Telecommunications consortium Terria has remained defiant after AAPT became the second member to withdraw its membership in less than four months.
It is the second blow for the National Broadband Network (NBN) contenders, after Macquarie Telecom defected in June this year to offer financial backing for Telstra's bid through Macquarie Bank.
Terria chair and former NSW treasurer Michael Egan said the alliance will push ahead with its NBN proposal.
"Telstra is still adamant that it will not bid unless the federal government first rules out the possibility of requiring separation of the new network from retail operations," Egan said in a statement.
"AAPT's owner, Telecom NZ, is undertaking major capital investment in New Zealand and I can understand it wanting to focus on its home turf.
"However, its decision will not affect Terria's bid."
Local user organisation TUANZ praised Telecom's decision to focus on New Zealand investment on Friday.
AAPT CEO Paul Broad said AAPT withdrew because the NBN regulation process had become a "personality debate".
Local telecommunications analyst Paul Budde said the move was not unexpected.
"It reflects the dire situation that Telecom NZ is in from being [operationally] separated," Budde said.
"Separation is painful and costly - [Telecom NZ] has left APPT floundering without properly investment and now the company is on the brink.
"Paul Broad was right to attack the tender process. We have waited for six years and it is clear that it will fail unless the government intervenes now."
AAPT is the second casualty of the financial crisis to affect the NBN bidding process. Terria this week told reporters the economic downturn could inflate costs of the estimated $8 to $15 billion NBN bids.
Terria managing director Michael Simmons was unavailable for comment at the time of publication.