Under the terms of your contract with Vodafone the company must repair or replace faulty equipment it supplied, unless any of the following apply:-
a) You’ve damaged the equipment in any way (excluding wear and tear) b)The fault is due to something you’ve done; or c)The company told you about the fault before you bought the equipment
From what you've said, none of these exclusions apply. The phone is not fit for purpose, and the company must replace it or repair it.
You are under no obligation to enter into a new contract, simply because a phone has a fault. In my opinion you are being bullied by the Vodafone call centre.
Tell them I said so.