First I will have to run the setup wizard and connect to WiFi. Yes connecting to WiFi is mandatory for setup on the 2023 mobile software. I don’t recall having this experience before.
This has been the case for a few years now. You need to either be on WiFi or have a cellular connection in the phone with activated data. This is used to enforce iCloud lock on the device. That can’t be done unless the device can talk to an Apple server.