China Mobile's 5G Dominance and Its Implications for Telecom Infrastructure Growth

In the evolving landscape of global telecommunications, China Mobile's strategic capital allocation decisions offer critical insights into balancing near-term profitability with long-term technological leadership. As the world's largest mobile operator by subscribers, China Mobile's approach to 5G infrastructure and its pivot toward 6G research underscores a nuanced calculus of risk, reward, and shareholder value.

Capital Allocation in a Maturing 5G Cycle

China Mobile's 2023 capital expenditures (CAPEX) totaled RMB180.3 billion ($25 billion), a 2.6% decline from 2022, with a significant portion directed toward 5G network expansion, according to a Techblog article. This reduction reflects a shift from the aggressive infrastructure buildout of earlier years to a phase of optimization. By extending the depreciable life of 5G assets from seven to ten years, the company aims to reduce depreciation expenses while maximizing the utility of existing infrastructure-a strategic move to align with the anticipated arrival of 6G by 2028, as noted in that Techblog article.

The 2024 CAPEX plan further illustrates this trend. China Mobile slashed its 5G-related spending by 20% to CNY69 billion (USD9.55 billion), while overall CAPEX fell by 9% to RMB164 billion, according to a Techblog analysis. Despite these cuts, the company plans to deploy an additional 410,000 5G base stations in 2024, bringing the total to 2.4 million, according to Mobile World Live. This efficiency gain-deploying more infrastructure with less capital-highlights China Mobile's focus on operational leverage.

Strategic Rebalancing: From Broadband to AI and 6G

The company's capital reallocation extends beyond 5G. A portion of 2024's CAPEX will fund computing power and AI infrastructure, reflecting a broader industry shift toward digital transformation, as reported by Mobile World Live. This pivot aligns with China's national priorities, including the integration of AI with manufacturing and the development of industrial 5G private networks, as noted in the Techblog analysis.

Chairman Yang Jie has explicitly stated that the next major investment cycle will target 6G, expected to begin around 2028, according to the Techblog analysis. This forward-looking strategy positions China Mobile to capitalize on the next wave of innovation while avoiding overinvestment in near-term 5G upgrades. The Ministry of Industry and Information Technology (MIIT) has also set a 2025 target of 4.5 million 5G base stations, leveraging China's existing 4.19 million stations to accelerate 6G R&D, as discussed in the Techblog analysis.

Shareholder Value and Long-Term Growth

China Mobile's disciplined CAPEX management has already delivered results. In Q1 2024, the company reported a 4.5% year-on-year increase in core business revenue to RMB219.3 billion and a 5.5% rise in net profit to RMB29.6 billion, figures highlighted by Mobile World Live. These gains, achieved amid reduced capital outlays, suggest that the company is entering a phase where its 5G investments begin to generate returns.

However, the true test of shareholder value will lie in the transition to 6G. By extending the life of 5G assets and redirecting capital toward AI and computing infrastructure, China Mobile is positioning itself to maintain dominance in an increasingly competitive global market. The company's ability to balance cost discipline with innovation will determine whether its current strategy translates into sustained profitability or merely delays the next capital-intensive cycle.

Conclusion

China Mobile's 5G journey exemplifies the challenges and opportunities of capital allocation in a high-growth sector. By prioritizing efficiency, extending asset lifespans, and investing in future technologies, the company is navigating the delicate balance between short-term profitability and long-term leadership. For investors, the key takeaway is clear: China Mobile's strategic agility and alignment with national innovation goals position it as a pivotal player in the next era of telecommunications.