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This paper proposes an algorithm for joint decoding and channel estimation (JDE) of frequency-hopping (FH) system employing space-time (ST) codes. The channel is modeled as a block fading channel, where the fade is constant during each hop and independent from other hops. The algorithm is based on quantizing the fading process, such as done in Markov fading models. The algorithm is semiblind, where initial estimation of the channel is obtained using orthogonal pilot sequence insertion (OPSI). Unlike existing JDE algorithms, the algorithm exploits soft information from the decoder to improve the channel estimation iteratively. The performance of the algorithm approaches the performance of the system where all signals in the frame are assumed to be known with probability one, i.e. acting as pilots.