* Altice wanted $7.8 bln for Portugal arm – sources
* Hefty valuation was main stumbling block
* EQT and CVC made non-binding bids below asking price -sources
* Highest bid was just above 6 bln euros - source
By Pamela Barbaglia and Sergio Goncalves
LONDON, Jan 27 (Reuters) - Altice Europe NV has ditched a plan to sell its Portuguese business after private equity bids failed to meet price expectations, leaving founder Patrick Drahi with no viable exit for the country's largest telecoms firm, three sources told Reuters.
Altice was locked in a valuation row with buyout funds EQT and CVC Capital Partners in December as non-binding proposals by two of Europe's biggest investment firms came well below a 7 billion euro ($7.86 billion) threshold that Drahi had set to negotiate a deal, the sources said.
The highest indicative bid came in at just above 6 billion euros and included a premium based on Altice Portugal's market dominance, one of the sources said.
Lack of competitive tension in the discussions was a key factor as most industry buyers including Telefonica had walked away while buyout funds refused to pay up for a business which had partly sold its fibre network and other key infrastructure over the years, the sources said.
EQT and CVC declined to comment.
A spokesperson for Altice said the company's Portuguese assets "were not for sale and are not for sale". Altice had previously denied discussions to sell the unit.
Altice hired Lazard last year to test market appetite for its Portuguese business but the telecoms firm, which has the bulk of its operations in France, never launched a formal auction process as price expectations immediately proved challenging for most bidders.
The talks were aborted between late December and early January, with the bidders notified that the sale had been cancelled "in the same informal way it was launched", the first source said.
Meanwhile, Altice has shifted its focus to Britain with its newly-established UK vehicle raising its stake in BT to 18 per cent in December - a move that triggered a defensive response from the British government.
"Altice needs to sell assets to focus more on other markets, such as Britain," the source said.
"The company has a package of assets which are constantly being reviewed ahead of a possible sale and the Portuguese unit was - and still is - part of it."
($1 = 0.8905 euros) (Reporting by Pamela Barbaglia in London and Sergio Goncalves in Lisbon, additional reporting by Mathieu Rosemain in Paris; Editing by Kirsten Donovan)