Maybe you have a bad mic. Ordinarily, the BMW hands-free microphone is the best in any car at any price. You might try checking the wiring connections at the phone module. Maybe there is a bad connection there. Finally, make doubly sure that the arrow embossed on the microphone is pointing forward toward the windshield.

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2000 E38 750iL Highline Edition, Upgraded with the lastest 2006 X5 Electronics
MKIV Navigation, 16:9 Display, Bluetooth, TV/Video with Backup Camera, Sirius, and Aux Input