“Investors believe that the merger between Portugal Telecom and Oi is under threat and the future of both companies is uncertain,” Joao Queiroz, a broker from GoBulling, told AFP.

The proposed merger of companies would create a giant operator in Portuguese-speaking countries with more than 100 million clients and 30,000 employees.

It comes during a wave of consolidation in Europe’s telecoms industry as companies battle with increased competition from new players, squeezed margins and large piles of debt.

But the merger was clouded when the powerful Espirito Santo family’s banking empire crumbled under huge debts this summer, owing PT almost 900 million euros.

Oi forced its Portuguese partner to sign a new merger agreement after the collapse, cutting its share in the new combined company to around a quarter from the 38 percent originally agreed.

A Luxembourg court on Friday effectively decided that Rioforte, the main holding company of the Santo’s non-financial assets, would be liquidated, making it less likely the loan would be repaid.

Pedro Lino, manager of brokerage Dif, said the markets had already factored in the loss of the loan to PT’s share price.

“Portugal Telecom may be able to recover 10-15 percent of their investment,” he added.

The price of shares in PT, an important component of the main Lisbon index, sank around 28 percent to a record low of 0.

865 euros at one point in trading on Monday.

They later recovered to end at 1.

0820 euros, down 10.

87 percent on the day, compared to a 0.

15 percent fall in the broader market.

Further questions were raised about the merger after Oi’s chief executive, Zeinal Bava, resigned earlier this month at a crucial time for the multi-billion-dollar deal.

PT shares have plunged more than 30 percent since his departure was announced on October 8.

That wiped out earlier gains driven by news that European cable group Altice has been in negotiations with Oi to buy some of PT’s Portuguese assets since the start of the month.

bh/cah/rl.