Nokia have there own repair centres throughout the UK as do all manufacturers. The warrantly is held by them but O2 have a duty of care so both the manufacturer or O2 can help you resolve the issue. You should have the option to send it to O2 or the manufacturer. For example of you take out a 12month contract then O2 will have a duty of care for those 12 months. Generally most manfacturers offer 2 years cover so outside of 12months you need to return it to the manufacturer directly.
I think one of the biggest issues is that the returns and repairs team are outsourced. I understand that to build/expand a building, train and develop staff, update systems and all the other costs that would be involved in making returns a part of O2 directly would eat greatly into a budget and would cost a lot more than outsourced but O2 do lose customers over the returns/repairs issue.
Having returned my own phone 4 times I understand how frustrating it can be but I was kept upto date by the store and the phone was never away longer than 10days. On the one occasion it took 10days I called up to ask if I could be refunded for the 10 days line rental as I had been completely without service as the store had no loan phones and I was refunded one months line rental
I know first hand how problems can arise and how angry some people get. I work on complaints in customer services so take a lot of stick.
If i get a returns complaint then I try to contact returns first to find out the delay so I would hold for 10-20mins then the line would drop. I'd go back to the aggressive customer who would shout some more. I again call back through, another 10mins and will talk to someone who clearly doesn't care but will tell me the replacement phone will be released soon. Don't believe him but can't keep the customer holding any longer. Talk to the customer again, O2 is disgusting etc I promise the customer I will monitor the account. Once the call ends I call back through and somebody else confirms the order will be released. I have no reason to doubt this as now confirmed by two different returns advisors. Ok so 24hours later i check account, still not dispatched I again have to call back through to returns and I'm told this time it will be dispatched. I then have to call the customer back who is clearly going to angry with me...Returns cause me so many headaches!
I used to monitor every account that was having issues with returns but found myself being swamped with work and having to call returns/chase up accounts on my breaks or after work when I wasn't getting paid. I now have to take it at face value and if a returns advisor tells me it will be dispatched I have to trust that.
Customers and staff should not be having so many issues with the returns/repairs team. Trust me O2 management know this!!