Microsoft Teams Phone and Telephony | Simply Explained

Quick answer: Microsoft Teams Phone is the focus of this M365 FM episode, which explains what it does, where it fits in the Microsoft ecosystem, and the architecture, security, governance, or operational choices that matter before teams adopt or manage it.

In today's fast-paced business world, effective communication is essential. Microsoft Teams Telephony stands out as a cloud-based phone system that integrates seamlessly with Microsoft Teams. This innovative solution reshapes how you connect with colleagues and clients. Currently, 6% of businesses have adopted cloud-based phone systems like Teams Telephony. Before this technology, organizations faced significant challenges. Employees often dealt with call issues, poor network quality, and confusion from managing multiple phone numbers. With Teams Telephony, you can enhance your communication efficiency and keep your team connected, no matter where they are.

Key Takeaways

• Microsoft Teams Telephony is a cloud-based phone system that improves communication for businesses.
• It reduces costs by eliminating the need for expensive hardware and maintenance.
• Teams Telephony enhances security with features like end-to-end encryption to protect sensitive information.
• You can set up Teams Telephony easily by buying licenses and assigning phone numbers to users.
• The system allows you to make and receive calls from any internet-enabled device, making it perfect for remote work.
• Teams Telephony includes advanced features like voicemail transcription and intelligent call routing to streamline communication.
• Using Teams Telephony can lead to improved collaboration and productivity within your organization.
• Many businesses report significant savings and better communication after switching to Teams Telephony.

What Is Teams Telephony?

Microsoft Teams Telephony is a cloud-based phone system that revolutionizes how you communicate in your business. It replaces traditional PBX systems with a software-driven solution hosted in the cloud. This means you can make and receive calls using your business number from various internet-enabled devices, such as PCs, mobile phones, and tablets. The integration with Microsoft Teams enhances collaboration by combining internal communication with external telephony.

Benefits of Teams Telephony

Using Teams Telephony offers numerous advantages for your organization:

• Cost Efficiency: Transitioning to Microsoft Teams Telephony significantly reduces expenses related to hardware and maintenance. You can allocate your budget more effectively while enjoying budget-friendly communication.

• Enhanced Security: Microsoft prioritizes security with end-to-end encryption and compliance with regulations like HIPAA and GDPR. This ensures that your sensitive communications remain protected.

• Flexibility in Communication: Teams Telephony allows you to access features globally. You can communicate seamlessly regardless of your location, making it ideal for remote work.

• Simplified IT Management: By eliminating the need for on-premises telephony equipment, Teams Telephony simplifies your IT environment. You can manage everything through the Microsoft 365 administration portal, allowing you to provision new users in minutes.

• Seamless Integration: Teams Telephony expands the voice capabilities of Microsoft Teams into a fully-fledged enterprise telephony system. You can make and receive calls, hold meetings, and manage contacts all within the same platform.

• Advanced Features: Teams Telephony includes features such as call transfer, call queues, auto-attendants, voicemail, and music on hold. These tools enhance your communication workflows and improve customer experiences.

• Support for Remote Collaboration: Unlike traditional phone systems, Teams Telephony integrates with the Microsoft ecosystem. This integration provides features that enhance collaboration, such as call data analytics and the ability to use your business phone number on any device.

Setting Up Microsoft Teams Phone System

Setting up the Microsoft Teams Phone System is a straightforward process that allows you to enhance your business communication. Follow these steps to get started:

Initial Setup Steps

1. Buy and assign a Teams Phone license for each user. This is essential for enabling calling features.
2. Choose a PSTN connectivity option. You can select from Microsoft Calling Plan, Direct Routing, or Operator Connect based on your needs.
3. Get and assign phone numbers for users and services. This step ensures that everyone can make and receive calls using their business numbers.
4. Set up emergency calling with defined emergency locations. This is crucial for compliance and safety.
5. If desired, set up an auto attendant for call navigation. This feature helps direct incoming calls efficiently.
6. If desired, set up a call queue for managing incoming calls. This allows you to handle multiple calls without losing any.
7. Finally, set up other Teams Phone features as needed. Customize the system to fit your organization's requirements.

Licensing Requirements

Before deploying the Microsoft Teams Phone System, you must meet certain licensing requirements. Each user needs a Microsoft 365 license. If you have Business Premium or E3 plans, you will also need an additional Teams Phone license for calling. The Teams Phone Standard license costs approximately $8 per user per month. Additionally, if you opt for the Microsoft Calling Plan, expect to pay an extra $12 to $18 per user per month for PSTN connectivity.

