(Adds details on Altice deal, share price. Refiled to remove repetitious text in fourth paragraph)
By Andrei Khalip
LISBON, Dec 23 (Reuters) - Angolan billionaire businesswoman Isabel dos Santos has dropped her 1.2 billion-euro ($1.46 billion) bid for Portugal Telecom SGPS (PT SGPS) which threatened to block the sale of PT's former domestic business PT Portugal by Brazilian affiliate Oi to rival telecoms group Altice.
Her Portuguese company Terra Peregrin said in a statement on Tuesday it had "decided to withdraw the offer after careful consideration" following last week's ruling by the Portuguese market regulator that said it had to raise the offer price.
Terra Peregrin launched the 1.35 euro a share offer last month seeking to block the sale of PT Portugal to Altice.
Oi owns Portugal Telecom's operating assets following a merger between the two companies, which soured after the now bankrupt Rioforte holding company of the Espirito Santo banking family, ultimately a shareholder in PT SGPS, defaulted on nearly 900 million euros ($1.14 billion) of loans from PT, a debt which Oi said it had not been aware of before their merger deal.
The Brazilian company subsequently agreed to sell PT Portugal to Altice for 7.4 billion euros to pay down its debts.
Dos Santos, the daughter of Angola's long-serving president, has been opposed to the sale, seeking to keep the Oi and Portugal Telecom merger intact.
Dos Santos's offer had been conditional on the Altice sale not going through, with PT SGPS shareholders due to vote on the sale on Jan. 12.
Following the Oi merger, PT SGPS's 25.6 percent stake in Oi is its only asset, apart from the 900 million euros of Rioforte debt.
CMVM earlier rejected arguments presented by Terra Peregrin for an exemption from a rule that demands the bid price to be at least the target company's average share price over the last six months, implying the Peregrin offer had to be over 1.9 euros a share.
Terra Peregrin had argued that July's debt default by Rioforte had caused PT SGPS shares to plunge since July, making the rule inapplicable.
PT SGPS's shares had closed 1.8 percent higher at 1.006 euros before the Terra Peregrin announcement. The shares had fallen from this month's peak of 1.48 euros to well below the offer price on expectations the takeover would fall through after meeting resistance from PT SGPS board and CMVM. (Editing by Greg Mahlich)