The decision pits O2 against Richard Branson's Virgin Mobile network, which is headline sponsor of the V Music Festival and whose marketing approach is tailored to the youth audience.
O2 Music will be launched this week in London and will encompass more than 30 live concerts taking place throughout spring and summer across the UK.
Confirmed events include six nationwide Party in the Park festivals, where O2 will be headline sponsor, having partnered with the Prince's Trust; an NME Britpack tour, to include six concerts showcasing the latest indie talent; and QueerNation, a series of gigs that will target gay people across the country.
The move into music sponsorship is a departure from O2's previous sponsorship strategy, which has focused heavily on sport through its deals with both the England rugby union team and Arsenal FC. O2 is renegotiating both deals, which expire this and next summer respectively.
Suzie Moore, O2's head of marketing and communications, said that music was the way forward for O2 because "it fits in perfectly with our target audience", but insisted the firm would not abandon sport.
The launch of O2 Music will build on the introduction of the O2 Digital Music Player, which enables users to download chart singles onto their mobile phone for a small fee.
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