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mobile phone use in Germany

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We are a military family and we just moved to Germany a couple of days ago. While I am able to use wifi on my state side smart phone for internet use and skype calls, I will not be able to use it for typical phone purposes. My question is what is the best option for cell phones here where I can call German phones as well as stateside. Prepaid phone and use calling cards? Or phone plans? The only thing with the phone plans is you have to purchase a phone here and they are so incrediblly expensive!!

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