MCI Inc. reported a $71 million loss for the second quarter as the Ashburn phone company announced a large dividend designed to disburse some of the cash it accumulated during the almost two years it spent in bankruptcy.

During the bankruptcy process, when the company was not required to pay interest on its debt, MCI's cash on hand rose to $6 billion. Under MCI's plan of reorganization, the board was required to review its reserves and determine whether it had excess cash. In a vote held yesterday, the board determined there was $2.2 billion in excess cash and voted to return it to shareholders in the form of a 40-cent-per-share dividend.

The dividend will cost the company about $128 million a quarter. MCI said the dividend would have to be approved on a quarter-to-quarter basis.

Many of the company's shares are held by former bondholders who bought up the company's debt for pennies on the dollar when it was in bankruptcy. The dividend will be paid on Sept. 15 to shareholders of record as of Sept. 1.

Shares of MCI fell 8 cents yesterday to close at $13.84 in regular trading. But shares shot up as much as $2.47, or almost 18 percent, in after-hours trading when the company announced its dividend.

MCI and its two principal long-distance competitors, AT&T Corp. and Sprint Corp., have been hit hard in the past several years by competition from the regional phone companies such as Verizon Communications Inc. and SBC Communications Inc., which have been freed by regulators to offer long-distance service. MCI's revenue for the second quarter was $5.2 billion, down from $6.2 billion in the same period last year -- a decline of 15 percent.

Its quarterly net loss, which came to 22 cents per share, is an improvement over last quarter, when the company reported a loss of $388 million, or $1.19 a share.

Until recently, the long-distance giants have responded to declining long-distance revenue by selling local telephone service in a bundle with long-distance. But a federal court recently threw out federal rules that allowed long-distance companies to lease parts of local networks at deeply discounted rates to offer competing local service. AT&T responded to the ruling by saying it would no longer market long-distance service to consumers.

During a conference call with analysts yesterday, MCI chief executive Michael D. Capellas stopped short of saying that MCI would follow AT&T's lead, although he did make it clear that the company expects to see its consumer business decline because of the ruling. "We are sizing our consumer effort to the profit opportunity," Capellas said.

Capellas said the company cut costs by about 18 percent in the second quarter. MCI has announced about 14,000 layoffs for the year and expects to reduce its workforce by a total of 16,000 by the end of the year. The additional 2,000 job reductions will likely come through attrition, a company spokesman said.