O2 UK has created a new tariff that separates the subsidised cost of a mobile phone from a minimum-term airtime contract.

Launching on 16th April, O2 Refresh has a 24-month airtime plan and a separate finance agreement for a ‘phone plan’. Customers who want a new handset before the end of their minimum contract term can pay for the remainder of their Phone Plan and start a new Airtime Plan with no termination fee.

Conversely, customers who don’t upgrade at the end of their two-year contract term will simply continue to pay for their airtime plan after the phone plan has ended.

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. For the first time in the UK, O2 Refresh will make it possible to get a new phone part way through a pay monthly contract, at any time – quickly, easily and cost-effectively.”

There’ll be three O2 Refresh airtime plans with monthly pricing from £12 per month. A number of high-end smartphones will be offered on Phone Plans. O2 says the overall cost of an O2 Refresh deal will be the same as a standard ‘pay monthly’ contract.

Representative example for HTC One: Duration of agreement 24 months. Cash Price is £600. Upfront cost is £49.99. Credit amount is £480. Interest rate is 0% fixed. Representative APR is 0%. Monthly phone payment is £20. Total amount payable for the HTC One is £529.99. The monthly airtime payment is £17.