Explain the rules and consequences BEFORE you pick up the phone - every day if necessary - until it sinks in. You only want to be interrupted if someone is bleeding. Or if they want your attention, they need to raise their hand. If you ignore them, they have to come back after you've hung up. Explain how rude it is to interrupt and how rude it is to be screaming/fighting while you are on the phone. This also applies when you are talking to someone face to face. As soon as our attention is engaged elsewhere - our children want it. That doesn't mean we have to give it to them - or even react to what they are doing.
Then if they break the rules, say excuse me to whomever you are talking to and issue the consequence. Don't yell, be matter of fact. I would especially punish the kid that picks up the extension. Why are they touching the phone at all? Hands off or else! I've made my kids sit down together and hold hands - they hate it. Or I've sent them to their rooms with orders to engage in silent reading. They've lost TV time, computer time, toys, you name it. But now a days, my kids rarely interrupt any phone conversation I'm having. I think the key is consistency.
I agree with you, your kids are old enough to know better. Good luck!