(Corrects to say Altice to pay $34.90 per share not $39.40 for Cablevision in third graph)

By Liana B. Baker

Sept 16 (Reuters) - Cablevision Systems Corp has agreed to be purchased by European telecommunications company Altice for $17.7 billion, including debt, a source familiar with the matter told Reuters ahead of an official announcement.

Shares of Cablevision, which is controlled by New York's Dolan family, jumped 16 percent to $33.12 after the bell on Wednesday.

Altice will pay $34.90 per share for Cablevision, CNBC said, citing sources. (http://cnb.cx/1YdRdbV)

The New York Times earlier reported the deal. (http://nyti.ms/1F3kZKc)

Altice and Cablevision could not be reached immediately for comment.

The latest move comes in an environment of consolidation among American cable companies that have been struggling with declining subscriber numbers as viewers shift to cheaper and more flexible streaming services offered by Netflix Inc , Amazon.com Inc, Hulu and others.

Time Warner Cable Inc said in July that it was working towards closing a deal to be bought by Charter Communications Inc.

Cablevision's shares closed at $28.54 on the New York Stock Exchange on Wednesday.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Ken Wills)