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I just managed to get 3.1GB free on my s3. I had to delete everything that was deletable (podcasts, music, audiobooks, apps (including the timer and the camera - everything), choose an empty folder for photos, all but two simple watch faces. Lets see if the update installs now.
 
Have same problem as well, including last update. I already removed almost all things on the watch and still wouldn't go through. That's why I hate this S3 and can't wait to trade it in later tonight for S6.
 
It's already solved by Apple, no need to erase anything. After 1 day using, not many new features, it seems a little faster (yeaaah), about same battery life. If I see any important change I will come back here in a few days.
 
After multiple attempts and too much wasted time trying to update to 7.0.1, I give up.

Unpairing via the phone, resetting from the watch, restoring from backup, setting up as new, fresh reboots; it made no difference.

I don't store anything on my watch, and since it added a native calculator, not even PCalc, so no non-native apps.

Every attempt started with 3.7GB free, which should be more than ample for a paltry 91.7 MB update. But it would fail just past half way every time, and said it lacked an internet connection. Not according to my router, which showed both phone and watch had pulled IP addresses.

The cherry on top -- it refuses to restore from backup now.

Addendum -- if the "null" error appears when trying to restore from backup, there is a way out -- skip the visual pairing method, and use the manual process, with the six-digit code. It will restore from backup that way.

Miserable failure for a company that prides itself on the UX.
 
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I have this same problem and even unpairing and loading as new does not clear enough space. By manually deleting apps from the watch itself I was able to get it to 3 GB available but the update needed 3.1 and I could not free up enough. Guess we’ll need to wait for 7.1.
I had the same problem, had to unpair then pair again as a new watch and that installed the upgrade without a hitch. Had to do the same with the update to watchOS 7.1 but it did work. I can see this is going to be an ongoing problem so I've taken that as a signal to upgrade the watch and while exchange rates in Australia are still high ordered a new Apple Watch SE.
 
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Had this on both my Series 3 models, ended up selecting the unpair option and that left me with 1.7GB free after pairing again and installing the OS 7 update! - nothing else would free enough space.

Clear as flagged above that the Series 3 will be struggling for space going forward. Side note, both my Series 3 watches are more snappy to use with OS 7.
 
I have another issue now with the Series 3 in that I am now unable to alter the Complication selection on the Watch. If I long press on the face I get to the edit screen but I can't swipe right as advised to get to the complications screen. All I can do is change the colour of the face.
 
Everything I read says the Apple Watch 3 without cellular has 8GB capacity. However, when I check on the iPhone app under General > About, it says its capacity is 3.4GB. This means I can't upgrade it to watchOS as it says it needs 3.6GB free to upgrade when I do try.

I can't find anything online that tells me where that missing 4.6GB is. I presume some is OS but all of it?

Did Apple note anywhere that this model can't be upgraded? Did I miss that? Since they are saying the AW3 is compatible with watchOS 7, thus upgradeable - but not all AW3s.

Thanks
Mine said 4.3 Capacity but that is a phurphy. Capacity is not total storage. Total storage for the GPS only model S3 is 8Gb but if you add stuff to the system its subtracted from the capacity. Watch faces are a good example. Delete watch faces until you have enough storage.
 
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