* Profit at mobile phone unit Pelephone tumbles 45 pct

* Shares down 0.4 percent (Adds details, comments, share reaction)

By Steven Scheer

JERUSALEM, Nov 19 Bezeq Israel Telecom reported a wider than expected 4.9 percent decline in quarterly profit, weighed down by a steep fall at mobile phone unit Pelephone that has been hard hit by fierce competition.

Bezeq, Israel's largest telecoms group, said on Thursday it earned 407 million shekels ($105 million) in the third quarter, down from 428 million a year earlier and below a forecast of 418 million in a Reuters poll of analysts.

It said cost cutting measures helped to offset the decline in profit.

Bezeq had on Sunday raised its 2015 net profit estimate to 1.7 billion shekels from 1.5 billion but did not give a reason. It earned 2.1 billion shekels in 2014 and 1.35 billion shekels over the first 9 months of 2015.

Boosted by the consolidation of satellite TV unit YES, revenue rose 16.6 percent to 2.6 billion shekels, in line with expectations.

However, Pelephone, the country's third-largest mobile phone operator, reported a 45 percent fall in quarterly profit, while revenue slipped 11.5 percent to 729 million.

Similarly, market leader Cellcom had reported a 62 percent dive in profit, while rival Partner Communications moved to a loss in the quarter as the sector has struggled with cut-throat rates since the market was opened to competition in 2012.

The number of subscribers at Pelephone slipped to 2.569 million from 2.6 million a year earlier.

Cellcom said this month it would buy smaller, low-cost rival Golan Telecom for 1.17 billion shekels but there is political opposition to the deal over competition concerns and public outrage that phone rates will rise again.

Citi analyst Michael Klahr said Bezeq's results were "solid", with Pelephone improving a little from the second quarter.

But he rates Bezeq a "sell" since "the share price has got ahead of itself in recent months".

Bezeq's shares were 0.3 percent lower at 8.62 shekels in afternoon trading.

They are up 24 percent this year on a view that Israel's telecoms regulator will permit a structural separation of Bezeq that would ultimately allow it to offer packages of phone, internet and TV. The regulator has yet to make a decision.

The company, which now faces competition in the landline sector in the wake of a government mandate that it lease its infrastructure to smaller rivals, is looking toward a fibre optics network to bolster its business.

It said infrastructure investments hit 230 million shekels in the third quarter while its fibre optic network reached 1.3 million homes and businesses.

"Our investments in technology, operational streamlining and entry into new markets enable us to successfully meet the increasing competition," CEO Stella Handler said.

Also on Thursday, the Communications Ministry fined Bezeq 3.37 million shekels for blocking the exit of business customers.

($1 = 3.8869 shekels) (Reporting by Steven Scheer; Editing by Keith Weir)