Sometimes if a user account is deleted and an identical account created, especially in quick succession you may find that the mailbox goes into a perpetual ‘Mailbox preparing’ state. Or sometimes there are the following errors.
You must ensure you delete the user from the recycle bin before setup again as there could be GUID conflicts.
The process to remove deleted item from recycle bin.
1. Get-MsolUser -ReturnDeletedUsers | ft UserPrincipalName,ObjectId
Search for specific deleted MSOL accounts using free-text search:
Get-MsolUser -ReturnDeletedUsers -SearchString "{SearchString}" | ft UserPrincipalName,ObjectId
2. Delete account using ObjectId (the recommended method as ObjectId is unique to every user):
3. Remove-MsolUser -ObjectId {ObjectId} -RemoveFromRecycleBin -Force
Once deleted try again, this time account should setup without the above mentioned errors.