Every week in this column, I take a publicly traded company to task. The market is loaded with sorely priced equities, and some weeks I'm just pointing out the obvious. However, sometimes you find a stock that appears cheap -- with a low earnings multiple and a chunky dividend -- when it's probably not.

That's where I'm heading this week, but don't take me for a value-stock curmudgeon. Besides, after my shellacking, I always come back with three alternative investments that I believe will perform better than the stock that's being heaved into the garbage.

Who gets tossed out this week? Come on down, AT&T (NYSE:T).

Down to a "T"
I know what I'm doing. I realize that AT&T may seem to be a compelling value. When you're trading for 11 times earnings and rewarding patient investors with a fat 6.8% yield, there doesn't seem to be a lot of downside to the titan of telco.

However, let's use that AT&T-subsidized smartphone to take a snapshot. Analysts see the company's bottom line taking a dip this year. It's easy to see why. The company closed out the first quarter with 1.2 million more wireless customers than it started with, but that also included 1.6 million Apple (NASDAQ:AAPL) iPhone activations. Some of the new iPhones went to those upgrading from older iPhones or non-Apple handsets. But the implications are still meaty: Where would AT&T's business be without the exclusivity of the iPhone?

This is a material question, since Apple is going to have to broaden its army of carriers if it truly wants to challenge Research In Motion's (NASDAQ:RIMM) BlackBerry for smartphone supremacy. Despite the buzz and hype over the iPhone, BlackBerry still shipped more units this past quarter. Meanwhile, AT&T is paying through the nose for exclusivity. It pays Apple roughly $375 for every iPhone it sells, so it can't afford to follow rival wireless companies into offering penny handsets or "buy one, get one free" offers.

The burdensome toll forces AT&T to offer voice and data plans starting at $70 a month for its 3G iPhones. That's pretty steep for a phone aiming to be a mass-market device in an ever more crowded playing field. And things won't get any easier, since Apple holds the negotiating power when its exclusivity contract comes up.

So what are investors getting with AT&T? Despite the iPhone wave and healthy top-line spurts in areas such as broadband, mobile broadband, and its U-verse television service, consolidated revenue at AT&T actually fell. Gains elsewhere weren't enough to offset its dying businesses of wireline voice access and business voice.

The more you think about it, the scarier even AT&T's growth opportunities appear. U-verse now has 1.3 million television subscribers, but cable and satellite companies are feeling the pinch as consumers discontinue their services and stream their content. Mobile broadband is going to take a hit once carriers begin allowing more wireless customers to tether their speedy smartphones to their laptops -- a development that will deal a blow to AT&T's growing LaptopConnect cards with costly subscriptions. Broadband and AT&T Wi-Fi hotspots will someday be challenged by free -- or at least dirt cheap -- connectivity.

So where's the growth for AT&T? Beware of banking on the low price-to-earnings multiples and high yields of peaking companies.

Good news
As I have every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting tossed. Let's go over three new fill-ins.

  • China Mobile (NYSE:CHL): If you're going to bet on wireless carriers, you may as well do it in a country with some serious upside. China's population of 1.3 billion residents is the world's largest, and its economy is growing at a healthy clip. China Mobile is the runaway leader in China, with nearly 493 million subscribers at the end of April. Think about that. Then factor in the pricing power that China Mobile will have in an economy that has grown at a 10% clip in recent years.
  • Verizon (NYSE:VZ): I'm not the only one left unsold on AT&T. Barclays Capital downgraded the stock this week, fearing that the unemployment picture, the company's inclination to benefit more from the latter stages of a business cycle, and AT&T's enterprise emphasis will keep the shares in check. The carrier it didn't downgrade was Verizon. Barclays is impressed by Verizon's FiOS platform and its limited exposure to cost-cutting enterprises. It also can't hurt that any chatter involving Apple or Palm's (NASDAQ:PALM) Pre breaking away from the shackles of AT&T or Sprint Nextel (NYSE:S), respectively, typically centers on being made available through Verizon.
  • Apple: I'm a bigger fan of RIM than I am of Apple, but in what is becoming a cutthroat world of wireless carriers and handset makers, you have to like Apple's ability to squeeze a premium out of its products. There are cheaper portable-media players than the iPod and less restrictive digital-music stores than iTunes. You can buy two or three netbooks for the price of an entry-level MacBook. The key is that Apple has earned enough style points to warrant a markup. If things get bloody, Apple is a brand with premium pricing power. It will be able to hold its breath underwater the longest.

Enjoy the run while you can, AT&T.

Other headlines out of the weekly wastebasket:

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Longtime Fool contributor Rick Munarriz is happy with his iPhone, although he does like the many choices available when it becomes time for him to move on. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.