Telstra lost a further $1.4 billion in value today as its chances of returning to the bidding process for the right to build a $10 billion national broadband network (NBN) were rated as extremely low.
Australia's largest Telco was excluded from the tender process by the federal government on Monday because it failed to meet one of five mandatory requirements in its response by the November deadline.
The government has said it is unlikely to readmit the company because that would be unfair to competing bidders which meet the request for proposal criteria on time.
Citigroup analyst Phil Campbell said in a client note Telstra had a less than 5% chance of being allowed back into the tender process.
"We assess the probability as very low,'' Mr Campbell wrote.
About $6 billion was wiped off Telstra's market value on Monday as a result, and by today's close the total two-day loss was $7.4 billion.
The stock lost another 11 cents, or 3%, to close at $3.54 today, its lowest in more that two years, after several analysts lowered their profit forecasts and downgraded the stock.
However, Goldman Sachs JBWere analysts Christian Guerra and Raymond Tong believe Telstra still has a chance of returning to the bidding process.
The expert panel reviewing the bids could deem that none of the remaining proposals were worthy and restart the tender process.
However, if one or more of the remaining bidders are recommended by the panel, Telstra faced the worst possible outcome.
"We remain of the view that Telstra is the only logical builder of the NBN,'' Mr Guerra and Mr Tong wrote in a client note.
"In our view, Telstra satisfies more criteria and answers more questions more comfortably than other probable or possible NBN tender bidders.''
Citigroup's Mr Campbell said a legal battle looms if one of Telstra's rivals is awarded the NBN contract, because access to existing Telstra infrastructure will be needed to build the network.
The government may be required to legislate for such access, he said.
"This would be an extreme move by the government, but we believe they may take such a stance given Telstra's actions,'' Mr Campbell said.
An expert panel is reviewing bids from the five remaining consortia, and will deliver its recommendation to federal communications minister Stephen Conroy by the end of January next year.
Senator Conroy expects to announce the winning bidder by the end of March.
AAP
