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is that the only way? because i haven't got Mobile me and i'm not paying the ridiculous price for it.
 
If you are syncing your contacts with your Mac you can group them in address book and the groups will sync (I assume the same is true of the outlook address book for Windows)
 
There's also an app called "Groups" in the app store. It costs a few dollars, but it lets you create and organize contact groups on the iPhone, rather than having to do it on your computer and sync.
 
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