>
> I'm happy to stay with O2, I just want to upgrade my tariff, *and* my
> handset.
>

You took out a heavily subsidised handset and agreed to keep
that handset for a minimum term of 18 months.

It says in your contract that you can put your tariff up if
you wish, but not lower it within a certain number of months.

What you agreed to do is in black and white, whilst I'm no fan
of O2, I totally agree that you shouldn't be able to just get
a new phone because now you've decided that you want to use
the phone more, they still need to claw back the cost of the
first subsidised handset that you've had from them, hence why
you can't just get a new phone anytime you feel like it.