Here’s a quick overview of the different licenses you might need:

License Type	Prerequisite License(s)
Microsoft Teams Phone Standard	Microsoft 365 Business Basic/Business Standard/Business Premium/F1/F3/E3/A3; Microsoft Teams EEA; Microsoft Teams Enterprise; Microsoft Teams Essentials (AAD Identity); Office 365 F3/E1/E3/A1/A3
Microsoft Teams Phone Standard for Frontline Workers	Microsoft 365 F1/F3; Office 365 F3
Microsoft Teams Phone with Calling Plan	Microsoft 365 Business Basic/Business Standard/Business Premium/F1/F3/E3/A3; Microsoft Teams EEA; Microsoft Teams Enterprise; Microsoft Teams Essentials (AAD Identity); Office 365 F3/E1/E3/A1/A3

You should also consider additional licenses for shared devices or resource accounts if you plan to use features like Auto Attendants and Call Queues.

By following these steps and understanding the licensing requirements, you can effectively set up the Microsoft Teams Phone System and enhance your organization's communication capabilities.

Making and Receiving Calls

With Microsoft Teams Telephony, you can easily make and receive calls from anywhere. This system offers several methods for initiating calls, ensuring you have flexibility in how you connect with others.

How to Make Calls

You can make calls in Microsoft Teams using various methods. Here are the main steps:

1. Make a call from your voicemail: Access your voicemail via History and select Voicemail. Choose More actions next to a name to Call back.
2. Make a call from your contacts: Go to Calls > View contacts and select Call next to a contact's name.
3. Use the dial pad: Navigate to Calls, enter the number using the dial pad, and select Call.
4. Hover over someone's profile picture: Hover over a profile picture to see options for video or audio calls.
5. Use commands: Type /call in the search box, enter a name or number, and the call will start automatically.

These methods make it simple for you to connect with colleagues or clients, enhancing your communication experience.

How to Receive Calls

Receiving calls in Microsoft Teams Telephony is just as straightforward. The system provides several features to help you manage incoming calls effectively. Here’s a look at some key call handling features:

Feature	Description
Advanced Routing	Route calls based on skills, business hours, holidays, or user presence with Teams-based logic.
Live Call Monitoring	Supervisors can listen, whisper, or barge into calls to support agents in real time.
Queue Management	Agents manage their queue availability through the app, and supervisors monitor queue health.
IVR Support	Set up smart call flows using no-code tools or JSON-based configurations.
Analytics & Reporting	Access insights on abandoned calls, average wait time, and agent performance.
Secure Call Recording	Record queue calls with secure Azure storage.
Contact Search and Presence	Instantly search and filter contacts, view availability, and transfer calls with a single click.
Call Summaries and Callback Reminders	Use AI prompts to auto-generate call summaries or action lists.
Customizable Layouts	Tailor the console to fit your workflow with multiple layout options.
Chat Consult Transfers	Transfer calls using adaptive cards that let recipients accept or reject transfers directly.
Accessibility Built-In	Full support for screen readers and keyboard navigation.

These features ensure you can handle calls efficiently, whether you are in the office or working remotely. With Microsoft Teams Telephony, you can manage your communication seamlessly, making it easier to stay connected.

PSTN Options for Teams Telephony

When considering Microsoft Teams Telephony, you have several options for connecting to the Public Switched Telephone Network (PSTN). Each option offers unique benefits and caters to different organizational needs. Here’s a breakdown of the available PSTN options:

Microsoft Calling Plans

Microsoft Calling Plans provide a straightforward solution for businesses. With this option, Microsoft acts as the PSTN carrier, managing your phone numbers and calls.

• Advantages:

  • Simple setup process.
  • No need to coordinate with multiple vendors.
  • Fully managed by Microsoft, which simplifies management.

• Disadvantages:

  • Limited coverage in only 33 countries.
  • Can be expensive for larger organizations needing many lines.

Advantages	Disadvantages
Fully managed by Microsoft	Limited number availability in many countries
No own infrastructure needed	Higher cost per minute
Predictable costs	Less flexibility and control

Direct Routing and Operator Connect

Direct Routing and Operator Connect offer more flexibility for organizations that want to use their existing telephony infrastructure or preferred providers.

• Direct Routing connects Microsoft Teams to the PSTN through your own Session Border Controller (SBC). This option provides high flexibility, allowing you to customize your telephony setup.

