RIM, Saudi Arabia reach deal to continue BlackBerry - report

Saudi authorities will be given ability to monitor Blackberry users' data.
RIM, Saudi Arabia reach deal to continue BlackBerry - report
BLACKBERRY BAN: Saudi Arabia had said Aug 3 that it would order the country’s three mobile-phone operators to shut off BlackBerry instant messaging starting Friday.(Getty Images)
By Bloomberg
Sat 07 Aug 2010 04:54 PM

Research In Motion and Saudi Arabia reached an agreement that will allow BlackBerry services to continue in the country after the government was given the ability to monitor messages, the Associated Press said today.

The deal involves installing a server inside Saudi Arabia that will let authorities check BlackBerry users’ data, averting a ban on the service, the AP said, citing an unidentified Saudi regulatory official. Marisa Conway, a RIM spokeswoman in New York, declined to comment when contacted by Bloomberg News.

Pierre Ferragu, analyst, Sanford Bernstein, London, said: “This whole story was getting annoying for RIM only as it could end up pushing users to go for an alternative brand in order to avoid problems if the service were actually shut off."

He has an “underperform” rating on RIM. “The sooner they reach such agreements and publicize them, the better.”

RIM, based in Waterloo, Ontario, faces growing scrutiny over its BlackBerry email and messaging services as governments in countries including the UAE, India and Indonesia express concern with how they may be used by terrorists or to violate national mores. The deal with Saudi Arabia may serve as a model for future settlements.

Ferragu said: “Similar solutions will be offered in Indonesia, India, etc." The only negative implication for RIM will be a “slight extra cost,” he said.

Saudi Arabia had said on Aug. 3 that it would order the country’s three mobile phone operators to shut off BlackBerry instant messaging starting yesterday. The government today extended that deadline by 48 hours, the state run Saudi Press Agency reported.

The reprieve was granted “to test proposed solutions, as service providers make efforts to meet regulatory requirements,” the agency said, citing a statement from the Communications and Information Technology Commission, Saudi Arabia’s telecommunications regulator.

Sultan al Malik, a spokesman for the commission, and Etihad Etisalat, the service provider known as Mobily, didn’t respond to emails today seeking comment on the reported agreement.

In a telephone interview on Saturday, Khalid al Bihlal, associate vice president, EFG Hermes, Saudi Arabia, said:“From a user’s point of view, it is definitely great that the service will continue."

Al Bihal said: “If the main reason is about preventing terrorism, we can’t do anything about it, the Internet is monitored, and terrorists are still using it.”

Saudi Arabia’s wireless operators include Saudi Telecom, Mobily and a unit of Kuwait’s Mobile Telecommunications, known as Zain KSA. The carriers had been told to stop messaging services after a yearlong consultation with RIM failed to bring BlackBerry functions in line with Saudi Arabia’s telecommunications laws, the regulator said this past week.

In this past week, Hillary Clinton, Secretary of State, US, said: “There is a legitimate security concern, but there’s also a legitimate right of free use and access.”

Turkey’s telecommunications regulator yesterday said there are “serious” security weaknesses related to BlackBerry services in the country, adding that it has set up a committee to look into the matter.

The UAE said in a statement this past week that it wouldn’t be changing its decision to ban BlackBerry service in October and that it was open to discussions aimed at achieving a solution to the issue.

RIM rose $1.22 cents to $53.45 in Nasdaq Stock Market trading yesterday, ending four days of declines. The stock has dropped almost 23 percent this year.

RIM said Aug 4 that it couldn’t meet requests from governments that it reveal codes for reading some users’ communications. The BlackBerry corporate service was designed to prevent RIM, or anyone else, from reading encrypted information and any claims that RIM provided “something unique to the government of one country” are unfounded, it said.

Tero Kuittinen, analyst, MKM Partners, Greenwich, Connecticut, said: “In some sense, the Saudi drama has been overblown as the government is already monitoring every other handset maker in the region offering SMS and email, which it can monitor."

He has a “buy” rating on the stock.

He said: “It’s only a question of whether RIM is going to go the level of other vendors, or if RIM is going to be particularly accommodating.”

The Indian government is still in talks with RIM over BlackBerry services in the country and is hopeful an agreement can be reached, Telecommunications Minister Andimuthu Raja said this past week.

India may ban RIM services unless the company agrees to resolve security concerns, a government official with knowledge of the matter said this past week.

RIM has about 1.2 million subscribers in Indonesia, 1.1 million in India, and a combined 1.2 million in the UAE and Saudi Arabia, said Mike Abramsky, an analyst at RBC Capital Markets in Toronto. RIM had 46 million subscribers globally at the end of May.

He said: “What the market wants is less uncertainty,” said MKM’s Kuittinen. “In that sense, a deal here appears to be positive." (Bloomberg)

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