Microsoft inked multibillion-dollar deal with AT&T

Microsoft have signed a deal to enhance its cloud business with AT&T worth above $2 billion, where AT & T will move applications to Microsoft's Azure infrastructure and move most of its employees to the Microsoft 365 package of productivity apps and security services. Where, all AT&T Communications employees will use Microsoft 365, which includes Windows 10 and Office 365.

AT&T represents both a hefty buyer and a highly recognizable brand with significant data storage and computing needs for its more than 250,000 staffers. The companies are working together on developing tools for artificial intelligence and high-speed 5G wireless, and plan to announce additional services later this year.

“With things like 5G coming together, we absolutely think the combination of AT&T and Microsoft can really go fulfill the demand which is going to be very broad-based across what is commercially led innovation,” Microsoft CEO Satya Nadella told CNBC in an interview. “This next phase of, I’ll call it the cloud and edge and AI era, will be led by what I would broadly call more production versus just consumption.”

Accenture estimated last year that U.S. telecom operators will spend $275 billion over seven years to build out communications networks for autonomous cars and the world of connected devices, or internet of things.

AT&T is a longtime customer of Microsoft and, in moving its technology to the cloud and the latest apps, underscores how Microsoft can use its existing position in the enterprise market as an advantage over AWS. The ability to work with someone who has a really strong track record in how enterprises are creating, recreating themselves into a digital form is a very important part of why we selected Microsoft,” John Donovan, CEO of the AT&T Communications business, said in an interview. The deal is not exclusive, and AT&T is permitted to use other cloud providers in addition to Azure, Donovan said.

Microsoft investors are counting on continued expansion out of Azure, which grew 73% in the latest quarter, though the company still doesn’t break out numbers from the business. Shareholders are so bullish on Microsoft’s prospects that they now value the company at more than 26 times earnings for the next 12 months, the highest multiple since 2002, according to FactSet.

AT&T Communications accounts for about 78% of total company revenue. AT&T said in a statement, it’s the first “public cloud” company, moving applications from its data centers to Azure and employees in its communications business to Microsoft 365, which includes Windows 10, Office 365, and mobility and security services.