Research In Motion has agreed to hand over user codes that would let Saudi authorities monitor its BlackBerry Messenger, as it seeks to stop the kingdom from silencing the service, a source close to the talks said on Tuesday.

The source said RIM would share with Saudi Arabia the unique pin number and code for each BlackBerry registered there. That will allow authorities to read encrypted text sent via Messenger, an instant messaging service that's distinct from email sent on the BlackBerry.

The arrangement would effectively give Saudi Arabia access to RIM's main server for Messenger, but only for communications to and from Saudi users, the source said..

The Canadian company declined to comment, referring media to its earlier statement in which it said it cooperates with all governments with a consistent standard.

I would imagine other countries are going to want to be treated in a similar way, whatever that way happens to be, said Todd Coupland at CIBC World Markets in Toronto, referring to a Saudi code sharing deal for Messenger.

Saudi Arabia, like United Arab Emirates, Kuwait, India and some other countries, has sought access to encrypted BlackBerry communications, citing social and national security concerns.

BlackBerry Messenger has proven popular with young singles in Saudi Arabia, an Islamic society that restricts contact between unrelated men and women. The country is the biggest BlackBerry market in the Gulf with 700,000 users.

Social and political activists also say BlackBerry's encrypted texting has brought more open dialogue, including criticism of governments and policies.

This use of the BlackBerry contrasts with the situation in Western countries, where the device is specially popular among business and government professionals that value its security. Email is encrypted and decrypted by BlackBerry Enterprise Servers, which RIM says are only controlled by the sponsoring business or organization.

RIM, unlike rivals Nokia and Apple, operates its own network through secure servers located in Canada and other countries such as Britain.

One analyst said RIM might give ground on servers for Messenger, but the company was unlikely to budge on the security of email sent through these Enterprise servers.

PROGRESS REPORTED

The Saudi telecom regulator said earlier it was making progress in its talks with RIM, and that the Messenger service was still up and running. It did not say what, if any, arrangement had been made with RIM.

In light of the positive developments in completing part of the regulatory requirements from the service providers, the regulatory authority has decided to allow the continuation of the BlackBerry Messenger services, the regulator said.

Saudi Arabia had earlier said it would stop all messaging from Friday unless the two sides found a way for authorities to tap into the BlackBerry messages. It later extended that deadline to Monday.

The source said RIM initially agreed to set up a server at each of the three Saudi service providers.

But that proved impractical, so the company changed course and offered the Interior Ministry and intelligence services the codes to all Saudi BlackBerry users, said the source, who was not authorized to speak about the talks and asked not to be named.

A spokesman for the regulator, the Communications and Information Telecommunications Commission, was not available for immediate comment on the source's remarks.

QUICK RETURN TO NORMAL

RIM has declined specific comments on any talks since governments, mostly in the Middle East, have stepped up pressure to gain access to the secure BlackBerry network.

But the company's co-chief executive, Michael Lazaridis, told the Wall Street Journal last week that RIM would have to comply with a court order to intercept communications.

I would give them the encrypted stream, he said. It would have to be like a wiretap.

A code-sharing arrangement with Saudi Arabia would let the interior ministry monitor Messenger activity, the source said.

It seems to be contrary to what RIM has always maintained, said Paradigm Capital analyst Barry Richards.

Abdulhamid al-Amri, a member of the Saudi Economic Association, said things will go back to normal once the two sides resolve the issue. He said a Saudi agreement would likely lead to early deals with other governments.

I believe that the firm will be as responsive to the rest of the countries because it is in its interest not to play favorites between countries as that would affect its own interests, he said.

RIM still faces a more sweeping ban in the neighboring UAE, where authorities have threatened to ban Messenger, emailing and web browsing on the device from October.

Saudi Telecom Co, the country's No.1 telecom operator, and its smaller rivals Mobily and Zain Saudi Arabia were not available for comment.

(Additional reporting by Alastair Sharp and Nicole Mordant; Writing by Jason Neely and Frank McGurty; Editing by Greg Mahlich and Janet Guttsman)

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