Wall Street tuned in to takeover rumors and turned on shares of Cablevision Systems Corp. Thursday, jolting the stock price $ 1.75 to $ 69.75 amid exceptionally heavy activity.

Several major brokerage and arbitrage funds were reportedly heavy buyers of Cablevision MDSDon talk that it would suit up in BellSouth colors and join the telco in its rumored run for Paramount. BellSouth stock closed 13 cents higher at $ 62.50.

For several weeks, traders have buzzed that Cablevision, the nation’s fourth largest multisystem operator, would be a prime playmate for a Baby Bell — BellSouth, U S West or Ameritech, most notably. And its decision Wednesday to buy three pricey TV systems convinced some investors that a cash infusion is indeed on the way.

A Cablevision spokeswoman declined to comment on market speculation, as did BellSouth.

Late Wednesday, Cablevision said it agreed to buy Massachusetts-based Framingham Cablevision, New Jersey’s Monmouth Cablevision and Riverview Cablevision from Sutton Capital Associates Inc. for $ 463 million, pending regulatory approval. Cablevision’s refusal to provide financing terms also fueled the market murmurings of an impending takeover.

The three systems will add about 176,300 subscribers to Cablevision’s existing customer base in the two states.

Although the cable sector overall has been the flavor-of-the-month since Tele-Communications Inc. and Bell Atlantic announced their merger, traders said much of the buying in Cablevision was by arbitrageurs, who bid in the belief that a deal is forthcoming.

Action arbs

“Most of the action you are seeing now is the arbs,” said one trader at a big brokerage. “It’s some of the funds specializing in telecommunications — not just straight institutions saying, ‘It’s a good time to get involved.’ ”

The conventional wisdom, traders say, argues that a $ 463 million acquisition would normally be viewed as a negative more likely to depress Cablevision’s stock price due to the risk of over-leveraging and poorer credit quality. As of June 30, the company had long-term debt of $ 2.1 billion. An investment in Cablevision, however, would hold positive implications, one analyst said.

Moody’s Investors Service has been reviewing Cablevision with the potential for downgrade for some time now. Standard & Poor’s Corp. rates the company a speculative BB-, with a negative outlook.