PaulS:
Are you talking to the phone on the serial port, or the Serial Monitor? You seem to be trying to do both.
You may not have realized the significance of this comment from PaulS.
You can only have one device at each end of the serial link. Your sketch is using the Arduino's hardware serial port to talk to the GSM shield. You must not connect anything else to the same serial port. The USB/Serial connection to the host PC uses the same serial port so you must not connect the USB lead at the same time as the shield is connected; that would result in both sources trying to drive the same serial Tx/Rx lines which is a bad idea.