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When I was in the apple store last week a young girl had her phone replaced free of charge due to a cracked screen.
She was warned this was the second and last time they would replace it though.
The refurbished phones look as good as new and setting them up is really easy.
Just sync your phone with iTunes and when you get the new one plug it in and all settings, music, texts etc come back.
They also wipe your old phone in shop if you are worried about that.
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