(Corrects revenue in third paragraph to billions from millions)
JERUSALEM May 29 (Reuters) - Bezeq Israel Telecom reported a smaller than expected decline in quarterly net profit and said it was investing in fibre optic cable deployment.
Bezeq, Israel's largest telecoms group, said on Thursday it earned 457 million shekels ($131 million) in the first quarter, down from 497 million a year earlier but above a forecast in a Reuters poll of 441.7 million shekels.
Bezeq's revenue fell 3.9 percent to 2.311 billion shekels, in line with expectations.
The drop in net income was largely due to a 29 percent fall in profit at mobile unit Pelephone, while profit at Bezeq's fixed line division - which offers phone and Internet services - slipped 4.6 percent.
Pelephone and its two main competitors are grappling with a price war following a shake-up of Israel's mobile phone industry in 2012 that ushered in six new operators. Competition has also been fierce for Internet services. The number of subscribers at Pelephone fell 4 percent over the prior year to 2.631 million.
Bezeq said streamlining of operations and a reduction in expenses helped the company maintain profitability levels despite the growing competition and amid a government-mandated decrease in fixed call termination rates.
Last week, Bezeq raised its 2014 profit forecast following the sale of its Yad2 classified ads website to Axel Springer Digital Classifieds. Bezeq forecast annual net profit of 2 billion shekels and earnings before interest, tax, depreciation and amortisation (EBITDA) of 4.5 billion shekels.
($1 = 3.4805 Israeli Shekels) (Reporting by Steven Scheer)