Hablábamos (I've corrected the option) is the conjugation of the verb hablar that matches the first person plural (nosotros) in the imperfect tense. In general, the imperfect is used to talk about past actions, conditions, or events that occurred regularly or frequently or that were in progress in a moment in the past. So this sentence stands for the first person plural because we can replace mis amigos y yo by nosotros. Finally:
<em>Mis amigos y yo </em><em>hablábamos</em><em> por teléfono.</em>
