European telecommunications companies are increasingly investing in data centre infrastructure as part of a broader push for technology sovereignty across the continent. Facing slow revenue growth and intense competition in mature markets, major telcos are turning to data centres as a new avenue for expansion and returns.
In the United Kingdom, BT has announced partnerships with US chipmaker Nvidia and data centre provider Nscale to develop up to 14 megawatts of artificial intelligence (AI) data centre capacity across three of its existing sites. Meanwhile, France’s Orange is teaming up with private equity firm Morrison to invest approximately €3 billion in expanding its data centre operations, aiming to increase capacity tenfold. Another French telecom group, Iliad, has also earmarked €3 billion for similar efforts.
This shift marks a departure from previous tech investment cycles in Europe’s telecom sector, which have at times been marked by overambitious spending, such as the costly acquisitions of 3G licences and high-profile mergers during the 2000s. Unlike those earlier ventures, data centre development appears to offer a more straightforward business case with less competitive pressure. European operators face fewer rivals domestically, as many aim to reduce reliance on US-based hyperscalers like Google and Amazon, which raise concerns related to data sovereignty and regulatory compliance.
Deutsche Telekom has prominently highlighted these issues with its “made for Germany, made in Germany” positioning, emphasizing local control over data and infrastructure. Given that telecom companies already manage critical national infrastructure and operate under strict regulatory frameworks, expanding into sovereign data centres aligns with their core competencies.
The financial profile of data centre investments also seems more stable and less risky compared to previous cycles. Rather than taking on significant debt, these telecom groups are collaborating with technology and financial partners, sharing costs and expertise. Research firm Polaris Market Research projects Europe’s sovereign cloud market could reach $70 billion in value by next year, a figure that, while modest compared to spending by global hyperscalers, represents a meaningful boost for telecom operators with otherwise limited growth prospects.
The trend toward domestic infrastructure investment is gaining traction beyond Europe. For example, Canada recently committed to building its own sovereign broadband backbone to connect the country internally instead of routing data through the United States, reflecting growing concerns about data privacy and geopolitical uncertainty among allied nations.
As global technology supply chains and data flows increasingly fragment, this push for regional self-sufficiency may create new opportunities for telecom companies that are adjacent to the tech ecosystem. For European operators, data centre development offers a potential path to revitalizing growth while supporting broader strategic goals around digital autonomy.