A theoretical analysis of the Modular Multilevel Converter is presented. The interaction between arm currents and modulating signals causes capacitors voltage oscillation at both fundamental frequency and twice the fundamental frequency. Capacitors voltage oscillation is the cause of undesired DC and second order harmonic voltage in the converter arms, besides an additional voltage at the fundamental frequency. All these components are compensated modifying the ideal modulating signals by means of additional DC, first and second order harmonic signals.