Orascom Tel: may hear from Algeria in a week or two

* Firm's chairman sent a letter to Algerian Prime Minister

* Orascom considers MTN offer basis for talks over Djezzy

* Pakistan flooding has not hurt operator's network

By Alexander Dziadosz

CAIRO, Aug 16 (Reuters) - Egypt's Orascom Telecom (ORTE.CA) may hear from Algeria's government within a week or two about starting talks to buy the mobile firm's lucrative Djezzy unit, but not before, an executive said in remarks published on Monday.

Algeria is the top revenue earner of Orascom's far-flung units and selling it or solving its regulatory problems, which worsened after clashes between Egypt and Algeria soccer fans last year, is seen as vital to the firm's future cash flows.

The firm's chairman, Naguib Sawiris, sent a letter to the Algerian prime minister asking the government to speed up talks or make it easier for the company to work there, Chief Executive Officer Khaled Bichara said in a conference call on Aug. 12.

Orascom said in May it would negotiate a sale of Djezzy to the Algerian government after it was blocked from selling it to South Africa's MTN (MTNJ.J). Talks, however, have yet to start.

"Until now we have got an initial response with the government that they will create a team to negotiate with us and this deal has not been created yet," Bichara said, according to the call transcript published on Monday.

"There was some indication it would end just yesterday, it is the beginning of Ramadan so I am expecting maybe in a week or two, maybe we would be hearing from them, not before at least."

Algeria's regulator has increasingly squeezed Djezzy since last year. In November, the government slapped the unit with a $597 million back tax bill, which it paid but is disputing and hopes to get back.

The firm has been blocked from transferring money out of the country, making it harder to import some equipment, Bichara said, adding Orascom is now trying to buy what it needs locally.

He said the company considered the $7.8 billion MTN offered for Djezzy to be the basis for talks with Algeria, but could not comment on how the government might value the unit.

POSSIBLE DOWNGRADE

Orascom runs or owns stakes in mobile firms in countries as far flung as Egypt, North Korea, Pakistan, Canada and Burundi.

Bichara said flooding in Pakistan, where Orascom runs the top operator by subscribers Mobilink, had not affected the company's network, though usage could be affected. The company planned to make donations and supply free minutes, he added.

Moody's on Friday put Orascom on review for a possible downgrade, citing tough conditions for Djezzy, a lack of resolution on the tax dispute, and continued liquidity concerns linked in part to its problems in Algeria.

"The ability to upstream dividends from OTA (Orascom Telecom Algeria) is key for the parent company OTH (Orascom Telecom Holding), which has significant ongoing debt servicing requirements," Moody's wrote in the report.

Moody's, which confirmed its B2 corporate family rating on Orascom in March, said the firm could face "near-term liquidity issues" without any material asset sales or a resolution to the situation in Algeria.

Orascom did not issue any immediate comment on the Moody's report, but its chief financial officer said in the conference call the company had no significant debt maturities until 2013.

For the full transcript of the conference call: here (Editing by David Cowell)