Following Apple, RIM hopes to grow its presence in China

In a new note to investors, research analyst Shaw Wu with Kaufman Bros. said while Apple has garnered a great deal of media coverage during its lengthy negotiations with China Mobile, RIM has quietly been working on its own deal with China Telecom. While the wireless carrier is the smallest of the "Big 3" in China, Wu said he believes the provider is a good fit for RIM as it prepares to offer more devices in the market. He believes an announcement of a deal could be made as soon as February 2010.

Currently, China Mobile offers a few 2G BlackBerry devices, but the country as a whole has been reluctant to embrace RIM's offerings because they are seen as "too secure," and do not allow surveillance. This, of course, is a stark contrast from the U.S., where security concerns have made BlackBerry the default smartphone within the U.S. government.

"From our understanding, in the past, RIM has been reluctant to modify its security software just for China and frankly was stretched keeping up with robust demand in North America," the report reads. "Now with China upgrading to 3G networks, with 700 million subscribers and with Apple entering, RIM simply cannot ignore the world's largest wireless market."

Wu said that sources suggest China Telecom is the frontrunner to carry new 3G BlackBerries. Reportedly, the handset maker is beta testing its localized hardware and working to make it work better with Chinese characters.

"On a technical level, we believe partnering with China Telecom makes a lot of sense in that the hardware should require very minor modification as it also runs the same QCOM CDMA technology used by Verizon," Wu said.

Last week, China Unicom and Apple announced they had reached a three year deal to sell the iPhone starting in the fourth quarter of 2009. But the agreement is not exclusive to the carrier, which has led to speculation that Apple is looking to also sell the iPhone through the nation's largest carrier, China Mobile.

While China Mobile has an estimated 498 million subscribers, China Telecom has only 42 million. But Wu said that China Telecom also has a strong customer base in enterprise and government, the market segment that might be likely to opt for the BlackBerry.

"We believe," he said, "this fits well with RIM's strengths."