The value of mergers and acquisitions (M&A) deals in the telecommunications (telecom) sector surged in 2016, and will probably climb even more this year as CEOs take advantage of less stringent regulations to offset slow growth, analysts told Bloomberg. While these transactions rose 34% to $266 billion last year, executives are currently considering deals that could change the entire industry. (For more, see also: Cable Exec Leo Hindery on Major M&As on the Horizon.)

However, some market observers have warned that the M&A cycle may be reaching its peak after Kraft Heinz Foods Co. (HNZ) made a $143 billion surprise bid for Unilever PLC (UL) which was ultimately unsuccessful, according to the Financial Times.

Many Potential Deals

Amid this situation, investors are watching out for possible deals between German company Deutsche Telekom AG (DTE) and U.S.-based Sprint Corp. (S), British Vodafone Group PLC (VOD) and U.S. firm Liberty Global PLC (LBTYB), and Indian mobile network operator Idea Cellular Ltd. (IDEA) and Vodafone's India unit. Many of the telecom industry's top executives are heading to an annual conference in Spain next week, where they might discuss potential deals in the space. (For more, see also: Sprint CEO: We Are a 'Formidable' Merger Partner.)

Earlier this month, Reuters reported that SoftBank Group Corp is willing to give up control of Sprint in order to seal a merger with Deutsche Telekom AG. Vodafone is currently in discussions to merge its Indian unit, which wrote down more than $5 billion worth of losses in 2016, with Idea Cellular, according to Bloomberg. This transaction could strengthen Vodafone's India unit and produce the largest mobile telephone company in the nation.

Vodafone has also considered M&A activity with Liberty Global, and both companies have "publicly stated that there is an interest," Arun Agarwal, a partner at U.K.-based hedge fund Altavista Investment Management, told Bloomberg. After establishing a joint venture in the Netherlands at year-end, these two companies have been talking here and there about participating in either asset swaps or working together in different ways, according to individuals who are familiar with the situation.

"New Political Environment"

Telecom companies interested in taking part in M&A deals may have a far easier time doing so in the new political environment, Kajal Lahiri, Distinguished Professor of Economics at the University at Albany: SUNY, told Investopedia during an interview. "During the last eight years, the Obama administration was hostile towards mergers," based on the presumption that these transactions would "reduce competition and increases costs for consumers."

Now, telecom firms have greater opportunity to increase their profits through M&A activity, and are looking for such transactions in this "new political environment," said Lahiri.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.