Telstra and Microsoft have signed a five-year agreement they say will help accelerate Australia's digital transformation.
The deal is also one of the largest partnerships Microsoft has established with a telecommunications provider globally.
"Our strategic partnership with Microsoft is on a scale not seen before in Australia," Telstra CEO Andrew Penn said in a statement on Tuesday.
As pressure grows on existing networks from remote working, high-definition streaming, online education and gaming, more bandwidth is coming.
Telstra will become Microsoft's largest supplier of its network capacity requirements on terrestrial fibre in Australia, while Microsoft will become an anchor tenant on Telstra's new ultra-fast intercity fibre network.
Microsoft technology will be used by Telstra to pitch new solutions for the manufacturing, retail, agriculture, utilities and finance sectors.
Telstra and Microsoft have also pledged to support hybrid ways of working and to reduce the environmental footprint as the Australian economy goes digital.
The deal accelerates Telstra's migration of its internal information technology workloads to the public cloud, with Microsoft Azure as a preferred partner of the telecom giant's 'multi-cloud' approach.
Microsoft will also explore boosting its capacity on Telstra's Asia-Pacific subsea cable network.
Through these investments, Microsoft says it will be able to achieve unparalleled connectivity across key telecommunications routes in Australia and across the Asia-Pacific region.
Microsoft and Telstra will work together over the coming months to finalise the expanded partnership.