Theoretical performance analysis is presented for an optical transmission system with RF subcarriers multiplexing (SCM) for radio on fiber technology considering the effect of PM-IM conversion due to Mach-zehnder modulator (MZM) and optical beat interference (OBI) generated during photodetection process. The computed bit error rate (BER) performance results show that there is significant deterioration in system BER due to OBI and PM-IM conversion and the system suffers significant power penalty at a given BER. The penalty is found to be approximately 5.8 dB, 11.0 dB, 13.5 dB, 15.0 dB, 17.0 dB for PM-IM conversion factor of -1, -2, -3, -4, -5 and 18.0 dB, 18.5 dB, 20.5 dB, 21.5 dB, 22.0 dB for number of subcarriers of 2, 4, 8, 16, 32 respectively.