Security agencies around the world are increasingly insisting on the installation of servers to intercept data sent and received through smart-phones as these services are used by terror elements.

"We made a commitment to install host servers in India by end of the year. It gives me immense pleasure to inform you that it has been installed. We have completed the software installation and internal testing and the messaging service is now live on our India based servers," Shivakumar said in the letter.

Canada-based Research-in-Motion , makers of BlackBerry, have argued that this was an industry issue and should be dealt with by all the players, including Nokia, and service providers who offer Virtual Private Network (VPN) services.

RIM has argued that its security architecture was uniform around the world and that it had no ability to provide security agencies encryption keys to messages sent by its customers.

Government has given RIM Blackberry time till January 2011 to create lawful interception facilities.

As for Nokia's servers in India, its letter to the home secretary says, "...the tool provides real time intercept of content. It also facilitates location of the mobile device generating emails."

Nokia servers include authentication server, email enterprise server, and configuration database servers. "This ensures that the authentication happens within India and the database will reside within India," Shivakumar said.