Datagrid New Zealand has signed a supply and installation contract for a 2,300 kilometre submarine cable between Invercargill and Melbourne, a route that would give the South Island its first direct international internet connection.
Under the contract, Alcatel Submarine Networks will supply the cable system and OMS Group will carry out the marine survey and lay the cable. The link is designed with a minimum of eight fibre pairs and a design capacity of at least 160 terabits a second, and it forms the first leg of a wider plan Datagrid calls the Tasman Ring Network.
Datagrid chief executive Rémi Galasso told RNZ the cable “will unlock the potential of the region, and will allow South Island IT companies, universities and research centres to benefit from better internet with latency improved by up to 45 percent compared with existing routes via the North Island”.
That last point is the part most New Zealanders never think about. Every international cable serving this country currently comes ashore within a couple of hundred kilometres of Auckland. The two Southern Cross cables land at Whenuapai and Takapuna, Hawaiki comes ashore at Mangawhai in Northland, and the Tasman Global Access cable lands at Raglan. A Dunedin business sending data to Sydney sends it north to Auckland first, then west across the Tasman, then back down the Australian coast. You can see how tightly that traffic is funnelled in our map of New Zealand’s cables, fibre and mobile towers.
A southern landing changes the shape of that map. It shortens the physical distance for South Island users and, more importantly for anyone worrying about resilience, it puts a second gateway on a completely separate piece of coastline. A cable fault, an earthquake or a ship’s anchor in the Hauraki Gulf currently threatens a much larger share of the country’s international capacity than most people realise.
The bigger Tasman Ring Network, announced with Chorus in December 2024, runs to about 6,000 kilometres and would link Auckland, New Plymouth, Greymouth and Invercargill with Sydney and Melbourne, with a headline capacity of up to 540 terabits a second. Datagrid has previously pointed at the last quarter of 2027 for that wider system, subject to enough customers signing up for capacity.
What was not released this week is arguably as interesting as what was. Datagrid gave no figure for the cost of the cable, no detail on how it is being financed, and no date for the start of construction. Signing a supply contract with a cable manufacturer is a real step, and manufacturers do not slot projects into their factory queues casually, but it is not the same thing as a fully funded build with ships booked.
The project also has form for moving slower than announced. When the southern cable was first unveiled in January 2024 under the name Te Waipounamu, the company said it aimed to finalise a supplier contract by April 2024 and had a budget of about $160 million. That contract has arrived roughly two years later than the original plan, and the specification has grown along the way, from four fibre pairs to at least eight.
The reason the cable matters commercially is what Datagrid wants to build at the New Zealand end. The company holds resource consent, granted in March 2026, for a hyperscale data centre at North Makarewa near Invercargill, pitched as an artificial intelligence facility rather than a general cloud site. Datagrid has described a campus of about 360 megawatts, with an opening targeted for 2028.
That is an enormous amount of electricity for a single customer. In March the company signed a 15 year power purchase option agreement with Mercury for 140 megawatts, equivalent to roughly 1.2 terawatt hours of electricity a year. For scale, New Zealand’s entire grid was drawing about 7,141 megawatts at the record peak set during the frost earlier this week. You can watch the national load and the generation mix move in real time on our live electricity map.
Mercury went a step further on 23 July, buying a 12.7 percent stake in Datagrid Holding Group NZ for US$30 million, about NZ$53 million, and putting chief executive Stew Hamilton on the Datagrid board. Hamilton said the investment “bolsters our position alongside an important emerging source of long term electricity demand”. Galasso said “time to market is driving our strategy, and closing this round of investment funding allows us to move decisively”.
For a generator, that logic is straightforward enough. Mercury is being asked to commit to building generation for demand that does not exist yet, and taking a slice of the customer is one way of getting comfortable with the risk. It is also a signal worth noting for anyone following the electricity market, because a single 360 megawatt load in Southland would change the shape of demand in a part of the country that has spent years waiting to hear what happens to the Tiwai Point aluminium smelter.
The final investment decision on the data centre is expected later this year. Until that lands, the cable is the more concrete half of the proposition, and even that carries a condition, because a submarine cable is only economic if telcos, content companies and cloud providers buy long term capacity on it. Datagrid is not the only party chasing that money either. Southern Cross has its own new trans-Tasman cable, Tasman Express, under contract with the same two suppliers since June 2025.
For Southland the appeal is easy to understand. A region better known for dairy, aluminium and sheep would suddenly host a piece of international infrastructure that Auckland has monopolised since the first Southern Cross cable went live in 2000. Local operators have been open about hoping it draws technology firms south, and the cable is the piece that makes the data centre pitch credible, because latency to Australian financial and cloud hubs is the thing customers actually check.
The honest read is that this is a serious project taking a serious step, with the money question still unanswered. Cables get announced far more often than they get laid. This one now has a manufacturer, an installer, a route and a landing point, which is further than most southern cable proposals have ever got, and a good deal further than the same project had reached this time last year.
What do you make of an AI data centre and an international cable landing in Southland, and should the country be spreading its internet connections beyond Auckland? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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