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U.S., RIM in Government Talks as Saudi Ban Looms

U.S. Secretary of State Hillary Clinton said yesterday the U.S. government is discussing a proposed ban in the U.A.E. with that country’s government. Photographer: Saul Loeb/AFP/Getty Images
U.S. Secretary of State Hillary Clinton said yesterday the U.S. government is discussing a proposed ban in the U.A.E. with that country’s government. Photographer: Saul Loeb/AFP/Getty Images

Aug. 6 (Bloomberg) -- The U.S. and Canadian governments and Research In Motion Ltd. are holding talks with authorities in the Persian Gulf and South Asia to head off restrictions on the BlackBerry handset as Saudi Arabia prepared to suspend services.

The largest Arab economy, Saudi Arabia, said Aug. 3 that it would order the country’s three mobile-phone operators to shut off instant messaging services starting today. Users in the kingdom said they lost access to some phone capabilities for a part of the day, before it was restored. The U.S. and Canadian governments said yesterday they’re in talks with foreign governments to find a solution.

“The BlackBerry has become indispensible for the business community in Saudi Arabia and the region,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, who said all three of his three BlackBerry handsets were working after some interruption earlier today. Blocking services would be “a disruption to the business flow and productivity,” he said, adding that all functions were restored by about 1 p.m.

RIM, based in Waterloo, Ontario faces growing scrutiny over its BlackBerry e-mail and messaging services in countries including the United Arab Emirates, Saudi Arabia and India. Indonesia, the world’s fourth most-populous nation, also expressed concern about BlackBerry services.

Messenger Services

The U.S. government is discussing a proposed ban in the U.A.E. with that country’s government, U.S. Secretary of State Hillary Clinton said yesterday at a press conference. Canadian Trade Minister Peter Van Loan told reporters yesterday his country’s officials are working with RIM and foreign governments to find a solution to disputes over the device.

Marisa Conway, a spokeswoman for RIM, declined to confirm whether BlackBerry Messenger service has been suspended in Saudi Arabia, when contacted by e-mail today.

RIM rose 11 cents to $52.34 at 10:54 a.m. New York time in Nasdaq Stock Market trading, following four days of declines. The stock had dropped 23 percent this year before today.

BlackBerry messenger services had continued to work for many users in Saudi Arabia as late as 12 p.m. Riyadh time, Al Arabiya TV reported today on its website Alaswaq.net.

A spokesman for Saudi Arabia’s telecommunications regulator, the Communications and Information Technology Commission, didn’t immediately respond to an e-mailed request for comments today, a weekend day in the kingdom. Calls to the three wireless operators in the country were unanswered.

Government Talks

Saudi Telecom Co., Etihad Etisalat Co., known as Mobily, and the local unit of Kuwait’s Mobile Telecommunications Co., known as Zain KSA, were ordered to stop messaging services today after a yearlong consultation with RIM failed to bring BlackBerry functions into line with Saudi Arabia’s telecommunications laws, the regulator said this week.

Government officials were still in talks with RIM over the issue this week, Sultan Al Malik, a spokesman for the regulator said in an e-mailed response to question Aug. 4.

“There is a legitimate security concern,” Clinton said, “but there’s also a legitimate right of free use and access.”

Turkey’s telecommunications regulator today 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.

‘Security Needs’

The Indonesian government yesterday backed away from limiting BlackBerry services in the country a day after an official with the national regulator said a ban was possible.

RIM spokeswoman Marisa Conway didn’t return a call or message seeking comment yesterday. A spokeswoman for the company in Dubai couldn’t be reached today. An external spokeswoman for RIM in London said she was unable to comment.

The U.A.E. said in a statement this 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.

State Department spokesman Philip J. Crowley said yesterday the U.S. has been in touch with RIM and will have further meetings “to try to understand fully the issues that have been raised” and “determine how to meet both the security needs that these countries are expressing and also ensure the free flow of information as we are advocating.” The U.S. is also in touch with all the countries involved, he said.

‘Working Intensely’

RIM said Aug. 4 it can’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.

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

Mike Abramsky, an analyst at RBC Capital Markets in Toronto, said he met with RIM Aug. 4. While the company declined to outline possible resolutions, “it seemed as if all the parties are working intensely to resolve the issues,” he wrote in a note.

The company has about 1.2 million subscribers in Indonesia, 1.1 million customers in India and the United Arab Emirates and Saudi Arabia together make up 1.2 million subscribers, Abramsky said. RIM had 46 million subscribers globally at the end of May.

RIM yesterday slipped $1.16, or 2.2 percent, to $52.23 on the Nasdaq Stock Market, extending its drop this year to 23 percent.

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

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net; Shaji Mathew at shajimathew@bloomberg.net.

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