Israel's largest telecoms group, which is in the midst of a change in ownership, reported a profit of 191 million shekels ($55 million), down from 234 million a year earlier and slightly short of the 198 million forecast by analysts.

Bezeq attributed the decline mainly to higher financing expenses.

Revenue fell 2.3% to 2.25 billion shekels, slightly above the 2.23 billion expected by analysts.

The company maintained its 2019 forecast of a net loss of 1.1 billion shekels.

Bezeq is the dominant telecoms group in Israel and owns mobile phone operator Pelephone, satellite TV firm YES and internet service provider Bezeq International.

"Bezeq is in the midst of a major restructuring with several parallel early retirement plans and cost-cutting measures," Barclays analyst Tavy Rosner said. "These are starting to pay off, as demonstrated by the 4% decrease in salaries."

Last week the communications ministry approved the sale of a controlling share in Bezeq to the foreign private investor group Searchlight Capital Partners.

For the past few years Bezeq has been locked in a battle with the telecoms regulator over deployment of a fibre optics network, with Bezeq unwilling to meet demands it provide the service for 100% of the country, saying that was not economically viable.

Rivals Cellcom and Partner Communications have started their own fibre networks.

This month the ministry said it was willing to ease up on its demands and would allow Bezeq to choose where to roll out its network.

"We hope that the new policy that will be formulated will enable us to launch fibre optic services for the private sector in Israel on an economic basis," CEO David Mizrahi said in a statement.

Rosner noted that although Bezeq was losing market share in fixed line, that will likely change once Bezeq and the regulator reach a final agreement.

Bezeq's shares were down 1.5% in morning trade in Tel Aviv. They are down 23% this year.

By Steven Scheer and Tova Cohen