Buying a mobile phone in Barcelona?

Hi there,
just found out that Spain does not provide a "free" mobile phone when one signs up for long term contracts with a Telecom company.

Was quite dismayed as in other countries i lived in, i have not had to purchase a phone in addition to the contract..

Any clues as to where and with whom one can buy a Smart Phone (preferably iphone) without it costing a bomb ?!

Thanks :)
Nancy