Microsoft, KT join forces to propel Korea’s AI innovation

Microsoft Corp. and KT Corp., one of South Korea's top three telecom companies, will drive artificial intelligence transformation in the Korean firm and Asia’s fourth-largest economy together through a five-year multibillion-dollar strategic partnership, the two companies announced on Sunday.

As part of the alliance, KT will provide the US partner with network infrastructure and data centers worth $450 million for 15 years, the Korean telecom giant announced in a separate regulatory filing on Monday.

The latest deal is a follow-up to the two companies’ agreement signed in early June to form a strategic parentship in the areas of AI, cloud and information technology (IT) to propel Korea’s AI and cloud innovation.

“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,” KT Chief Executive Kim Young-shub said in a statement.

Satya Nadella, chairman and CEO of Microsoft replied, “Together, we will help accelerate the AI transformation of Korean organizations across the private and public sectors and build new AI-powered experiences for millions of consumers.”

TO BUILD AN AX SERVICE FIRM AND KOREAN SOVEREIGN CLOUD 

Under the agreement, KT and Microsoft will jointly develop a customized AI service for Korean consumers and businesses, using OpenAI’s generative AI GPT-4o and KT’s extensive data on Korean culture and industries.

They will also develop a Korea-specific version of Microsoft’s Phi family of small language models.

KT will use these AI solutions to offer advanced customer service chatbots and industry-specific AI services for business-to-business customers.

In particular, the Korean telecom company will leverage Microsoft Copilot Studio and Azure AI Studio to develop custom AI agents, which will be used in not only customer support services in the education, healthcare and in-vehicle infotainment sectors but also business applications.

KT and Microsoft also plan to develop secure public cloud services, the Korean telco’s sovereign cloud solution built on Microsoft Cloud to provide B2B customers with the latest cloud and AI features that comply with local privacy and regulatory requirements.

Through their parentship, KT will set up an AI transformation (AX) service company, dubbed AI Total Service, to accelerate AI transformation in Korean businesses with Microsoft Cloud and AI expertise.

Microsoft will provide its professional consulting resources for KT's new organization for three years and seek to make inroads into other markets such as Southeast Asia with AI Total Service to seize opportunities in the global enterprise AI market.

According to Precedence Research, the enterprise AI market is forecast to grow to $270 billion in 2032 from $14.5 billion in 2024.

Separately, the two companies plan to open a co-innovation center to advance KT’s AI R&D capabilities.

They will also cooperate on fostering AI startups to create an AI ecosystem in Korea through KT’s investment and technology support from Microsoft, such as through Azure credits.   

They will lead research in network modernization, AI for healthcare and industry AI adoption at the center.

KT’S AI PUSH 

The Korean telco giant has been striving to transform into an AI company.

In June last year, it pledged to invest about 7 trillion won ($5.4 billion) by 2027 to become Korea’s No. 1 AI service provider, mainly targeting the robot, healthcare and education markets.

As part of the plan, KT carried out an organizational reshuffle in July this year to reinforce its business-to-business (B2B) services with a focus on media and AI.

The organizational reshuffle came as its mainstay telecom business growth stalled. Its mobile telecom service users remain in the 240 million range, while its wired telecom and internet TV businesses remain stagnant.

To enhance its B2B services, the Korean company has formed a strategic partnership with Amazon Web Services (AWS) to bolster customized mobile and generative AI services.

Write to Seung-Woo Lee at leeswoo@hankyung.com

Sookyung Seo edited this article.