Microsoft chief executive Satya Nadella and Telstra boss Andy Penn have signed a partnership agreement for both companies to develop new products and services together, to take advantage of the growing capabilities of artificial intelligence, cloud computing and 5G technology.

The partnership will be a notable boost in a long-mooted plan at Telstra to become regarded as a broader technology company, alongside its telecommunications roots, and will serve as a feather in Microsoft's cap in its ongoing cloud computing battle with fellow US tech giant Amazon Web Services.