O2 becomes the first UK network to offer 4 year phone contracts
O2 has become the first network in the UK to offer 48 month phone contracts, starting with the new Samsung Galaxy S24 series.
The fresh range of contracts are now available for the Galaxy S24, Galaxy S24+ and Galaxy S24 Ultra, with O2 Plus Plans and Custom Plans (both previously referred to as O2 Refresh).
Currently, the 4 year option is not available with any other phones. There’s no word from O2 on when it will spread to more devices, however we expect this to happen by the end of the year with the upcoming iPhone 16.
Recent data has revealed that more than 30% of consumers have owned their smartphone for three or more years, which is the longest record to date. Smartphones continue to increase in price, coupled with high inflation rates and mid-contract price increases on top. UK consumers are opting to keep their device for longer, and choosing to repair their device and extend its life when necessary, rather than replace it with a new model altogether.
In a press release, O2 claims that their extra long contracts will help consumers “extend the lifespan of their device and benefit from a more affordable monthly price should they wish to”. O2 Plus Plans include a 3 year warranty, which we assume that's what they're alluding to.
In 2011, Ofcom banned 3 year broadband and phone contracts, with the maximum allowed set to 24 months. However, mobile networks have circumvented this ban with a rather interesting loophole - instead of offering a phone contract as an all in one package, phone contracts are now commonly sold as two separate agreements - one for the device, and one for the airtime (your allowances for data, minutes and texts).
The device agreement is presented as a separate credit agreement, which is generally a 0% interest loan. On the other hand, the airtime agreement is presented as a traditional 24 month contract - essentially a SIM only deal.
As much as this loophole benefits the networks, it also benefits consumers just as much:
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After 24 months, you are free to cancel your airtime agreement, and switch to a different network if you choose to do so, while continuing to pay the remaining months for the device agreement.
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In addition, once the device contract ends, customers can continue their plan if they don’t wish to upgrade, while only paying for the airtime plan. Previously, the airtime and device were coupled into one, meaning consumers ended up paying an extortionate amount if they continued their plan after their contract ended, essentially paying for a device that they had already paid off.
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Furthermore, the device contract is not subject to mid-contract price increases - only the airtime plan is.
O2’s 0% interest agreement for the Samsung Galaxy S24 is fixed in price, regardless of the device length or the upfront cost you choose:
For example, if you choose a 3 month device contract for the S24 with a £30 upfront fee, you’ll pay a total of £837.83 (£30, plus 3 months x £269.28). Similarly, you’ll also pay the same £837.83 amount if you choose a 48 month device contract with a £100 upfront cost (£100, plus 48 months x £15.37).
If you choose a device agreement for less than 24 months, the airtime plan will be a rolling 1 month contract. This means you can end the airtime plan at any time, while continuing to pay the monthly amount for the device agreement, until it’s paid off.
However, for device agreements at 24 months or longer, you’ll be forced into a 24 month airtime contract. You can cancel the airtime contract before 24 months, however you’ll need to pay off your device in full when doing so. If you cancel your airtime plan after 24 months, you can continue paying the monthly device agreement, or choose to pay off the device in full.
There are many pros and cons for 36 and 48 month contracts. While they do allow consumers to split the cost over a longer period, there are alternatives. For example, you can often buy your phone outright with 0% finance offered directly by Apple and Samsung, and pair it with your own SIM.