BellSouth Building Cingular War Chest

Cingular's ambitions have its parents scrambling to raise more cash.

BellSouth ( BLS) set plans Friday to raise up to $6.95 billion by selling debt. The company's so-called shelf filing, which allows the big telco to sell debt at any time in coming months once the paperwork is cleared, cited the need to help fund Cingular's acquisition of AT&T Wireless ( AWE).

Cingular, a joint venture of BellSouth and SBC ( SBC), has offered to pay $15 per share, or about $41 billion, for the ailing AT&T Wireless. The combination, which is expected to close by year-end, would create the nation's largest cell-phone service, surpassing current leader Verizon Wireless.

Wireless represents one of the few promising areas of growth in telecom, and the big Bells -- Verizon ( VZ), BellSouth and SBC -- view it as an antidote to their eroding performance in the core local phone market.

Atlanta-based BellSouth controls 40% of Cingular and will pay a total of $16.3 billion for its share of the AT&T Wireless buyout. SBC is expected to chip in $24.7 billion to cover its end of the deal.

But while the acquisition of AT&T Wireless has strategic justifications, some observers are concerned about the debt that outfits like SBC and BellSouth stand to take on. Should cell-phone service growth cool, carriers might be inclined to counter the trend by taking on lower-paying customers. Such a shift could cause the business to become yet another drag on the Bells, say some skeptics.

Signs that investors are growing more cautious on wireless became evident this month as shares of onetime Wall Street favorite Nextel ( NXTL) dropped 11% on fears that the company faces a big tab for upgrades to accommodate more growth.

Both BellSouth and SBC have been busy on the cash-raising trail lately. On Wednesday, SBC said that publisher R.H. Donnelley ( RHD) agreed to buy its yellow pages business in the Illinois region for $1.4 billion.

And in March, Telefonica Moviles ( TEM), a unit of Telefonica, agreed to buy BellSouth's stake in 10 Latin American wireless operations for $3.2 billion.

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