Thursday, October 19, 2017

O2 Contract Cancellation Gymnastics

August 21, 2010 by · 104 Comments 

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I am unfortunately moving to a new flat where I don’t have O2 coverage in spite of the fact that I still have a contract with 5 months outstanding and that I’m generally happy with O2.

When I signed up for my iPhone contract, I chose the 45 pound a month plan so that if I ever had to cancel, I would (I assumed), only have to pay 45 x months left. This is the way that I’ve had countless other carriers explain their cancellation contract to me. For this ‘luxury’, I was willing to pay a price for the iPhone up front, vs getting the most expensive plan and getting the iPhone for free.

Let me rephrase that.. because I was trying to reduce, what I assumed, the contract-cancellation-hit should I need to cancel in the future, I did not choose the plan that would give me the phone for free.

Now.. there is another reason too.. you can’t sign a contract for say 65 pounds, get the phone for free and then the next month drop down to 30 pounds… it doesn’t work like that.

With O2, you need to be on a contract for at least 9 months, and then you can drop your contract by 5 pounds every month. This means that if you were to go for the free iPhone option at 65 pounds a month, at month 9 you could drop down by 5 pounds (however, only in the case of the 65 pound plan, they drop you down to 50 pounds a month). This means that your payments, at best, would be like this (18 months):

65-65-65-65-65-65-65-65-65-50-45-40-35-30-30-30-30-30 = 960

Now, here is the tricky thing that I learned today about how O2 calculates you termination fee:

Your cancellation charge is your current monthly charge * the number of months you have left.

My assumption all this time was that it was your contract charge (45 pounds a month in my case) * the months I had left. I assumed this, because other carriers did it this way, and because their cancellation language online is ambiguous, but also because it makes sense. If they subsidized my phone with the assumption that they’d get at least 45/month out of me, then why should they settle for any less?

Well, let’s see the math behind this vs the way they actually do it:

65-65-65-65-65-65-65-65-65-50-45-45-45-45-45-45-45-45 = 1020  -> How other carriers do it

65-65-65-65-65-65-65-65-65-50-45-40-35-30-30-30-30-30 = 960 -> How O2 does it

This makes no sense… I’m really surprised at this considering they’re losing out on money… (about 60 pounds)

However, not everything is rosy.

What was my situation? Well, I found that I went over my 45 pound a month plan that I had signed up with, quite a bit. So I switched to a 65 plan.. as in.. I was paying 45-45-45-45- and went to 65……

Now, that I have to move to my new flat with no O2 coverage (and need to cancel), I receive the nasty surprise that I have to pay 65 * my remaining months in spite of the fact that I paid for half my iphone up front with the 45 plan so that I wouldn’t have this very issue and that I would only have to pay the contract amount 45* months remaining (or so I thought)…

This is what I thought would happen now that I needed to cancel with 5 months remaining in my contract:

45-45-45-45-45-45-45-45-45-50-65-65-65-45-45-45-45-45 = 875

However, this is the way O2 just informed me it actually happens when my current plan is 65 and I have 5 months remaining (even if I signed a contract for 45 / month):

45-45-45-45-45-45-45-45-45-50-65-65-65-65-65-65-65-65 = 975

So, as you can see, I’m worse off with O2’s method of calculation…. however, I was further informed that I was only allowed now to drop by 5 / month! Ok.. so they happily moved me up, but I had to negotiate hard to get it dropped down to where I started from! Argh!

So, in conclusion, I think that O2’s contract termination format is actually MORE customer friendly, but ONLY if you understand the way they calculate things:

1) Your cancellation is your current monthly charge * months remaining so start planning early your cancellation by at least two months so you can drop at least 10 pounds * months remaining off your cancellation fee.

2) You can only go down by 5 a month, regardless of where you started from.. so don’t necessary go to the highest plan option if you expect to have a busy month.

You live and you learn.

AS ALWAYS, PLEASE CONFIRM THESE CONCLUSIONS WITH CUSTOMER SERVICE BEFORE MAKING ANY CHOICES FOR YOURSELF AS POLICIES CAN CHANGE FROM TIME TO TIME AND ALSO BECAUSE SOMETIMES I FIND CUSTOMER SERVICE AGENTS DON’T KNOW ALL THE DETAILS.

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