Why the price discrepancy between an airtime contract when bought with a device and sim only?

[a_hcir]

I'm looking at an upgrade at the moment, and I don't get why when upgrading direct with o2 the airtime portion of the contract is more expensive than the same amount of minutes/messages/data on a SIM only deal.  

The discrepancy is quite a bit in the case I'm looking at (an extra £5/month in my wallet - £26 p/m for Unlimited/Unlimited/20GB airtime when purchased with a device, vs. £21 p/m when going SIM only) Is there anything I'm missing or does that extra cost actually cover something (i.e. increased risk of the airtime contract ending early when the device is paid off)?

Anyone managed to negotiate the airtime portion of the contract down the same levels as the SIM only tariffs? 

[MI5]

Airtime is usually the only bit you can negotiate any discount on. Deals are available if you call the re-contract team on 202 (thinking of leaving option), so give them a call and see what they offer you.

[Anonymous]

It's likely because one will have the device included in the overall cost where as the Sim only. You are only paying airtime 

[a_hcir]

lovemyphone: That's not the case. The cost breakdown is very clear that the device plan is the full cost of the device, with 0% interest.

I am assuming that the airtime plan costs more because it hides some of that interest from the phone plan, plus mitigates some risk that you may purchase the device outright & not complete the full term of the contract.

I wouldn't mind the airtime plan being a little higher in that case, but in this case I can get the device direct from the manufacturer - factory unlocked for £40 less than O2's, so the penalty for not going SIM free over the full term is £160 (£120 extra for airtime, £40 extra for the device, with the advantage that the device comes unlocked out the box which enhances its resale value).

I'll do as MI5 suggests and play the "retentions game", but part of me wonders why I should bother when I can get a better deal myself and not have to spend any time haggling - wasting both my own and the O2 representative's time.

[viridis]

Dunno, playing the retentions game recently got me a deal no one else could come near.

[CalMor]

My take on this is that its done to take advantage of those who can not afford to purchase a phone outright. They charge the total device cost at retail and make there extra buck on the side from it in increasing the airtime fee since its much harder to finance the phone indivually elsewhere and then take out a sim only plan.