What should I do when my students use their phones in class?

Frame challenge:
You shouldn't, in fact, You cannot.
This is academia, not kindergarten.
These are adult people and are completely free to do whatever they want in their life as long as they are not disrupting other people. Whatever the results of their actions are, are on them and solely on them. You are not allowed to dictate other people's lives, in classroom or anywhere else. You trying to enforce such a rule would be as ridiculous as trying to dictate what colors should they be using while taking notes - and in fact, whether they take notes at all.

While I consider the above argument sufficient, I would like to point out a few supplementary points. On the flip side, other answers already pointed out that phones (being nothing else than small computers) can be very useful for students. People may take notes, record the class to listen again later and take pictures of the slides and blackboard notes. They can check the definitions on the internet and play around with equations on Wolfram Alpha while listening to You talk about these equations at the same time.

On the other hand, if You will try to go through with this, You will very quickly loose any and all respect. People do not take kindly to having their lives dictated by a person at position of power.

It should be also noted that common decency rules about phones apply in class the same way they apply in cinema or opera. People are expected to keep all their devices completely silent - the 'not disrupt other people' part of the fundamental rule is as important as the 'complete freedom' part.

EDIT: I would encourage all the commentators to point out WHAT culture do they belong to. It seems to me, seeing the comments, that it's one of those many questions where You will get WIDELY different answers depending on the place where a given person lives. For that matter, I would also like to point out that I speak from the European perspective.