could hardly have dreamed up a more trivial reason to exclude Telstra from the NBN."