The company confirmed the network issues on Twitter, saying: "Our technical teams are investigating reports of issues when using data".
The service status page of the O2 website added that "voice calls are working OK" and apologised for any inconvenience caused.
The company is blaming software issues at one of its suppliers for the problems. Our technical teams are working extremely hard to resolve this.
If you spent this morning freaking out you'd used up your data allowance and tried desperately to call O2 to give them a piece of your mind, you're not alone.
"We'd encourage you to use Wi-Fi wherever you can and we are really sorry".
Affected phones, which may be every single O2 device, simply fail to show any kind of data connection and will not connect even when turned off and back on or when other workarounds are tried, according to users experiencing the problems.
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O2 customers have been locked out of their mobile data with thousands unable to access the internet and 4G services.
It has 25 million direct customers, but also provides services for the Sky, Tesco, Giffgaff and Lycamobile networks. It also affected services that use O2's network, bringing down digital timetables at London bus stops...
The outage is thought to be affecting about 32 million in the UK.
"Our technical teams are working with their teams to ensure this is fixed as quickly as possible. This issue is being investigated".
O2 said it would share further updates as soon as they were available.