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A novel algorithm, called group-scatternet formation algorithm (GSFA), is proposed for scatternet construction. GSFA consists of two phases, piconet formation and group scatternet formation. An efficient routing protocol based on the resulting scatternet of GSFA is also presented. The experimental results show that two-group and three-group scatternets are suitable for the networks with more than 50 devices and for that with less than 50 devices, respectively. The proposed GSFA also outperforms BTCP, TREE, and LINEAR in terms of delay and network throughput.