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I am getting "Thethering error" in popup window saying Error occured during thering. 
I am facing this prob in xperia P android 4.0.4 build number 6.1.1.B.1.54 . Not able to tether both wifi and USB. Can anyone tell me a solution ?
You must have a working data connection in order to get rid of the error.
When i enable data and the "H/3G/E" is on top of the signal bars i'm ready to enable the hotspot/tether without any errors.
No. As I explained before, my data plan works perfectly fine, and the error shows up while I see either the 3G or H icon in the phone's status bar.
Why is this question assumed answered? It's not.
Weird, on which FW ver are you on? Can you try removing the APN Settings and set it up from the start? (Only the internet settings, not the whole phone).
I have same problem as oboxodo.
I tried resetting the APN settings, tried with my friend's SIM card.
But no luck.
This is a major issue, and Sony is expected to solve this immediately.
I recently had the same error with my xperia P this is what seemed to fix it:
Go to settings>more>mobile networks>Access Point Name
Ensure that all the values are correct for your carrier, for example a Rogers APN will look like this:
Name Rogers Mobile
APN: rogers-core-appl1.apn
Proxy:
Port:
Username:
Password:
Server:
MMSC: http://mms.gprs.rogers.com
MMS Proxy: 10.128.1.69
MMS Port: 80
MCC: 302 (retrieved from SIM)
MNC: 720 (retrieved from SIM).
Authentication type:
APN type: default,mms,supl,Internet+mms
Do some research on your carriers APN values. Now this is what fixed my error: Under 'APN type' make sure you type in "default,mms,supl,Internet+mms"
Should work, let me know!
Did you try in the first place going to Settings > Xperia > Internet Settings and try to download the settings automatically? Mine had the settings too but wasn't able to access the internet.
I performed the automatic internet settings download and all worked fine! 
Well I guess its not by the simcard network. I do have a Sony C3 and a Samsung S5. i have 2 numbers with the same carrier. now since my C3 got updated to LOLLIPOP os ( which I hated and regreted a lot ) this tethering problem also occured. Whenever i tried to use my C3 for wifi to share it with my Samsung S5 it says "ERROR". but when i will exchange the sim cards which are in the same carrier ( Im an ETISALAT user because im here in UAE) and I will use my S5 to share the wifi to my C3, im not facing any problem. I can share it even with 2 or 3 phones extra. So I guess its not by the carrier.