(Corrects "wireless" to "fixed line" in fourth paragraph)
* Q1 operating profit 278 mln euros vs poll average 293 mln
* Operating margin up to 22.6 pct
* Says faces "demanding market and competition"
FRANKFURT, May 3 Telefonica Deutschland on Friday reported a lower-than-expected first-quarter operating profit due to tough competition in the German telecoms market.
The company, which is 79.86 percent-owned by Telefonica and was listed on the Frankfurt stock exchange late last year, said this year it faced a demanding market.
Operating income before depreciation and amortisation fell 0.7 percent to 278 million euros ($363 million), missing average analysts expectations of 293 million euros.
Telefonica Deutschland said first-quarter fixed line revenue fell 10.7 percent to 315 million euro, reflecting a drop in voice calls.
Wireless service revenue, which also includes data fell 3.3 percent to 733 million euros.
Only months after its market debut, Telefonica Deutschland has had to deal with a sudden increase in competition in the German market. Germany was long was seen as a haven of growth and high margins in the telecoms sphere, where regulatory pressures, price wars and recession have taken their toll on growth in France, Britain, Spain and Italy.
But German consumers have turned up the heat on the country's four telecom groups by switching to smartphones from basic mobiles, forcing the companies to revamp tariffs to focus more on mobile Internet.
Telefonica Deutschland introduced new tariffs in March, which pair unlimited calls and texts with chunks of data.
Telefonica Deutschland said its operating margin increased to 22.6 percent during the quarter from 22.3 percent last year.
($1 = 0.7649 euros) (Reporting by Harro ten Wolde; Editing by Maria Sheahan and Jane Merriman)