Proposed is a method of deriving differentially decoded data values from a received differentially encoded phase modulated optical signal. The method uses an estimation algorithm in order to find derive a sequence of differentially decoded data values. The algorithm stipulates transition probabilities between hypothetical first states, representing differentially encoded data symbols assuming that no phase slip has occurred, and transition probabilities towards hypothetical second states, which represent differentially encoded data symbols assuming that a phase slip has occurred. The transition probabilities between the first and second states are weighted on the basis of a predetermined phase slip probability value.