Saudi Arabia Extends Its Deadline for BlackBerry Shutoff as Talks Continue

Saudi Arabia gave mobile-phone operators a 48-hour extension before shutting off Research In Motion Ltd.’s BlackBerry instant messaging as they worked toward a resolution, the state-run Saudi Press Agency reported.

The government extended the deadline to Aug. 9 to test proposed solutions as wireless operators attempt to comply with regulatory requirements, the SPA said, citing a statement from Saudi Arabia’s Communications and Information Technology Commission. Saudi authorities have said they want to monitor BlackBerry communications in the country to prevent terrorism and other illegal activities.

The Saudi situation is being closely watched because it’s one of a growing number of countries in which RIM, based in Waterloo, Ontario, faces scrutiny over its BlackBerry e-mail and messaging services. The United Arab Emirates, India and Indonesia have also expressed concern that such mobile communications could be used to violate laws or national mores.

“The sooner they reach agreements and publicize them, the better,” said Pierre Ferragu, an analyst at Sanford Bernstein in London. He has an “underperform” rating on RIM. If the situation is not resolved “it could end up pushing users to go for an alternative brand in order to avoid problems if the service were actually shut off.”

The Associated Press reported today that RIM had reached a deal in Saudi Arabia that would allow authorities to monitor messages, citing an unidentified Saudi regulatory official. The pact involves installing a server inside Saudi Arabia that will let authorities check the data of BlackBerry users, the AP said.

No Special Access

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

RIM said in a statement Aug. 4 that it cooperated with governments around the world with standard practices and that any reports it gave special access or information to certain authorities were inaccurate. Marisa Conway, a RIM spokeswoman in New York, declined to make any further comment when contacted by Bloomberg News.

Saudi Arabia’s wireless operators include Saudi Telecom Co., Mobily and a unit of Kuwait’s Mobile Telecommunications Co. 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 Aug. 4.

The delay came after U.S. and Canadian authorities began talks with foreign governments about potential BlackBerry bans.

‘Legitimate Security Concern’

“There is a legitimate security concern,” U.S. Secretary of State Hillary Clinton said Aug. 5, “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 U.A.E. said in a statement Aug. 4 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 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 corporate service was designed to prevent RIM, or anyone else, from reading encrypted information.

‘Overblown’

“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 e-mail, which it can monitor,” said Tero Kuittinen, an analyst with MKM Partners in Greenwich, Connecticut. He has a “buy” rating on the stock. “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 Aug. 5. 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 U.A.E. 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.

“What the market wants is less uncertainty,” said MKM’s Kuittinen.

To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net; Mourad Haroutunian in Riyadh at mharoutunian@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

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