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I have been using internet sharing with ease but I don't understand why one could not use Wifi simultaneously while sharing Internet with other devices. It has been same for Android also, so there has to be some standard/logical reason behind this. Any ideas ?

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Turning on Internet Sharing turns your phone into a router hosting a WiFi network. As the phones only tend to have a single WiFi adapter, it can only be listening on a single radio channel at any given time. As each WiFi network will prefer to sit on its own channel to avoid interference, the adapter cannot be connected to multiple networks simultaneously.

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