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I have a new iPhone, which is synced with iTunes for music. I have around 200 contacts on here - I read somewhere if I now sync my iPhone with Exchange, it will overwrite all my contacts, leaving me with only the contacts from my Exchange account. Is this true?

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No, its not true.

When you add any new account, you can choose to sync contacts or not, and the contacts are kept separate from each other by the name you give the Email account in Mail settings.

In the case of Exchange, you can also get a Global Address List for that account.

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