When Agent Smith disconnects his earphone in M1, he is consequently totally oblivious to what is happening inside the building when Neo and Trinity come to rescue Morpheus. We also see other examples of Agents communicating to each other through earphones:
I think the reason agents need earphones is the same reason disabling electricity to 27 city blocks allows the One to get to the Source without setting off bombs in the building: everything in the Matrix simulation is based on rules of human reality. Simply stated, humans would need earphones, so Agents do too. Although some rules can be bent and others broken, the inability for humans to communicate telepathically within the Matrix is a rule that agents are apparently not allowed to break, just as they are not allowed to carry unlimited ammunition in their guns, they are not allowed to fly like Superman, etc.
Also, police officers would need to know how it is that the Agents communicate with each other so efficiently anyway. The earpiece probably also serves as a way to explain Agents' ability to communicate quickly.
He doesn't want the other Agents to know what he's saying to Morpheus. The Agents seem to operate collectively, finishing each other's sentences at times, and certainly knowing what each is thinking. Smith's actions may largely be symbolic to show that he's able to turn this collective consciousness off, and in this case, has a reason to. His discussion with Morpheus implies that he is much more "human" than his colleagues - he shows frustration, exhaustion, impatience, and hatred of the Matrix itself and his place in it.
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