O2’s Refresh Tariff splits Airtime Plan from Phone Plan: Cheaper Handset Upgrades

April 23rd, 2013

O2 has launched the new “O2 Refresh” tariff. It splits your airtime plan from your phone plan and allows faster upgrades at a lower cost.

o2On today’s mobile phone contracts, you’ll usually sign up for a 24-month agreement that includes a handset as well as airtime allowances that can be used each month. The total cost of your mobile phone contract incorporates two things: the cost of your handset and the cost of your airtime (i.e. minutes, texts and internet). The two costs are usually combined into a single monthly figure, often in the region of £35/month.

Once you’re tied in to a 24 month contract, it’s incredibly expensive to end it early. For instance, if you had wanted to upgrade your smartphone early, you’d need to pay off the remainder of your current contract before starting a new one with a new phone. On your old contract, you’ll need to pay something called an early termination fee. The early termination fee is usually quite hefty: it involves making all of your remaining contract payments in one go. For a £35/month contract, you should expect to pay around £210 in early termination fees when upgrading after 18 months (6 months early). To upgrade after a year (12 months early), the early termination fee will be in the region of £420.

With O2 Refresh, O2 are aiming to make their Pay Monthly contracts more transparent. Contracts are now split into two parts: an airtime plan and a phone plan. If you want to upgrade your phone early, it’s simply a matter of paying off the phone plan. There’s no need to pay off the airtime part of your plan. This makes it cheaper to upgrade your phone early. The phone plan will also end itself once the phone is fully repaid. After 24 months, you’ll only need to pay for the airtime plan. This will reduce your monthly payments in the same way as a SIM Only plan.

What is O2 Refresh?

O2 Refresh is a mobile phone contract that is split into two parts: one part for your mobile phone and another part for the airtime.

  • O2 Refresh - Airtime and Phone PlanPhone Plan. This is a 24-month agreement where you can pay for your smartphone in equal monthly instalments. To give an example, a smartphone like the Galaxy S4 costs £600. Rather than paying for your phone in one go, you can pay £25/month for 24 months on an O2 Refresh Phone Plan. The total amount repaid over 24 months is £600. O2 does not charge any interest on this credit agreement (so the interest rate is nominally 0% APR). However, the handset cost is sometimes inflated when compared to the cost of a SIM-free handset.
  • Airtime Plan. This is the part where you pay for your calls, texts and internet. There are a choice of three airtime plans: the cheapest being £12/month for 600 minutes, unlimited texts and 750MB internet. For £17/month, you’ll get unlimited calls, unlimited texts and 1GB internet. For £22/month, you’ll get unlimited calls, unlimited texts and a data allowance that is doubled up to 2GB.

You’ll need to take both a “Phone Plan” and an “Airtime Plan”. Both must be taken at the same time.

To upgrade your smartphone, you’ll need to pay off the remainder of your current Phone Plan. You’ll then be able to start a new Phone Plan. O2 does not allow you to have two Phone Plans concurrently.

How much does it cost to buy a phone on O2 Refresh?

Galaxy S4 ColoursThe cost of your handset depends on several factors such as the handset you choose, the airtime plan you choose and the amount that you choose to pay upfront. The handset will usually be cheaper when you select a more expensive Airtime Plan. You can also reduce the cost of your handset by paying more upfront. The cost of your handset is paid for in 24 monthly instalments. Handset prices are shown on the O2 Refresh website.

Example: Samsung Galaxy S4 on O2 Refresh

The Samsung Galaxy S4 is one of the UK’s best selling handsets. Hence, we’ll take a look at the Galaxy S4 as an example. The following table shows the total amount you’d need to pay for a Galaxy S4 on O2 Refresh.

Each row in the table indicates a different airtime plan and each column indicate a different upfront payment. Depending on which airtime plan you choose and how much you pay upfront, the total cost of the phone can vary between £509.99 and £639.99. For comparison, a SIM-free Galaxy S4 can be purchased from Amazon for £579.95. This is a fixed price regardless of which tariff you eventually join.

Amount Paid Upfront for Galaxy S4
£0.00 £29.99 £69.99 £159.99 £179.99 £279.99 £299.99 £399.99
O2 600 (£12/month) £600.00 £639.99 £639.99 £639.99
On & On 1GB (£17/month) £600.00 £549.99 £539.99 £539.99
On & On 2GB (£22/month) £600.00 £509.99 £539.99 £539.99

Example: Samsung Galaxy S III on O2 Refresh

Samsung Galaxy S3On many smartphones, you’ll find yourself paying more on an O2 Refresh Airtime Plan than if you were simply buying the same handset SIM-free from retailers like Amazon.

