Vodafone seals €1.4 billion deal with Microsoft for AI tech

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UK telecoms company Vodafone is joining up with US tech giant Microsoft in a 10-year partnership to provide generative artificial intelligence (AI), digital, enterprise, and cloud services to more than 300 million businesses and consumers in Europe and Africa.

The British firm plans to invest $1.5 billion (€1.4 billion) in customer-centric AI using Microsoft’s Azure OpenAI and Copilot technologies. It has also revealed plans to substitute physical data centres with more cost-effective and scalable Azure cloud services. 

As part of the arrangement, Microsoft will become an equity investor in Vodafone’s independent IoT (Internet of Things) platform, which is expected to become a standalone business by April 2024. The technology company will also help in expanding Vodafone’s mobile financial platform in Africa.

“Today, Vodafone has made a bold commitment to the digital future of Europe and Africa,” said Vodafone’s Group chief executive Margherita Della Valle.

“This unique strategic partnership with Microsoft will accelerate the digital transformation of our business customers, particularly small and medium-sized companies, and step up the quality of customer experience for consumers.”  

Della Valle, who is under pressure to return profit growth, reportedly sees an opportunity to help businesses with digitisation. One month into her appointment last May, she highlighted the market potential as worth some €140 billion.

At the same time, she announced plans to cut 11,000 jobs worldwide over a three-year period, with the aim of restoring the telecoms group’s competitive position. The move followed a warning about poor performance in its key market, Germany, having an effect on cash flow. 

Shares in Vodafone, trailing behind competitors in major European markets, fell to their lowest point since 2002 and were down 9% by mid-afternoon on Tuesday.

Referring to the new partnership, Microsoft’s chief commercial officer, Judson Althoff, highlighted the strategic importance of Vodafone’s expertise in IoT and financial services.

“The IoT assets are critical in helping us address the sustainability needs of so many of our customers in hard-to-abate sectors,” he said. 

“Vodafone’s IoT stack allows us to go into those environments, model the environment, create large-scale data stores, and use AI to help customers meet their sustainability goals.”

Microsoft on Monday announced the expansion of its artificial intelligence tool Copilot beyond large enterprises. Consumers and small businesses can now purchase subscriptions that will unlock enhanced features. 

Following the introduction of a free version for Bing search last year, Microsoft is introducing “Copilot Pro” for its customers at $20 (€18) per month. The subscription brings a text-drafting, number-crunching AI assistant to popular applications such as Word and Excel, along with access to new tools and advanced AI models, such as GPT-4 Turbo.