I've been going through the programming for the project and decided to use a finite state machine which controls the behaviour of the telephone. It looks like this. It's pretty straight forward how it should work.

I've implemented the state machine and it runs fine. I might need to add some transition states if it simplifies the code. I can add features to the states as I connect components to the breadboard and progress on the project.

I've added a toggle switch to simulate the handset and an other push switch to simulate the URC from the modem. This will make it possible for me to start programming the sleep and wakeup functionality without the modem.