Depending on how bad the signal is, this could count as either a breach of condition entitling you to cancel the contract or a breach of warranty entitling you to some compensation in a counter-claim. From what you've said, I doubt it is the former, but you could potentially have a breach of warranty or a misrep claim. Clause 2.2 of the contract reads: You’re entitled to the quality of service generally given by a competent mobile telecommunications service provider, using its reasonable skill and care. Do you happen to know if other networks provide a significantly better service in those areas than O2's? Did the salesman make any statements about the availability of O2's signal in those areas?
My advice would be to complain to O2 about the signal and the phone's quality to start with. (Coincidentally, I actually got O2 to swap my Sensation XE for a Galaxy S3 + £100 this week and I have 18 months left to run on my contract. No signal problems, but I was fed up with the crap implementation of ICS and several bugs, inter alia. Took several phone calls to customer services and the store, but got there in the end.) If O2 can't swap your handset or do anything about the signal, I would only then look into terminating the contract. Use your own legal rights to ask them to let you out of your contract (perhaps if you return the phone) for the least amount possible or ideally nothing.
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