Vodafone and Microsoft hit the headlines on Tuesday with the announcement that they have signed a 10-year strategic partnership that will focus on business development in areas including generative artificial intelligence (GenAI), IoT services and mobile payments.
The U.K.-based operator said it will invest $1.5 billion over the next ten years in cloud and customer-focused AI services developed in conjunction with Microsoft. Notably, Vodafone aims to replace its physical data centers with virtual ones operated by Microsoft’s Azure cloud platform.
Vodafone also hopes to be able to use the deal to scale its African fintech platform, M-Pesa, which is operated by the group’s African operators Vodacom and Safaricom.
In turn, Microsoft will use Vodafone’s fixed and mobile connectivity services. In addition, the U.S.-based software and cloud services giant intends to invest in Vodafone’s managed IoT connectivity platform, which the operator said will become a separate, standalone business by April 2024.
The move forms part of Vodafone chief executive Margherita Della Valle’s efforts to return the group to profit growth. For instance, during Vodafone’s results presentation last May for the year to March 31, 2023, Della Valle identified an opportunity to help enterprises adopt digital strategies, noting that the addressable market was worth €140 billion ($152 billion).
Vodafone said it is aiming to support 300 million businesses and consumers across its European and African markets through the collaboration.
According to a statement from Della Valle, Vodafone has “made a bold commitment to the digital future of Europe and Africa. 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.”
Five focus points
In summary, the two partners aim to collaborate in five key areas, with the first identified as GenAI. Here, Vodafone plans to use OpenAI to improve customer support services provided by its digital assistant TOBi. In addition, Vodafone employees will have access to Microsoft Copilot, the GenAI-based tool designed to help people with creating documents, reading and summarizing emails, crafting presentations, and more.
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In terms of IoT, as noted above, Microsoft intends to invest in Vodafone’s IoT managed connectivity platform when it becomes a standalone venture. The operator said the platform connects 175 million devices and platforms worldwide. Vodafone also plans to become part of the Azure ecosystem, “making the IoT platform available to a vast developer and third-party community using open APIs.”
With regard to M-Pesa, Microsoft intends to help further scale the platform by housing it on Azure and enabling the launch of new cloud-native applications. The companies are also launching what they called a purpose-led program that aims to enhance digital literacy and youth training and outreach programs, as well as offer digital services to the underserved SME market.
A further focus area is the enterprise market, and here Vodafone said it will extend its commitment to distributing Microsoft services, including Microsoft Azure, security solutions and Microsoft Teams Phone Mobile.
Finally, the replacement of data centers by Microsoft Azure will enable the operator to “improve its responsiveness to customers, while simplifying and reducing the operational costs of its IT estate,” as well as reducing energy requirements.
Worth noting here is that the U.K. Competition and Markets Authority (CMA) is currently investigating the public cloud infrastructure services market following a referral from Ofcom, the telecom regulator. Ofcom has estimated that the market for cloud services in the U.K. was worth up to £7.5 billion ($9.5 billion) in 2022.
Ofcom’s concerns relate to features that make it difficult for customers to switch and use multiple cloud suppliers. However, it also cited concerns about the software licensing practices of some cloud providers, “in particular Microsoft.”
Unfinished business
Meanwhile, Vodafone is also in the process of trying to turn around its struggling European businesses in Germany, Italy, Spain and the United Kingdom.
For example, Vodafone Germany has required a “re-engineering” of its commercial model while Vodafone Spain is to be sold to U.K.-based telecom investment firm Zegona Communications. Vodafone UK is to be merged with Three UK, subject to regulatory approval.
In Italy, no decision has yet been reached, although the France-based Iliad Group has offered a solution to the U.K. headquartered group by suggesting the two should merge their respective operations in the Italian market into a 50:50 joint venture.
2024 is certainly set to be another busy year for Vodafone.