It's so basic.
In order to retain and build any relationship, you first have to establish trust. In business, just the same as in personal relatioships. Once that trust is compromised, then everything has to be revalued.
Its so simple.
If they decide not to honour the agreement, they should then return the phone to you at their expense. Just like eBay.
This shabby behaviour by O2 or their agents can cause huge damage to their reputation which they nurture by spending collossal amounts in marketing and advertising.
From your point of view you feel that you have been the victim of a scam.
From O2's point of view they (or the agent acting on their behalf) have shot themselves in the foot and whatever happens now is going to be expensive.
Either they honour the original agreement and apologise (by far the cheapest option) or they risk having their reputation dragged through the mud.
Best of luck, and power to your elbow.
They continue to dupe people. In the beginning, the idea was that these phones were recycled to third world companies but I'm guessing that employees of this sometimes disgraceful company are buying these phones at rip off prices and selling them (that's just my opinion btw).
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