According to the telco, the two companies had been unable to reach an agreement on commercial arrangements for a joint venture, bringing the negotiations to an end at the weekend.
Both companies entered into talks last August, with Telstra said to be possibly investing up to $1 billion to create a third operator in the country.
"Despite an enormous amount of effort and goodwill on all sides, we were simply unable to come to commercial arrangements that would have enabled us all to proceed," said Penn.
"While this opportunity is strategically attractive, and we have great respect for San Miguel Corporation and its president, Mr Ramon Ang, it was obviously crucial that the commercial arrangements achieved the right risk-reward balance for all involved."
