Similar issue for me.
I usually had my apple watch 2 (ios3.1) and my iphone 7 (ios10.1.1) working for more than a year.. no issues
I was going to sell it and I did:
1- Unpaired in the iphone using the apple watch app, no problem
2- Login appleid.apple.com and deleted the apple watch from my listed devices
3- I went to pair it to the new phone and just ask to Update the apple watch, and begins and then:
ACTIVATION ERROR
Activation request could not be completed. Press
the home button to try again. If the problem persists,
please contact customer care.
4- I tried then to pair it again with my iphone 7 (the one i used for a year) and nothing... it gave me two options:
.Restore backup or Setup as new apple watch; I tried both several times both and again:
ACTIVATION ERROR
Activation request could not be completed. Press
the home button to try again. If the problem persists,
please contact customer care
5- I went to next apple store and they made me update my iphone 7 to the ios11.3, then tried again to pair it and asked me now to Update the apple watch, and again the same ACTIVATION ERROR
6- I have already deleted the watch in 2- (appleid.apple.com) and confirm and the apple watch was not there...
7- Just in case went to icloud.com and in settings/ find iphone and found the apple watch!! that is weird, anyway I select Delete from account and i checked later again and is gone.
8- Restart my iphone 7 and also my apple watch.. same error; also tried the hard reset in the apple watch (pressing crown and button for 10 seconds) and same error trying to pair
I cant believe this happens.. really disappointed with this device.
Appreciate if someone gives me clue how to solve this