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Hi Russell
You can setup an iCloud address, but you don't have too. If you don't though, you wont be able to access all of the features on iCloud.
With just your Apple ID you can use Contacts, Calendar, Reminders & Find My Phone.
With an iCloud address you can also use Mail & Notes.
I just went through the same process. I don't much if I can help, let me know.
Regards,
Shane
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