Firstly it was Paul Hontz from The Startup Foundry, and the problem covers up the iPhone 4s using Verizon Network and those who updated to iOS 5.0.1 via over-the-air. Here is a little hint:
And since you have already known the root of the problem and now it is time to know how to fix contact bug issue or address issue on Verizon iPhone 4s Running On iOS 5.0.1:
- Dial *228 on your device (A Verizon programming number)
- You need to push “1” to “Program or Activate”
- Once the call disconnects, open task manager by clicking on your Home Button twice quickly
- Close your Phone, Message and Contacts Apps
- After 5 minutes, open your Message App to verify fix
Anyway, no worry you won't lose your contacts, it's just your device is unable to recognize your contacts and associate them with their phone numbers listed inside your address book.
Hope Apple will release fix for this bug in the next iOS update along with any remaining battery problems.