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Federation in Teams is the ability to communicate with Teams users in other organizations. Your organization can choose to federate with all other organizations or just specific organizations that you choose.
People outside your organization will not be able to see status without a federation and no chat messages can be exchanged. However, if users outside your organization are invited to attend a Teams meeting with you, they can join via link if you invite them to their e-mail address.
Here's how to change your federation pattern
You can change your federation pattern inside the Microsoft Teams admin center under the Org-wide settings section.
Note that federation is only possible if the organization on the other side also allows it.