Research In Motion will give India access to secure BlackBerry data beginning September 1, a government source said on Monday, leading New Delhi to put off a decision on whether to shut down the smartphone.
Concerned about militants using the BlackBerry or Internet to plan attacks, India is also pushing RIM, Google and Skype to set up local servers to allow full monitoring of their services.
Shares of Canadian-based RIM rose after the Indian Interior Ministry said the company had offered several ways to allow authorities to monitor BlackBerry communications. The government said it would check their feasibility over the next 60 days.
New Delhi had threatened to shut down BlackBerry email services by Tuesday unless RIM provided a workable way for the government to monitor the data. India has said it wants the means to fully track and read BlackBerry communications.
Indian officials have also expressed concerns over security threats from Internet-based messaging and other services from providers such as Google and Skype.
The Indian government had set a August 31 deadline for RIM to come up with a method to allow email monitoring and avoid a shutdown in the world's fastest-growing mobile phone market. On Monday, a source said RIM provided an interim solution.
They have given some access, which we will operationalise from September 1, said the government source, referring to RIM.
They will have to provide full access to all communications that go through India. They will have to set up a server in India, the source said on condition of anonymity as he was not authorized to speak to the media.
A RIM spokesman based in India said the company had no immediate comment, while a spokeswoman at Google said the company was unable to comment as it had had no communication from the government.
Skype said it had also not received any directive from authorities in India.
BlackBerry's reputation is built on its system security and a compromise under pressure from governments could damage the device's popularity with business professionals and politicians.
Apple Inc and Nokia, RIM's two biggest smartphone rivals, may have the most to gain if India blocks BlackBerry services. Nokia said on Monday it will host an email server in India from November 5.
India is keen to retain its position as one of the world's fastest-growing information-technology nations, and a BlackBerry ban would jeopardize its status. A shutdown would also limit the efficiency and productivity of Indian businesses that rely on the smartphone.
It is a huge hassle, not only for the government itself, which uses the RIM service, said Avian Securities analyst Matthew Thornton.
It's not easy to take out all of your servers, put in new servers, take out all the different devices you have in the field, put in new devices. It's a big hassle and a cost, he said.
RIM uses powerful codes to encrypt email messages as they travel between a BlackBerry and a computer known as a BlackBerry Enterprise Server (BES) that is designed to secure those emails.
RIM has said BlackBerry security is based on a system where the customers create their own key and the company neither has a master key nor any back door to allow RIM or any third party to gain access to crucial corporate data.
In addition to India, several other countries, most of them in the Middle East, have raised concerns that the BlackBerry could be used to aid terrorism or peddle pornography.
Saudi Arabia, fretful over services such as online pornography, has reached a deal with RIM on access to the BlackBerry Messenger instant messaging service, a consumer product that operates outside of the secure corporate domain. India has also reached a deal until November on Messenger service, according to government sources.
Kuwait and the United Arab Emirates have raised similar concerns, with the UAE setting an October 11 deadline for RIM.
Analysts see no easy fix to the standoff as RIM says it has no way of intercepting the data that countries want to access. RIM has denied media reports that say it provided unique wireless services or access to any one country.
A shutdown would affect about 1 million users in India out of a total 41 million BlackBerry users worldwide, allowing them to use the devices only for calls and Internet browsing.
RIM's stock was up 54 cents, or 1.2 percent, at $46.53 on Nasdaq, and up 80 Canadian cents, or 1.8 percent, at C$49.15 on the Toronto Stock Exchange on Monday afternoon.
(Writing by Krittivas Mukherjee and Frank McGurty; additional reporting by Nicole Mordant in Vancouver; editing by Surojit Gupta, Jui Chakravorty, Michael Roddy, Peter Galloway and Rob Wilson)