TECH

O2 Refresh: New Mobile Contract Splits Cost Of Phone And Service

12/04/2013 15:06 BST | Updated 12/06/2013 10:12 BST

Mobile phone users stuck in 24-month contracts will be able to get new phones before their contract ends under a new service.

O2, owned by Telefonica, has announced a tariff that allows users to upgrade their handsets without paying out the full cost of their contract or a termination fee.

The service, O2 Refresh, will split customers' monthly costs into a phone plan, where they pay for the cost of their handset in instalments, and an airtime plan, which covers calls, texts and data costs.

By paying separately, customers will be able to pay off the outstanding balance on their phone plan any time during the 24 months and start afresh with a new handset.

The airtime cost, which varies between £12 and £22 depending on usage allowance, will remain the same each month.

Customers who do not want to upgrade their handset during their contract will only have to pay airtime costs once they have paid off the handset cost.

Feilim Mackle, sales and service director at Telefónica UK, said: "Mobile phone technology continues to advance at a rapid pace yet the way phones are sold has remained largely static.

"Increasingly, our customers are telling us that they don't want to be tied to the same phone for two years and, with 4G coming to O2 this summer, we want to make it easier for our customers to benefit from the latest technology."

The tariff, which launches on April 16, allows customers to either pay for their handset up front or use the phone plan to pay for it monthly.

For an HTC One phone valued at £600, customers would pay £49.99 up front, and then £20 each month along with airtime costs, paying a total of £529.99 for the handset.

Customers upgrading their phones can trade in their old mobiles for cash, getting up to £260 to put towards their new phone.