I own a 1995 E320 that came with a built-in cellphone installed in the arm-rest between the front seats. The phone "CPU" is located in the trunk, as is the CD-changer.

Problem:

More than 80% of the time, whenever the audio is on (whether in CD / tape / radio mode, doesn't matter), the word "PHONE" appears on the LCD display of the in-dash car stereo, and all audio is muted. Sometimes the word "PHONE" will quickly (I mean, 10 or more times per second) alternate with the radio station I'm tuned to, or the CD track number, or whatever would normally be displaying on the LCD.

It happens so often now, I basically can't listen to radio, play a tape or CD.

What I would love to do is just open the trunk and disconnect any wires I see leading into the phone equipment. HOWEVER I don't know if that'll solve the problem.

Anyone else ever experience this? Any suggestions?

I tried to post this a few minutes ago, but it didn't go.
The radio mutes from a ground signal from the phone. There is a lead to your head unit that when grounded it causes the unit to mute and display "phone" locate this wire, it sounds like it might be grounding out somewhere on the chasis. I think I remember seeing some prior posts that it is a brown wire but not sure. Give it a check, disconnecting this wire will solve the problem, but your phone will not mute the system when used. Finding the short or replacing the wire would work best. Good luck!
Regards,
Brian