• Operator Connect allows you to use existing PSTN providers with Teams. This option simplifies the process by letting certified providers connect directly to Microsoft Teams.

Feature	Direct Routing	Operator Connect
Connection Method	Connect Teams with your own SBC	Microsoft-approved telecom providers connect directly
Management Responsibility	You manage SIP trunks, SBC, and voice routing policies	Providers handle routing; Teams admins assign policies
Flexibility	Full flexibility for advanced routing or hybrid setups	Simplicity and quick deployment
Best For	Enterprises needing full control and custom configurations	Organizations wanting simplicity and quick deployment

According to recent statistics, 71.4% of Microsoft Teams Phone users prefer Direct Routing over Microsoft Calling Plans. This preference highlights the demand for flexibility and control in telephony systems.

Core Features of Microsoft Teams Phone

Microsoft Teams Phone offers a range of core features that enhance your communication experience. These features streamline call management and improve productivity, making it easier for you to connect with colleagues and clients.

Voicemail and Call Management

Voicemail in Microsoft Teams Phone goes beyond traditional systems. One standout feature is voicemail transcription. This feature automatically converts audio messages into text. You can read your messages instead of listening to them, which is especially useful in meetings or noisy environments. You can quickly scan for key details, such as names or phone numbers, without replaying the audio multiple times. This capability also creates a searchable record of your voicemails, making it easy to find important information later on.

In addition to voicemail transcription, Teams Phone provides robust call management features. Here are some key functionalities:

Feature	Description
Call delegation	Share your phone line with others to make and receive calls on your behalf, with customizable notifications.
Integrated dial pad	Dial by name or number directly in the search bar, enhancing call efficiency.
External Caller ID	Displays detailed caller information from the corporate directory for internal calls, improving identification.
Device switching	Switch calls between devices seamlessly, enhancing mobility.
Presence-based call routing	Controls incoming communications based on your presence, allowing for selective blocking.

These features ensure that you can manage your calls effectively, whether you are in the office or working remotely.

Intelligent Call Routing

Intelligent call routing is another powerful feature of Microsoft Teams Phone. This functionality allows you to direct incoming calls based on various criteria, such as user presence or specific business rules. You can set up routing options that prioritize calls to available team members, ensuring that customers receive timely responses.

Here are some additional features related to intelligent call routing:

• Call park and retrieve: Park calls and retrieve them using a unique code, allowing flexibility in call handling.
• Federated calling: Securely connect and collaborate with users in different organizations, expanding your communication capabilities.
• Video calling: Make face-to-face video calls if enabled, enhancing your communication experience.

With intelligent call routing, you can optimize your team's responsiveness and improve customer satisfaction.

Security is also a top priority in Microsoft Teams Phone. The system employs several measures to protect your call data:

• End-to-end encryption safeguards calls and messages in transit.
• Identity and access controls integrate with Azure AD for policy enforcement.
• Compliance tools support eDiscovery, retention, and regulatory standards like HIPAA and GDPR.

These security features ensure that your communications remain confidential and secure, allowing you to focus on your work without worrying about data breaches.

Comparing Teams Telephony with Other Solutions

When you consider telephony solutions for your business, understanding the differences between Microsoft Teams Telephony, traditional PBX systems, and other VoIP solutions is crucial. Each option has unique features that can impact your communication strategy.

Key Differences

Here’s a comparison of Microsoft Teams Telephony and traditional PBX systems:

Feature	Microsoft Teams Phone	Traditional PBX Systems
Cost Efficiency	Reduces IT costs, no hardware required	High maintenance & hardware costs
Remote Access	Available on any device, anywhere	Limited to physical office phones
Call Management Automation	AI-powered call routing & transcription	Manual call handling
Security & Compliance	End-to-end encryption, HIPAA & GDPR compliant	Limited security features
Scalability	Easily adds new users & integrates with Microsoft 365	Requires manual expansion & costly upgrades

Cloud telephony represents a significant shift from traditional systems. It allows voice communication services to be delivered via the cloud. Unlike traditional PBX systems that require physical infrastructure, Teams Telephony operates through an off-site cloud-hosted PBX. This setup enables seamless call routing and configuration without the need for physical wires.

