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when can you cancell your contract????

hi ive been having trouble with 3 now for a couple of months,
i upgraded my handset in august and have had major problems with coverage.
after 3 or 4 calls and factory restores on the handset ive had to borrow a phone off a friend to prove to myself its a handset issue, tonight 3 have told me they have known about this handset and its issues for a while and did offer to exchange mine for a bottom of the range nokia.
3 will not take my phone for repair as they say its non repairable and it will just come back to me as it is now.
how can 3 still be selling these phones with a known fault on them and then offer me a basic phone as a replacement??
all i want is to be able to use the minutes/texts im paying for and have an equivalent standard handset to the one i purchased, has anyone any ideas how i can get out of this mess without,
1-been stuck with the cheap brick theve offered me
2-having to fork out for a decent phone when i have a 4 month old one they wont repair????
cheers

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