I change Startup Type for SQL Server Agent (LYNC) service (from Disable to Auto)
Granting Full security access to folder C:\CsData for account 'NT AUTHORITY\NETWORK SERVICE'.
I opened Lync Mgmt Shell and ran the following command:
Install-CSDatabase -Confirm:$false -Verbose -LocalDatabases -DatabasePaths c:\CsData
This created the local databases on the FE server and then when I re-ran Step 2, it worked.
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