I've got about 11 months to run on my current iPhone contract. As far as I can see, o2 are giving me a new phone for a mere 7 months contract. Not a bad deal as far as I can see. What you are describing is standard practice for any contract phone you take out.
Exzactly, only had my phone on contract for 4-5 months, now getting another while getting me out of this one.