Moody’s Investors Service raised its rating on about $ 500 million of CBS Inc.’s long-term debt, citing the Eye web’s ratings, cutting-efforts and an improving ad market.

While the one-step move to A3 from Baa1 reflected the network’s “good” performance last year, analysts Richard Stephan and Gery Sampere struck a wary note given an increasingly fierce contest among the three webs, Fox and the cable community for market share and the potential for higher programming costs as a consequence.

“The new rating continues to recognize the inherent volatility of CBS’ television network and some uncertainty linked to the company’s ultimate use of its ample liquidity,” Stephan and Sampere wrote in a report.

A vibrant merger market has exacerbated concern among fixed-income analysts that CBS could use its large cash position — about $ 800 million — for a pricey takeover that might cause its debt to balloon and credit quality to worsen.

Quell other fears

Still, a takeover might quell some of Wall Street’s other fears about CBS’ plans for the future. Capital Cities/ABC and General Electric unit NBC have established a presence in cable territory, but CBS has been slow to do so, said Salomon Brothers fixed-income analyst Oren Cohen.

CBS is “a single-channel operator in what is becoming a multichannel universe ,” Cohen said. “They really haven’t elaborated any good strategy that takes them through the next 10 years.”

CBS shares rose $ 1.75 Tuesday to $ 292 per share.

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