Orange and Morrison are set to launch a EUR 3 billion data center project in France.

      On Monday, Orange and Morrison revealed an exclusivity agreement to establish a jointly controlled data centre company in France, supported by a €3 billion investment plan that merges Orange's assets, Morrison's equity, and debt. The venture aims for a capacity of 400 megawatts, nearly ten times Orange's current operations.

      Orange is set to contribute five data centres in France to the initiative, while Morrison will provide the equity necessary to expand the platform beyond its initial foundations.

      Both companies presented the agreement as a means to enhance Europe’s digital sovereignty, branding it a “sovereign offering” designed to meet the increasing demand for cloud and AI services from Orange and Orange Business customers. They also highlighted that French electricity is among the least emission-intensive in Europe.

      However, there is an aspect that complicates this narrative. Morrison, an infrastructure asset manager based in New Zealand and founded in 1988, manages a portfolio that includes Infratil, UK operator Kao Data, CDC Data Centres, and Vodafone New Zealand.

      Consequently, half of the equity in the new “sovereign” data centre entity will be held by a fund manager located in Wellington. While this is not unusual in European infrastructure deals, it does complicate the sovereignty discussion.

      This venture resolves a process initiated last year, during which Orange sought up to €500 million from the sale of a minority stake in its French data centre operations to finance anticipated AI investments. Morrison emerged as the preferred bidder over Vauban Infrastructure Partners and Macquarie, according to reporting from L’Informe as noted by Telecompaper this month.

      What has been announced is substantially larger than just a minority stake sale. Instead, Orange has secured a co-controlled growth platform rather than a mere cash injection, indicating a shift in strategic priorities during the negotiation process.

      Capacity constraints hinder Europe’s AI ambitions, and 400MW represents a significant addition. Research has cautioned that Europe’s sovereign AI goals may falter due to limitations in data centre capacity, as the EU’s Cloud and AI Development Act aims to at least triple the region’s capacity within five to seven years.

      Orange is entering a market dominated by competitors it is positioning itself against, namely AWS, Microsoft Azure, and Google Cloud, which collectively account for around 70% of the European cloud market. This concentration has increasingly been viewed in Brussels as a political vulnerability rather than simply a commercial challenge.

      There is debate over whether the new European capacity will lead to true independence. Critics contend that GPU-as-a-service models perpetuate the facade of European AI sovereignty, as the fundamental silicon and much of the software stack remain American irrespective of the physical location of the infrastructure.

      The EU's tech sovereignty package aims to reduce dependence on US cloud services and revitalize its chip strategy, creating a favorable policy environment where domestically based capacity is valued more highly. The timing of Orange's move appears deliberate.

      The energy aspect is also politically significant. Brussels has instructed Big Tech to ensure AI data centres align with climate objectives or refrain from operating there, making France's largely nuclear energy grid a competitive advantage for those building in the region.

      Next steps involve the exclusivity agreement, which is not yet a finalized transaction. The companies anticipate signing the agreement by the end of 2026 and completing the deal in the first quarter of 2027, pending consultations with employee representative bodies and obtaining regulatory approvals.

      Additionally, Orange is exploring capacity through other avenues, having partnered with Iliad in May for a €10 billion EU AI gigafactory project in France. Both the data centre initiative and the gigafactory bid suggest that French telecom incumbents now view ownership of computing infrastructure as a central business rather than merely an ancillary service.

      The key figure to monitor is not the €3 billion but the 400MW capacity. Proclaimed capacity targets across Europe have often exceeded the actual delivery of capacity, with grid connections emerging as the primary bottleneck, rather than capital availability.