In sum – what to know:
Sovereign AI funding opens a new growth path for telcos – Governments investing in domestic AI infrastructure are increasingly turning to operators, whose network and regulatory strengths position them to capture a large share of this emerging market.
Telcos’ capabilities align with sovereignty needs – Their expertise in large-scale networks, local presence, and established government relationships give them an edge over hyperscalers for sensitive, sovereignty-focused AI projects.
Early adopters gain advantage – Operators in Canada and Europe are already moving into sovereign AI, positioning themselves to secure higher-margin enterprise and government workloads as national AI buildouts accelerate.
Governments around the world are racing to build sovereign AI infrastructure, and according to a new report from Morningstar DBRS, major telecommunications companies are uniquely positioned to benefit from that shift.
The report, released in the wake of Canada’s announcement of nearly CAN $926 million in federal spending over five years to develop public AI infrastructure and embed AI across government operations, concludes that telcos are “well positioned” to capture a significant share of the growing sovereign AI market. As nations seek to reduce reliance on foreign cloud providers and retain control over sensitive data and AI capabilities, telcos are emerging as natural partners for building the infrastructure required to support those ambitions.
Telco strengths align with sovereign AI needs
Telecommunications companies bring a set of competitive advantages that align closely with the requirements of sovereign AI development. Their existing expertise in designing, constructing, and maintaining large-scale communications networks gives them a technical foundation that few other industries can match. Equally important, telcos have long-standing relationships with governments and a track record of navigating complex regulatory environments, making them trusted partners for projects involving sensitive national infrastructure.
“Core competence positions them well to integrate and build facilities and high-speed fibre networks to support sovereign AI development,” said Scott Rattee, senior VP and team lead for corporate ratings at Morningstar DBRS.
That combination of technical capability and regulatory familiarity is difficult to replicate. Hyperscalers may offer scale and software sophistication, but telcos offer deep local presence, established trust with public institutions, and the physical infrastructure that underpins national connectivity. For governments wary of ceding control over critical AI systems to foreign providers, those things matter.
A growing market opportunity
The report suggests that telcos that move early to capitalize on sovereign AI initiatives will be “best positioned to capture the enterprise/government market share as this part of the industry is set to expand meaningfully over the next five years.” That expansion is being driven not only by national security concerns but also by data residency requirements, regulatory pressure, and a broader desire among governments to retain strategic autonomy in the AI era.
Several major operators have already begun positioning themselves in this space. In Canada, Bell Canada and Telus have made investments tied to sovereign AI and domestic cloud infrastructure. In Europe, Deutsche Telekom, Orange, Vodafone, and Swisscom are pursuing similar strategies, while Telenor in Norway and Scaleway in France have also entered the market.
For telcos, the opportunity represents a potential new revenue stream at a time when traditional connectivity services face increasing commoditization. Building and operating sovereign AI infrastructure, whether through data centers, high-speed fiber networks, or managed services, offers a way to deepen relationships with government customers and capture higher-margin enterprise workloads.
The shift toward sovereign AI is still in its early stages, and the competitive landscape remains fluid. But as governments commit more capital to domestic AI development, telcos with the right capabilities and relationships may find themselves at the center of a significant infrastructure buildout, one that could reshape their role in the broader technology ecosystem.
