China Mobile's (CHL) stock has plunged 30% over the past 12 months, as China's economic slowdown, protests in Hong Kong, and the novel coronavirus (COVID-19) outbreak all throttled its growth. Government-mandated reductions in wireless fees and the elimination of data-roaming charges exacerbated the pain.

Despite those challenges, China Mobile remains the country's largest wireless carrier provider, with 942.2 million subscribers at the end of February. Moreover, 15.4 million of those subscribers had already upgraded to 5G subscriptions -- up from 6.7 million in January -- which indicates that China's 5G rollout is accelerating. Let's see how China Mobile's 5G plans will shape its future.

An illustration of 5G connections over a modern city.

Image source: Getty Images.

A closer look at China Mobile's numbers

China Mobile's total service revenue rose 0.5% to 674.4 billion yuan ($94.9 billion) in 2019, which marked a return to growth following a 1.7% decline in 2018. Its net profit fell 9.5% to 106.6 billion yuan ($15 billion), but most of the decline occurred in the first half of the year when it reduced its fees while ramping up its 5G expansion efforts.

China Mobile's four smaller growth engines -- the mobile cloud, internet data center (IDC), Internet of Things (IoT), and IT services (ITC) units -- continued to generate robust growth. Its mobile cloud revenue rose 59% to 2 billion yuan ($280 million), its IDC revenue grew 47% to 10.5 billion yuan ($1.5 billion), its IoT revenue rose 18% to 8.8 billion yuan ($1.2 billion), and its ICT revenue surged 164% to 6.7 billion yuan ($940 million).

Those businesses only account for 4% of China Mobile's service revenue, but that percentage could rise over the next few years.

A look at China Mobile's 5G plans

China Mobile was granted a 5G license last June. It built over 50,000 5G base stations, started over 100 5G joint projects, launched 5G commercial services in 50 cities, and guided manufacturers in the launch of 32 5G devices.

A speedometer rising from 4G to 5G.

Image source: Getty Images.

China Mobile expects its CapEx to rise 8% to 179.8 billion yuan ($25.3 billion) in 2020, with 100 billion yuan ($14.1 billion) allocated to 5G upgrades. Those investments could widen China Mobile's lead in the 5G market against its two main rivals, China Telecom (CHA) and China Unicom (CHU), which don't disclose their 5G subscriber numbers separately yet.

China Mobile's average revenue per user (ARPU) took a big hit last year after the government-mandated fee reductions. However, it claims its ARPU from 5G subscribers is now 6.5% higher than its 4G subscribers. That sounds like good news, but its data traffic per user for 5G users also rose 16.8% -- which suggests that its 5G margins could still be significantly lower than its 4G margins.

On the enterprise front, China Mobile is integrating its 5G networks into cloud services, smart agriculture, smart energy, and smart factory technologies across China. That state-backed push, which also involves China Telecom and China Unicom, could tether more companies to the three carriers' wireless and wireline ecosystems.

Solid progress in 5G ... but unanswered questions elsewhere

China Mobile's executive chairman Jie Yang stated that the company's 5G expansion was off to a "very good start."

However, Yang didn't address its abrupt loss of 7.5 million wireless subscribers in February, which coincided with similar losses at China Telecom and China Unicom. The loss of subscribers at one carrier should translate to gains at its rivals, but the simultaneous declines suggest that China may have suspended wireless services across certain regions during the lockdown period, or that its official death count (at about 3,300 as of this writing) is too low.

That's all speculation for now, but China Mobile's chilling drop in February subscribers casts a dark cloud over its 5G gains. Looking ahead, investors should keep a close eye on its monthly subscriber numbers and its growth in 5G ARPU to see if its business is truly stabilizing.