RIM Refuses to Give Customer Codes as BlackBerry Faces Bans

Research In Motion Ltd., whose BlackBerry smartphone faces bans in Saudi Arabia and Indonesia, risks losing out on expansion in emerging markets after saying it won’t reveal codes for reading some users’ communications.

RIM can’t meet requests for corporate customers’ encryption keys since it doesn’t have the codes, the company said in an e- mailed statement. 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.

Saudi Arabia, the Arab world’s largest economy, ordered phone companies operating in the kingdom to suspend BlackBerry instant messaging from Aug. 6 and Indonesia threatened to ban some functions on the devices. The moves follow a decision this week by the United Arab Emirates, home to Middle East business hub Dubai, to shut BlackBerry e-mail and messaging functions the government can’t monitor. India, the second-most populous country, asked RIM to host a server in the country or be banned.

“The company is in a pretty tricky position now,” said Matthew Reed, a senior analyst for the Middle East and Africa at U.K. business data provider and publisher Informa Plc. “Part of the BlackBerry’s appeal is that it offers high levels of security and that same factor is what’s getting it blocked.”

Photographer: Jonathan Gainer/Bloomberg

A trader uses a RIM BlackBerry mobile device on the Dubai International Financial Market trading floor in Dubai. Close

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Photographer: Jonathan Gainer/Bloomberg

A trader uses a RIM BlackBerry mobile device on the Dubai International Financial Market trading floor in Dubai.

U.S. Contacts

A spokesman for the U.S. State Department said today that officials have reached out to Saudi Arabia, Indonesia and other countries about the matter.

“We’re in touch with them, we’re going to understand what their concerns are, what their plans are and then we’ll have more to say,” said spokesman Philip J. Crowley.

The U.S. government is a major user of BlackBerry units with “well over 100,000 BlackBerry users in the U.S. government in 2005,” according to an RIM report.

“There are legitimate security concerns attached to certain technologies and the flow of information around the world,” Crowley said. “We understand those concerns; at the same time we do support the flow of information, the availability of technologies that empower people.”

International Expansion

RIM, which is based in Waterloo, Ontario, and is expanding outside North America to counter slowing growth in the U.S., is facing mounting challenges as developing countries tighten restrictions on mobile communications. States such as the U.A.E. and India have cited a need to monitor calls and e-mails for security, as well as to uphold social mores, as reasons for a potential ban on the services.

The BlackBerry competes with smartphones like Apple Inc.’s iPhone and handsets from Nokia Oyj. Nokia, the world’s biggest maker of mobile phones, today said it isn’t opposing new restrictions on mobile messaging in emerging-market countries.

RIM’s service for large corporate customers routes e-mails through its own servers, which are often physically located in a country different from the user, with the data encrypted throughout the system. The company also provides an encrypted Internet-based service for smaller customers and consumers.

Saudi Arabia will suspend only the BlackBerry instant messaging service, Sultan Al Malik, spokesman of Communications and Information Technology Commission, said in an e-mailed statement today. The service doesn’t meet regulatory requirements, the regulator said in a statement via the state- run Saudi Press Agency yesterday. Saudi phone companies and RIM are in talks over the issue, the regulator said.

Crime Concerns

The U.A.E. said Aug. 1 it may suspend BlackBerry e-mail, messaging and Web browsing services in October because of concern the devices could be used in crimes. Days earlier, an official in India said that country may ban BlackBerry e-mail use. Indonesia may block some services because of security concerns unless RIM sets up a server and office in Jakarta, Heru Sutadi, a telecommunication regulatory body member, said today, without specifying which services could be affected.

The U.A.E. phone companies Emirates Telecommunications Corp., known as Etisalat, and Emirates Integrated Telecommunications Co., known as Du, announced plans to provide BlackBerry users with alternative access to Internet, e-mail and instant messaging and with the option to buy or receive a new handset.

Saudi Arabia Growth

There may be about 350,000 BlackBerry users in Saudi Arabia, leaving room to grow as more people adopt data services, Informa’s Reed said. The analyst, who estimates the U.A.E. could have as many as 750,000 BlackBerry users, said Saudi Arabia is a potential growth market as more consumers begin to use services initially embraced by businesses.

PT XL Axiata and PT Indosat, Indonesia’s two biggest providers of BlackBerry services, expect subscribers to double to 500,000 each by the end of this year, Investor Daily Indonesia newspaper reported in January, citing officials at the two mobile-phone operators.

Saudi Arabia’s economy will grow more than 4 percent in 2010 after expanding less than 0.2 percent last year, Finance Minister Ibrahim al-Assaf said Jan. 25. The 29 million-strong population may grow 1.8 percent this year, according to the U.S. Central Intelligence Agency’s World Factbook.

Saudi Telecom Co., Etihad Etisalat Co., known as Mobily, and the local unit of Kuwait’s Mobile Telecommunications Co., known as Zain KSA, will have to stop the services after a year- long consultation with RIM failed to bring BlackBerry functions into line with Saudi Arabia’s telecommunications laws, the regulator said.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net.

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