Paramount Deal Attracts More Suitors : Mergers: Viacom in talks with Cox, Southwestern Bell in effort to line up more funding for purchase.

Bolstered in its bid to buy Paramount Communications Inc. by a $600-million investment from video giant Blockbuster Entertainment, Viacom Inc. was actively negotiating with other potential investors Wednesday.

Intense discussions were under way with media giant Cox Enterprises and Southwestern Bell Corp., a regional telephone company. Separately, sources confirmed that NYNEX Corp., the New York area phone company, is also a possible investor.

Viacom Chairman Sumner Redstone confirmed in an interview that he is having “continuing talks” with cable and telephone companies, but he refused to identify the parties.

The Blockbuster infusion will strengthen Viacom’s effort to thwart a rival bid from home shopping giant QVC Network, the Barry Diller-led company that is backed by cable giant Tele-Communications Inc. Viacom, which earlier this month struck a $7.8-billion deal with Paramount, is believed to be on the verge of sweetening its bid. QVC, which declined to comment on the Blockbuster development, has proposed a stock offer that at current prices is worth nearly $2 billion more than Viacom’s.

“We’re not saying we’re going to increase our bid,” said Redstone, who still claims the QVC offer is flawed by potential regulatory problems and an inflated stock price.

But the Viacom chairman continued, “ Should we consider restructuring our offer, we’ll have all the money that we need, and it will leave us with an unleveraged company.”

Under the Blockbuster-Viacom deal, Blockbuster would invest $600 million in Viacom in exchange for cumulative convertible preferred stock carrying a 5% dividend rate. The Ft. Lauderdale,. Fla.-based company may convert the shares into Viacom Class B, non-voting common stock at $70 a share. Blockbuster Chairman H. Wayne Huizenga would join Viacom’s board of directors.

The deal also gives Blockbuster or Viacom the right to reduce Blockbuster’s investment by $300 million if Viacom hasn’t bought Paramount by next Aug. 31.

But Blockbuster Vice Chairman Steven R. Berrard emphasized that Blockbuster’s interest in Viacom does not hinge on the success of the Paramount bid.

“This is an investment in Viacom and its assets,” Berrard said in an interview. “Whatever comes as a result of that investment--whether it’s a merger with Paramount or any other thing that happens--we like being involved with the company.”

Berrard confirmed that Blockbuster, which is diversifying from its video rental business into programming and other entertainment areas, and Viacom have held “informal talks” about various ventures since the start of the year. Those talks were shelved temporarily after Viacom announced its deal to buy Paramount, but resumed a short time later.

Berrard said possible ventures with Viacom include promoting Viacom programs through Blockbuster Video stores and merchandising products from Viacom’s MTV channel through Blockbuster’s Music Plus and Sound Warehouse music store chains. Berrard further noted that Viacom and Blockbuster control all of the program libraries the federal government forced the three major networks to spin off in the early 1970s.

Neither Cox nor Southwestern would talk Wednesday about their potential investments, which could purportedly top $1 billion.

If it invests in Viacom, Southwestern Bell will continue its pattern of aggressively pursuing hot, new communications opportunities outside its primary monopoly: telephone territory.

Since the 1984 breakup of AT&T;, San Antonio, Tex.-based Southwestern has led the Baby Bells in investing in businesses beyond its traditional telephone operations, including cellular, where it is a close second behind Bell South among the Bell wireless companies, with an estimated 1.5 million subscribers.

Cable television in the United States is rapidly becoming Southwestern’s third major source of potential new business. Earlier this year, the company became the nation’s first Baby Bell to purchase a cable franchise when it agreed to pay $650 million to Hauser Communications for two Washington area video operations.

NYNEX, which serves New York and six New England states, is scrambling for new businesses because its own markets face serious competitive threats from outside communications companies lured by its attractive metropolitan markets.

Times staff writer Kathryn Harris contributed to this report.