by Linda Reyburn

Created on: December 23, 2011   Last Updated: December 30, 2011

In every stock portfolio, there ought to be a few backups.

Though Verizon would now be an obvious choice for telecommunication, it's never safe to assume that things will go on as they always have. AT&T (T) has been fighting to overtake them as top dog in cellphone and wireless usage, but their most recent measure (an attempted merger with T-Mobile) has just cost them $4 billion in merger cancellation fees. That means, T-Mobile might have enough cash to overtake Sprint Nextel (S) in telecommunication's third place, so AT&T (T) has simultaneously given a helping hand to their competition and gotten smacked in the back by eager beavers in the anti-trust FCC boys and the Justice Department. The

$4 billion will increase spectrum for T-Mobile's parent company Deutsche Telekom AG (DTEGF), and improve roaming issues.

Nor do things look stellar for AT&T customers, who've been complaining enough to put them at the bottom of Consumer Report's quality ratings for a few years. The company quote is telling: "Customers will be harmed and needed investment will be stifled". Translated, this means that AT&T will be looking for ways to increase costs, and with their hands tied for mergers, they'll have to be creative about expansion to keep investors happy. On the other hand, they can't afford to lose customers, so even if quality doesn't improve dramatically, this might be the incentive they need to invest in quality service.

Also, competing against Verizon Communications (VZ) is no joke. Verizon seems to have the Midas touch, buying and swapping "wireless airwaves" across the U.S., from Leap Wireless International (LEAP) and other service companies, and $38 per share stock. They're consistently rated #1 in size and service quality.

Yet all is not lost. With $31 billion+ in annual revenue, a $4 billion payout will greatly wound but not kill AT&T. They're big enough to afford setbacks, whereas Sprint can barely afford to compete with T-Mobile. As a European-owned company reeling from the Euro financial crisis, Deutsche Telekom badly needed AT&T's $39 billion to shore up its issues abroad, and in the U.S. with T-Mobile. Will Draper of Espirito Santo, Portugal's powerhouse financial group, cautioned against reading too much into the $4 billion of cash and spectrum increases for T-Mobile, estimating that their current issues may cost up to $10 billion to fix. Deutsche Telekom stock "declined 9 percent this year".

AT&T's third quarter in 2011 still

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