Q: software update issue

Don't continue trying. Here's why:

If your iPhone is working fine as is, the new features may give you "weird" behaviors

The reason you cannot is 2nd in this list - interesting reading

• If you can't activate your iPhone, iPad, or iPod touch after installing a software update - Apple Support
• Apple pausing iOS 9.3 updates for older devices, working on activation fix | iMore
• Apple releases new build of iOS 9.3 for users of iPad 2 affected by bricking bug | 9to5Mac 
• Apple Addresses GSM iPad 2 Activation Bug With Revised iOS 9.3, but Broader Issue Remains Unfixed - Mac Rumors
• If you can’t activate your iPad 2 (GSM model) after you update to iOS 9.3 - Apple Support 
• Troubleshooting iOS 9.3 Update Problems

Thanks for info, I tried to uprade it manually and got error code saying its compatible. Any news when this ios bugs wll be fixed and re-released?

anecdotal... a user said an Apple Support specialist said "3-5 days" - grain of salt, amigo