The Galaxy S III is a great example: you can currently pick up a SIM-free Galaxy S III for £319.99 on Amazon. The cheapest way of buying a SIM-free Galaxy S III would be to pay the entire amount upfront. This would cost you £319.99. If you’d prefer to pay over 24 months (i.e. on a credit card at 15% APR), you’d need to pay £15.52/month. This is equivalent to paying £372.38 over 24 months – still much less than you’d pay on an O2 Refresh Airtime Plan.

The following table shows the cost of a Galaxy S III on O2 Refresh:

Amount Paid Upfront for Galaxy S III
£0.00 £29.99 £129.99 £149.99 £299.99
O2 600 (£12/month) £489.99 £539.99
On & On 1GB (£17/month) £480.00 £389.99 £389.99
On & On 2GB (£22/month) £480.00 £389.99 £389.99

Comparison of Handset Prices: O2 Refresh VS SIM Free

Depending on the handset you choose, you may be better off buying that phone SIM-free. The following table compares the cost of various smartphones when purchased on an O2 Refresh Airtime Plan and when purchased SIM-free.

Handset Handset Cost on O2 Refresh Cost of SIM-Free Handset
Apple iPhone 5 £492.99 to £599.99 £529.00 from Apple Store
Samsung Galaxy S4 £509.99 to £639.99 £579.95 from Amazon
Samsung Galaxy S III £389.99 to £539.99 £319.99 from Amazon
HTC One £489.99 to £600.00 £529.99 from Expansys
Sony Xperia Z £439.99 to £600.00 £490.00 from Amazon
BlackBerry Z10 £439.99 to £589.99 £430.00 from Amazon
Google Nexus 7 £339.99 to £459.99 £279.00 from Google Play

For a full list of available handsets, refer to the O2 Refresh website.

How does this compare to a SIM Free handset and SIM Only plan?

SIM card

SIM Free Handset & SIM Only Deal: An alternative to O2 Refresh.

Rather than buying a handset from O2 Refresh, an alternative is buying a SIM-free smartphone that’s unlocked for use on any network. A SIM-free smartphone can be used on any network and the costs are often comparable to O2 Refresh (or even cheaper).

To reduce upfront cost on a SIM-free smartphone, many stores offer a credit agreement where you can pay for the phone in monthly instalments. This would work just like an O2 Refresh Phone Plan. Alternatively, you could use a credit card to split up the cost of your phone.

Once you have a SIM-free smartphone, you can make use of super cheap “SIM Only” deals. These are low cost airtime-only plans that start from £6.90/month with inclusive calls, texts and internet. Some popular examples include:

For more information, see our full guide to SIM only tariffs for smartphones.

Compared to O2 Refresh, the combination of a SIM Free handset with a SIM Only contract can offer greater choice and flexibility. Before signing up to O2 Refresh, you should compare the cost of both options.

How much does it cost to upgrade my phone early?

To upgrade your smartphone early, you’ll need to pay off the remainder of your Phone Plan. The following table shows the cost of paying off your Phone Plan. To upgrade early, you’ll need to pay this in addition to the upfront payment for your new handset.

Monthly Cost of Phone Plan
£10/month £15/month £20/month £25/month
Immediately £240 £360 £480 £600
3 months £210 £315 £420 £525
6 months £180 £270 £360 £450
9 months £150 £225 £300 £375
12 months £120 £180 £240 £300
15 months £90 £135 £180 £225
18 months £60 £90 £120 £150
21 months £30 £45 £60 £75
24 months
or after
No additional costs to upgrade after 24 months.

If you’re leaving O2, you’ll also need to pay this fee. To use your phone on another network, you’ll need to unlock it from O2.

Does O2 still offer normal Pay Monthly tariffs?

Yes. O2 still offers their standard Pay Monthly tariffs. You can find these on the O2 online shop.

I’m switching to O2. Can I keep my existing phone number?

Yes. You’ll need to ask your existing network for a PAC code. This should be provided to O2 when your new phone arrives. The entire process of transferring your phone number should take no longer than 24 hours. Our PAC Code Finder tool will provide a step-by-step guide on taking your your phone number to O2.

Where can I find out more about O2 Refresh?

You can find out more about O2 Refresh on their website.

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Ken Lo

My passion is helping people to get the most out of their mobile phone. I've been blogging at Ken's Tech Tips since 2005.

Aside from writing about mobile technology, my interests are in software development, digital marketing and physics. Outside of the blog, I work with numerous technology companies helping them to explain their product and helping them to market it to consumers. Please get in touch for more information.

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