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

      On Monday, Orange and Morrison revealed an exclusivity agreement to form a jointly controlled data center company in France, supported by a €3 billion investment plan that combines 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 plans to contribute five data centers in France to the project, while Morrison will provide the equity needed to expand the platform beyond this initial setup.

      Framing of sovereignty

      Both companies presented the agreement as a move to enhance Europe’s digital sovereignty, labeling it a “sovereign offering” capable of meeting the rising demand for cloud and AI services from Orange and its business clients. They also highlighted that French electricity is among the least emission-intensive in Europe.

      However, this framing has a complication. Morrison is an infrastructure asset manager based in New Zealand, established in 1988, and its portfolio includes Infratil, UK-based Kao Data, CDC Data Centres, and Vodafone New Zealand.

      Consequently, half of the equity in France’s new “sovereign” data center leader will be held by a fund manager located in Wellington. While this is not uncommon in European infrastructure transactions, it does complicate the narrative of sovereignty.

      The background of Orange’s decision

      This venture stems from a process initiated last year when Orange sought up to €500 million from selling a minority stake in its French data center operations to finance planned AI investments. Morrison was ultimately chosen as the preferred bidder over Vauban Infrastructure Partners and Macquarie, according to reports from L’Informe mentioned by Telecompaper this month.

      What was revealed is significantly larger than a minority stake sale. Instead of a cash infusion, Orange has secured a co-controlled growth platform, indicating that strategic considerations likely shifted during this process.

      The actual European need

      Capacity constraints are a significant hurdle for Europe’s AI ambitions, and the additional 400MW is a vital enhancement. Research has cautioned that Europe’s aspirations for sovereign AI could falter due to limitations in data center capacity, with the EU’s Cloud and AI Development Act aiming to at least triple the region’s capacity in five to seven years.

      The market Orange is entering is currently dominated by competitors it is set against, namely AWS, Microsoft Azure, and Google Cloud, which together hold about 70% of the European cloud market—this concentration has increasingly been regarded in Brussels as a political vulnerability rather than a commercial issue.

      There is debate over whether new European capacity will genuinely yield independence. Critics have asserted that GPU-as-a-service models perpetuate the illusion of European AI sovereignty, as the underlying technology and much of the software remain American, irrespective of the physical location of the data centers.

      Supportive policy conditions

      The EU’s tech sovereignty initiative has been aimed at reducing reliance on US cloud services and revitalizing its chip strategy, creating a policy landscape where domestically established capacity is prized. The timing of Orange's move is clearly strategic.

      The energy aspect also holds political significance. Brussels has instructed major tech firms to align their AI data centers with climate objectives or refrain from involvement, making France’s predominantly nuclear energy grid a competitive advantage for developers in the region.

      What’s next

      This is an exclusivity agreement rather than a finalized deal. The companies anticipate signing by the end of 2026 and completing the transaction in the first quarter of 2027, pending consultations with employee representatives and securing regulatory approvals.

      In addition, Orange is exploring other avenues for capacity, having partnered with Iliad in May to bid for a €10 billion EU AI gigafactory project in France. Both the data center initiative and the gigafactory proposal suggest that French telecom providers now view owning computational infrastructure as a fundamental part of their business rather than an ancillary service.

      Importantly, the figure to monitor is not the €3 billion but the 400MW. Announced capacity targets across Europe have frequently outpaced actual capacity delivered, and it is the connections to the power grid, rather than capital, that have become the chief bottleneck.