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India firm Bharti Airtel goes big into African cellphone market

Bharti Airtel, an Indian company, paid $9 billion for access to an African cellphone market serving 45 million. The world's last unsaturated market holds a potentially huge payoff.

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"The traditional partners, such as the Americans, Britain, Canada, and Australia, Italy and France, they are still leading when it comes to controlling most of the resources," says Claude Kabemba, director of the Southern African Resources Watch, a project of the Open Society Initiative of Southern Africa in Johannesburg. "But China captures everything that hasn't been captured."

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"The Chinese are very strategic; they don't go everywhere. They go where traditional partners have retreated, and where they can dominate the market," says Mr. Kabemba.

Unlike China – which tends to invest mainly in Africa's resources in order to solidify its role as the world's factory – India's investments tend to be in communications, like the Bharti deal, or in infrastructure or commercial farming.

Also, Indian companies operating in Africa are usually private firms that take a purely mercantile approach, unlike China's massive state-owned or state-run companies, which often come in with political goals deeply entwined.

"There is a political strategy and idealism behind Chinese investment," says Kabemba. "They want their model of development to sensitize the Africans about a system that is totally different from the West, and they tell Africans, 'We succeeded because we remained outside the Western economic models.' "

Beyond boom and bust

In past booms, Africa's fortunes were largely dependent on whether foreign markets were going boom or bust. If China was growing, it was buying more copper. If China or the West went into recession, then African copper mines would be shuttered. But today, Africa's growing population and its growing concentration in urban centers are making Africa more attractive for investors, regardless of what happens in the outside world.

"The problem before is that Africa was very fragmented, with small towns spread out, and getting goods from Point A to B was very hard," says Mr. Satchu. But "now, young Africans are moving into urban centers in droves and companies are starting to look at the 1 billion Africans as potential customers. The switch has gone off."

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The move shows how international companies will now pay top dollar to get a piece of the world's last untapped telecommunications market. It also highlights how developing giants India and China pursue different investment strategies on the continent.