Private equity group Providence has pulled the sale of mobiles specialist Phones4U after turbulent debt markets undermined a deal.

Providence had hoped to sell Phones4U for as much as £700m but potential buyer BC Partners had to cut the price offered because difficulties raising debt.

A Providence spokesman said: “Following the receipt of a number of unsolicited expressions of interest for Phones4U, Providence conducted a process to explore strategic options for the company. 

“After concluding this process, Providence has determined it can realise the most value through its continued ownership of Phones4U.”

He said that Phones4U is performing strongly and on track to to generate EBITDA of £130m in 2010 - up 23% year on year.

Phones4U has consistently been highly cash generative the spokesman said, allowing the private equity firm to return its initial investment and pay down about £300m of bank debt.

Providence will now consider options for Phones4U including accelerating growth and “optimising the capital structure”.