* Says will soon pay $110 million to continue appeal process
* Egyptian firm "exploring all its other strategic options"
* Raised $790 million to fight Algeria tax claims
(Adds details, background)
CAIRO, March 7 (Reuters) - Algerian authorities have rejected Orascom Telecom's appeal against claims its Djezzy unit owed back taxes and penalties from 2004 to 2007, the Egyptian mobile operator said on Sunday.
Orascom said it "intends to appeal the rejection according to the Algerian rules and regulations which dictates a three tiered appeal process."
To do so it will have to pay 20 percent of the remaining balance of the taxes and penalties the Algerian government claims, or around $110 million. It said it will do this shortly.
Orascom paid $120 million in December in order to file an appeal against a $597 million tax bill which Algeria says Djezzy owes for 2005-2007. Algeria also claims a $50 million bill from 2004. The appeal rejection covered both claims.
The firm, the Arab world's largest mobile operator by subscribers, said it can now appeal to the Central Commission or an administrative court called the State Counsel.
The Cairo-based international mobile operator said in November that the tax claim could reduce 2010 dividends from Djezzy, its single biggest source of income. Orascom will post full-year and fourth quarter results on March 15.
Orascom is also fighting an ownership dispute with France Telecom over their jointly-held unit Mobinil.
Algerian sources told Reuters last month the government wanted Orascom to exit the country. Algeria's finance minister later said the government treated all telecom firms equally and only wanted its taxes paid.
Orascom has raised more than $790 million via a rights issue launched in part to ensure liquidity in case of a protracted dispute in Algeria.
Orascom said the amount it had paid would be returned if the appeal is successful but also noted: "On the other hand, (Orascom) is exploring all its other strategic options."
Orascom Telecom's relations with the Algerian government soured in early 2008 when a sister firm, Orascom Construction Industries (OCI), sold its Algerian cement manufacturing assets to France's Lafarge.
The transaction angered Algerian officials who believed they should have been consulted.
Djezzy headquarters and dozens of the firm's shops in the Algerian capital were ransacked in November by crowds angry about minor violence surrounding a soccer World Cup qualifying match between Algeria and Egypt. (Reporting by Alastair Sharp; Editing by Jon Loades-Carter)