Organizing and accessing contact information in Outlook.com
I just read all the above messages and can confirm that I have exactly the same problem/situation with my Iphone.
I am convinced of the fact that the current Outlook.com conversion by Microsoft is the cause of all this.
We (my family) have 5 Outlook accounts, from which 2 are converted and 3 not. We all have an Iphone too.
For the 2 converted accounts we encounter the Iphone-issue as described above.
For the other 3 accounts it all works fine without the extra groups visible on the Iphone
I have same problem, not only on my iPhone, my android phone has same problem too.
definitely it is a problem of outlook