Pros and Cons

Pros of Microsoft Teams Telephony:

• Cost Savings: Many businesses report a 143% ROI after switching to Teams Telephony. You can save on equipment and maintenance costs. For example, one organization reduced its monthly phone bills from AUD $4,500 to approximately AUD $1,000.
• Scalability: You can create new business phone extensions in minutes. There’s no need to install new wiring or handsets.
• Collaboration: Teams Telephony enhances collaboration by enabling employees to communicate effectively from anywhere. This flexibility ensures that your team remains productive, regardless of location.
• Centralized Management: You can monitor and resolve issues from easy-to-use dashboards. This feature simplifies your communication infrastructure.

Cons of Microsoft Teams Telephony:

• Dependency on Internet: Since it relies on cloud calling, a stable internet connection is essential. Poor connectivity can disrupt communication.
• Learning Curve: Transitioning to a new system may require training for employees. Familiarizing your team with the new features can take time.

In contrast, traditional VoIP solutions often lack the seamless integration found in Teams Telephony. While they may offer basic voice calling capabilities, they do not provide the same level of collaboration tools or scalability.

Ultimately, choosing the right telephony solution depends on your business needs. Microsoft Teams Telephony stands out for its cost efficiency, flexibility, and integration with the Microsoft ecosystem, making it a strong contender in the modern communication landscape.

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In summary, Microsoft Teams Telephony transforms how you communicate in your business. This cloud-based phone system enhances collaboration and streamlines workflows by integrating with Microsoft 365. You can enjoy features like voicemail transcription, mobile-first calling, and intelligent call routing.

Consider the benefits that many organizations have experienced. For instance, 75% of employees reported improved collaboration using Teams. Additionally, case studies show significant productivity increases, such as a 30% reduction in meeting times for a mid-sized marketing agency.

As you explore Microsoft Teams Telephony, you will find that it not only simplifies communication but also supports your team's needs in a flexible and secure manner.

FAQ

What is Microsoft Teams Telephony?

Microsoft Teams Telephony is a cloud-based phone system that integrates with Microsoft Teams. It allows you to make and receive calls using your business number from any internet-enabled device.

How do I set up Microsoft Teams Telephony?

To set up Microsoft Teams Telephony, you need to buy licenses, choose a PSTN option, assign phone numbers, and configure emergency calling. Follow the setup steps outlined in the blog for detailed guidance.

Can I use my existing phone numbers with Microsoft Teams Telephony?

Yes, you can use your existing phone numbers with Microsoft Teams Telephony through Direct Routing or Operator Connect. This flexibility allows you to retain your current numbers while enjoying new features.

What are the licensing requirements for Microsoft Teams Telephony?

Each user needs a Microsoft 365 license and an additional Teams Phone license. The Teams Phone Standard license costs around $8 per user per month, with additional fees for PSTN connectivity.

Is Microsoft Teams Telephony secure?

Yes, Microsoft Teams Telephony prioritizes security with end-to-end encryption and compliance with regulations like HIPAA and GDPR. These measures protect your sensitive communications.

Can I access Microsoft Teams Telephony on mobile devices?

Absolutely! Microsoft Teams Telephony works on various devices, including smartphones, tablets, and laptops. You can stay connected and make calls from anywhere.

What features does Microsoft Teams Telephony offer?

Microsoft Teams Telephony includes features like voicemail transcription, call queues, auto-attendants, and intelligent call routing. These tools enhance your communication workflows and improve customer experiences.

How does Microsoft Teams Telephony compare to traditional phone systems?

Microsoft Teams Telephony offers cost efficiency, flexibility, and seamless integration with Microsoft 365. Unlike traditional systems, it eliminates hardware costs and simplifies management through the cloud.

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🎧 Listen to this episode

Want a practical explanation of Teams Telephony? This episode breaks down the topic in clear language and shows why it matters for Microsoft 365, Azure, Power Platform, security, AI, and modern work.

Listen to this episode if you want to:

• Understand the key concepts behind Teams Telephony
• See how it fits into the wider Microsoft technology ecosystem
• Learn where it can create practical value for your organization

You may also enjoy these related M365 FM episodes:

• ARM Templates vs Bicep: Why Azure Teams Are Switching
• Microsoft Teams Hidden Features with Josh Blalock [MVP]
• High-Stakes Hybrid Events with Microsoft Teams and Mesh
• From Microsoft Lync to Teams with Carsten Lund Meilbak [MVP]
• Microsoft Teams Governance with Entra ID as the Control Plane

Discover more practical Microsoft conversations on M365 FM.

Last reviewed: July 2026.

Who Should Listen

This episode is for Microsoft administrators, architects, developers, security professionals, and business leaders who need a practical foundation before making implementation or governance decisions.

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