KT strikes multibillion-dollar AI deal with Microsoft

• South Korean telco KT has high hopes for its AI strategy
• It teamed up with Microsoft earlier in the year
• Now the partners have outlined a five-year, multibillion-dollar plan to jointly develop AI and cloud services specific to the Korean market and to address international needs

Having outlined its AI-based service aspirations last year and positioned itself as an AICT (AI plus ICT) company earlier this year, South Korean national operator KT Corp. has struck a five-year strategic partnership with Microsoft worth billions of dollars to collaborate on local and international AI, cloud and IT developments. 

KT initially announced its engagement with the tech and cloud giant in June this year, when the Korean operator’s CEO, Kim Young-Shub, met with Microsoft’s chairman and CEO, Satya Nadella, at the vendor’s headquarters in Redmond, Washington, to determine how the companies could collaborate on the development of “sovereign AI” and “sovereign cloud” for the South Korean market.  

Now the partners have agreed on an action plan worth “several trillion” Korean won, a value that includes a usage fee of $450m (about 590bn Korean won) for Microsoft to use KT Corp. and KT Cloud infrastructure, the telco noted in this announcement to the Korea stock exchange. 

“The partnership with Microsoft presents a pivotal opportunity, not only for technological collaboration but also for expanding Korea’s AI foundation and driving transformative innovation across industries and daily life,” stated KT’s CEO. “Leveraging this strategic partnership, we aim to rapidly evolve into an AICT company with unparalleled competitiveness in domestic and global markets,” he added. 

Microsoft’s Nadella noted: “Our strategic partnership brings together KT’s industry expertise with the power of our entire tech stack, from Azure AI to Microsoft 365 Copilot. Together, we will help accelerate the AI transformation of Korean organisations across the private and public sector and build new AI-powered experiences for millions of consumers.”

Over the next five years, the partners will jointly develop “customised AI models and services tailored for Korea,” launch a secure sovereign public cloud platform for the country’s public and financial sectors, establish an AI transformation (AX) company aimed at the global market as well as South Korea, “strengthen the domestic AI ecosystem through joint R&D and investments in startups” and by setting up an innovation centre at KT’s Gwanghwamun Building to serve as a hub for global AI and cloud technology innovation, and promote related talent development programmes. 

For the country-specific AI models, KT plans to “swiftly develop customised AI models for Korea and provide relevant application services by leveraging Microsoft’s software,” including OpenAI’s ChatGPT-4o and Phi-3.5 small language model.

“These AI models will be co-developed and applied to KT’s customer services (such as chatbots) and industry-specific AI solutions for B2B sectors,” continued the operator. “By collaborating from the initial testing and application stages of the AI model, KT and Microsoft intend to launch specialised services that reflect Korea’s unique language and culture, making AI technology more familiar and effective for local customers. 

“Additionally, KT will integrate Microsoft’s conversational AI, Copilot, into services to offer a distinctive customer experience. Customers will enjoy advanced AI experiences, such as personalised AI search and customised services based on Copilot. The two companies also plan to enhance the level of services provided and create new business opportunities by developing industry-specific Copilots for various sectors, including education, healthcare, and mobility, through extensive technical cooperation,” noted the operator. 

Microsoft noted in its announcement about the collaboration that “KT will leverage Azure AI Studio to develop custom AI agents aimed at differentiating customer experiences. KT plans to expand the development and utilisation of KT-custom AI agents not only for consumer use cases in education, healthcare, and in-vehicle infotainment but also for business applications. Importantly, Microsoft and KT will collaborate closely on further evolving KT’s Responsible AI framework to help ensure the delivery of safe AI services for the Korea market.”

It added that the new AX company will “provide advanced Microsoft  cloud and AI expertise and solutions to the Korean market, with plans to expand to broader markets, including ASEAN [Association of South-east Asian Nations]. Microsoft will support this initiative over the next three years with professional consulting resources to build core practices and capabilities for the new entity.”

That’s a very deep AI and cloud partnership, then, but KT isn’t putting all of its AI eggs into one basket, as the Korean telco is also working with Amazon Web Services (AWS) on the development of generative AI (GenAI) and cloud-based private 5G services. 

- Ray Le Maistre, Editorial Director, TelecomTV