** Portugal Telecom slumps 18 pct to new all-time lows to 1 euro, and is worst performing stock across Europe on the day.
** Traders cite Friday's Morgan Stanley price target of 0.79 euros/share issued last Friday, and a slide in merger partner Oi's shares.
** Brokers warn that risk of co having to write off Rioforte debt is high.
** Stock has been sliding along with shares in PT's Brazilian merger partner Oi following departure earlier this month of Oi CEO Zeinal Bava and reports Oi may sell its Portuguese assets, which became part of Oi after the merger, to pay off debts.
** "The Morgan Stanley note has marked the sentiment, it is the catalyst for the slump. PT remains a vehicle linked to Oi, and Oi keeps falling," says Albino Oliveira, a trader at Fincor brokers.
** Remaining listed company Portugal Telecom holds a near 26 pct stake in Oi, as well 900 mln euros in defaulted debt of Espirito Santo business empire.
** PT has lost 38 pct of its value so far this month, while Oi, which is yet to start trading on Monday, has lost 27 pct. (Reuters messaging rm://firstname.lastname@example.org)