More than likely it would be handled the same way a cellular phone transitions between cell towers while moving - hand off or handover. Basically while connected to one tower, it connects to another to make the transition seamless.
Now, remember, the iWatch has an eSIM attached to it which itself is linked to the iPhone’s account. That watch simply has to connect to the cell network as the radio signal starts to degrade and the call is handed off. More than likely, the watch is already connected to the call because it’s directly linked to the account.
Most folks generally take "connected via Bluetooth" for granted that it's just "connected" and your iWatch likes your iPhone. That's not the case. When connected via Bluetooth, it must do so with a specific Bluetooth Profile, usually a headset profile because it's providing mic, earphones, hold, dial, volume up/down features. It's acting exactly how a BT headset would work and would "react" the same way if it went out of range of the iPhone - it would disconnect.
You can think of the WiFi connectivity between your iPhone and you iWatch as the same as the Apple Handoff works with your iOS devices and your Mac. For example, when Handoff is enabled and my iPhone and iMac are on the same network, I can make and receive calls on my iMac. What's happening is I'm making a call on my iPhone through my iMac.