AT&T (NYSE:T) is often considered a solid stock for conservative investors. It has a well-diversified business, pays a high forward yield of 7.5%, and trades at just nine times forward earnings.

Yet AT&T's long-term returns are dismal. Its stock has declined nearly 20% over the past five years as the S&P 500 rallied nearly 70%. Even after factoring in reinvested dividends, AT&T generated a total return of less than 10%. Those poor returns can be attributed to the sluggish growth of its wireless business, its ongoing loss of pay TV subscribers, its messy media ambitions, and its high debt.

A man and a woman use smartphones outside.

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Instead of sticking with AT&T, investors should check out China Mobile (NYSE:CHL), China's top telecom company, as an alternative play. China Mobile's stock has declined nearly 50% over the past five years, but four core strengths could help it outperform AT&T.

1. A market-leading position and a head start in 5G

China Mobile's total number of wireless subscribers rose 0.4% year-over-year to 946.2 million in the third quarter of 2020. Within that total, its 4G customers grew 3% to 769.5 million, as its 5G customers, which didn't exist a year ago, hit 133.6 million.

China Mobile remains far ahead of its two main rivals, China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU). China Telecom had 349.4 million wireless subscribers, including 64.8 million 5G customers, at the end of September. China Unicom had 309.2 million wireless subscribers, but didn't separately disclose its 5G numbers.

By comparison, AT&T's total number of wireless subscribers rose 9% year-over-year to 176.7 million last quarter, but that total includes non-smartphone devices and overseas subscribers.

Its core phone business had just 80.3 million postpaid and prepaid subscribers -- which puts it in third place behind T-Mobile, which acquired Sprint earlier this year, and Verizon in the U.S. wireless market. T-Mobile's 5G network also covers a wider area than AT&T's 5G network. AT&T hasn't disclosed any 5G subscriber numbers yet, but it faces a tougher uphill battle in this high-growth market than China Mobile.

2. A state-backed safety net

China Mobile, China Telecom, and China Unicom are all state-backed enterprises. Chinese regulators monitor competition between the three telcos to prevent one from dominating the market.

A Chinese flag superimposed on a circuit board.

Image source: Getty Images.

Back in 2015, those regulators pushed the three telcos to sell their wireless towers to China Tower and lease them back to cut costs. That orchestrated move, along with China Tower's subsequent IPO (which the telcos gained stakes in) boosted their earnings.

But in 2018, the regulators forced all three telcos to reduce their wireless fees and eliminate data roaming charges to boost wireless penetration rates across the country. That order throttled the growth of all three companies, but set the foundations for faster 5G adoption rates.

China Mobile's state ownership is often a double-edged sword. But it also casts a broad safety net under the company, which AT&T lacks in its debt-fueled quest to become a telecom and media superpower.

3. Stable growth with a simpler business model

China largely contained the COVID-19 pandemic in the first half of the year, and China Mobile's operating revenue rose 1.4% year-over-year in the first nine months of 2020. Within that total, its core telco services revenue grew 2.5% as its revenue from products and other businesses fell 9.2%. Its profit dipped 0.3% due to higher 5G expenses throughout the year.

China Mobile hasn't offered any guidance, but analysts expect its revenue and earnings to rise about 7% for the full year, presumably as its higher-value 5G subscriber base expands in the fourth quarter.

AT&T's operating revenue fell 6% year-over-year during the first nine months of the year. Its mobility business gradually stabilized throughout the crisis, but its entertainment unit is still struggling with the delayed releases of WarnerMedia's movies, its loss of pay TV subscribers, and the pricey expansion of its streaming ecosystem. As a result, its adjusted EPS declined 10%.

AT&T also didn't offer any guidance last quarter, but Wall Street expects its revenue and earnings to drop 6% and 11%, respectively, for the full year. In other words, AT&T would probably be better off if it had maintained a simpler business model of wireless and wireline services like China Mobile.

4. A lower valuation

China Mobile trades at just eight times next year's earnings, which is slightly lower than AT&T's forward P/E ratio of nine.

Unlike AT&T, which was weighed down by concerns about its high debt and sluggish growth, China Mobile's stock was hit by concerns about forced price cuts, the unrest in Hong Kong, and concerns about brewing regulations targeting state-backed Chinese stocks on U.S. exchanges.

Those headwinds are also fierce, but they'll arguably fade faster than AT&T's long-term challenges. China Mobile still pays a much lower dividend (which it declares annually based on its earnings) than AT&T, but I believe it will outperform its American counterpart over the next 12 months.