UPDATE 1-AT&T in initial labor pact for Midwest

* Agreement covers 18,5000

* Terms incl. pay increases, more employee health payments

* AT&T shares rise 1.75 percent on NYSE

NEW YORK, July 15 (Reuters) - AT&T Inc (T.N) has reached a tentative labor agreement with the Communications Workers of America covering 18,500 workers in the telecom service provider's Midwest region, the parties said on Wednesday.

The proposed 3-year agreement, which is subject to member ratification in coming days, includes annual pay and pension contributions for future retirees over the life of the contract, the company and the union said.

AT&T said its workers would be paying more than before for health care under the new contract.

Contracts covering another roughly 101,500 workers, or about a third of AT&T's workforce are still under negotiation.

The company and the union said they hoped that the current agreement means they can move forward with the other negotiations.

AT&T shares rose 41 cents, or 1.75 percent, to $23.86 on the New York Stock Exchange at mid-afternoon.

(Reporting by Sinead Carew; Editing by Richard Chang)