How Does Microsoft Teams Phone Work?

Microsoft Teams Phone works by combining the Teams app, a Phone System licence, and a connection to the phone network. Together, these let a user make and receive calls to any external number from inside Teams, while an administrator controls who can call what, from a central admin panel. Behind the scenes, Microsoft's cloud handles calls between colleagues directly, and routes any call to or from an outside number through whichever PSTN connection method you've chosen.

If you've read our guide to what Microsoft Teams Calling is, this article goes a level deeper into the mechanics — what actually happens when someone picks up the phone.

What Happens When You Make a Call in Teams Phone?

When a user dials a colleague inside your organisation, the call travels entirely across Microsoft's own cloud infrastructure. No phone network is involved, so there's no extra connectivity cost.

When a user dials an outside number — a mobile, a landline, or an international number — the call still starts inside Teams, but at the point it needs to leave your organisation, it's handed off to whichever PSTN connectivity method you've set up:

• Microsoft Calling Plan — Microsoft carries the call itself, using its own network
• Operator Connect — a telecoms provider carries the call on Microsoft's approved network
• Direct Routing — the call passes through a certified session border controller (SBC) to your own SIP trunk provider

The user experience is identical in every case. It's only the path the call takes once it leaves Teams that changes.

How Do Administrators Control Calling?

Everything is managed centrally through the Teams admin centre, rather than on individual devices. This is one of the real advantages over a traditional desk-phone system, where changes often mean reprogramming each handset.

From the admin centre, IT can set:

• Calling policies — who can make calls, transfer, forward, or set up call groups
• Voice routing policies — which PSTN connection a call uses, useful if different offices or countries route differently
• Dial plans — how internal extensions and external numbers are dialled
• Emergency calling settings — the location data attached to a user's account for 999 calls

Changes made here apply immediately to the user's account, across every device they're signed into.

What Features Does Teams Phone Include?

A Teams Phone licence unlocks the features you'd expect from a proper business phone system, not just basic calling:

• Auto attendants, so callers are greeted and routed without a receptionist
• Call queues, so incoming calls wait in an ordered line for the next available person
• Call transfer, hold, and park
• Voicemail, with transcription available on some plans
• Simultaneous ring and call forwarding, so a call rings multiple devices or diverts automatically
• Delegation, so an assistant can manage calls on behalf of someone else

Which of these are available depends on the specific licence assigned — Teams Phone Standard covers most day-to-day needs, while larger organisations sometimes add extras like Teams Phone Mobile or Teams Phone Extensibility for contact centre integrations.

What Devices Can You Use with Teams Phone?

No physical handset is required. Calls work from the Teams app on a laptop, desktop, tablet, or mobile phone, using a headset or the device's built-in microphone and speaker.

If your team wants a traditional desk phone experience, Teams-certified handsets are available from manufacturers including Yealink and Poly. These register directly to a user's Teams account and behave much like the phone itself — the same call history, contacts, and voicemail follow across every device.

How Does Emergency Calling Work?

Because Teams Phone runs over the internet rather than a fixed line, it has to be told where a user actually is, so that a 999 call can be routed to the right emergency service with accurate location information. This is set up per user or per site in the admin centre, and it's an area worth getting right during setup rather than assuming it works the same way a traditional landline does — Ofcom's rules on emergency calling apply to Teams exactly as they do to any other phone system.

Frequently Asked Questions

Does Teams Phone work without an internet connection? No. Every call, internal or external, depends on a working internet connection, so reliable business broadband matters more with Teams Phone than it did with a traditional phone line.

Can I use my existing SIP trunk provider with Teams Phone? Yes, through Direct Routing. This connects your own SIP trunk to Teams via a certified session border controller, rather than using Microsoft's own Calling Plans.

Do all users need a Teams Phone licence? Only users who need to call or receive calls from outside numbers. Internal calling between colleagues is included in standard Teams licensing.

Can Teams Phone work alongside a different phone system? Yes. Many businesses run Teams Phone for some staff and a separate system, such as Gamma Horizon or 3CX, for others — reception desks or call centre teams, for example, where features like call queues and reporting are more mature outside Teams.

Getting the connectivity method and licensing right at the planning stage avoids a lot of rework later. Request a quote for independent advice on setting up Teams Phone properly, or use our phone system finder to see how it compares with other options.