<i>Here (Europe) buying a pre-paid card and a phone separatly is the most cost effective option</i><p>Where?  Europe is a big place. Also it depends very much on which phone you want.<p>Certainly last time I did the math in Sweden, if you wanted a new high end phone like the latest iPhone or Samsung S6 then it was basically always cheaper to get it on a two year contract compared to paying  for the phone and getting a separate equivalent plan or per-paid card.  On the other hand if you wanted a sub 100€ phone or where happy with a second hand phone, then getting a phone and pre-paid card or cheap monthly plan separately is almost always cheaper.