A lesson in economics as UAE schools get competitive

The cost of a child’s education from preschool to university in the UAE has been estimated at around $255,000. (Shutterstock)
Updated 25 August 2018
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A lesson in economics as UAE schools get competitive

  • chools in the UAE could find themselves in a price-and-quality battle to attract students
  • A flood of new schools across the UAE means parents have more choice yet are seeking value

ABU DHABI: Schools in the UAE could find themselves in a price-and-quality battle to attract students as competition within the nation’s education sector hots up.
After years of near-constant growth and an infrastructure boom in the field of education, a flood of new schools across the UAE means parents have more choice yet are seeking value as salaries become squeezed in a tougher economic environment.
While education analysts do not see a so-called “expat exodus” leading to empty spaces in UAE classrooms, they believe rising living costs and uncertainty in the job market mean schools will have to carefully consider their price structure and show they can continually drive up standards if they are to survive. As the sector becomes increasingly competitive, some schools are taking heed by turning down the option of raising tuition fees.
Mahboob Murshed, managing director at Alpen Capital (ME), said: “The UAE education sector — which has in the past seen a phase of robust growth in student enrolment coupled with an expansion of infrastructure — is now entering a phase of transition.
“For the first time, there are concerns of oversupply as demand struggles to catch up with supply, with the entry of a large number of new schools in the past few years. The competition among private players has intensified over the years with new schools offering incentives and discounts to attract students.
“The increased competition has ensured a greater focus on quality of education, with players focusing on continuous improvement to enhance their ratings.
Any drop in enrolment numbers has a direct impact on profitability of schools and newer entrants are at a greater risk as compared to older and more established schools. We expect to see consolidation in the sector and only those with a high-quality offering in their price segment will be able to maintain and enhance their profitability.”
While concerns have been raised that tougher economic times mean that some expats will leave the UAE, with a resulting impact on school numbers, WorldOmeter — one of the world’s leading sources on global population growth — estimates that the UAE’s population will continue to expand at a net rate of 1.5 percent.
But according to Mansoor Ahmed, director for health care, education and public-private partnerships at Colliers International, the potential client base for schools is only one factor in whether they thrive or stagnate. He feels providers need to look at “the composition of the population,” which is becoming more mid-income than high-income, and make “affordability” their focus.
“The government in Dubai has already taken a step in this regard, by freezing private school fees in 2018/19, while the private sector is also moving in this direction by introducing more and more affordable schools,” he said. “Dubai is expected to maintain its status as one of most buoyant private school market in the world.”
However, he emphasized that studies have shown the cost of private education in the UAE is still the second highest in the world — behind only Hong Kong — with parents spending an average of 365,025 dirhams ($99,378) to send their child to school. Meanwhile, the cost of a child’s education from preschool to university in the UAE has been estimated at around $255,749 — and that excludes the cost of books, school trips, and uniforms, which could add another 40 percent to that figure where leading schools are concerned.
“In Dubai, based on 2015/16 data, almost 57.5 percent of students pay tuition fees of less than 20,000 dirhams per annum, whereas a large number of schools that have opened in the last few years, especially branded international schools, were catering to the premium end of the market,” said Ahmed.
“However, as the education market is maturing in the UAE and in Dubai, parents are becoming more and more careful in selecting a school for their children, as being expensive does not guarantee better quality. This hypothesis is also supported by the KHDA School Inspection Report which does not show a one-to-one correlation between tuition fees and a school’s ranking, as there are a number of schools charging affordable and/or mid-level tuition fees and still being ranked as ‘outstanding’ or ‘very good’.”
Ahmed said that while schools in Dubai are allowed to increase tuition fees based on the Education Cost Index (ECI) released by the Dubai Statistics Center — which, in 2017, enabled eligible schools to raise fees by between 2.4 percent and 4.8 percent — some schools decided not to do this for the 2017/18 academic year.
He said this decision was based on their desire “to attract and retain students in their schools as a result of a slowdown in economic activities,” which reduced the enrollment growth rate from 6.4 percent between 2011/12 to 2015/16 to only 3.13 percent in 2016/17.
“There is also increased competition, with the opening of around 10 new schools in 2017, following a record 15 new schools in 2016,” Ahmed added. “In fact, a number of schools in Dubai — especially this year — are offering incentives such as scholarships founder’s discounts, and sibling discounts to attract and retain students.”


SoftBank mobile unit to go for $21bn IPO

Updated 13 November 2018
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SoftBank mobile unit to go for $21bn IPO

  • The IPO will be one of the biggest ever worldwide, and will provide the group with funds to pay down debt and continue placing big bets on innovations
  • SoftBank’s bets so far have been as varied as small gaming startups, ride-hailing firms such as Uber Technologies, and e-commerce behemoth Alibaba Group Holding

TOKYO: SoftBank Group Corp. has won approval to conduct a 2.4 trillion yen ($21.04 billion) initial public offering (IPO) of its domestic telecoms business, in a deal that will seal the group’s transformation into a top global technology investor.
The IPO will be one of the biggest ever worldwide, and will provide the group with funds to pay down debt and continue placing big bets on innovations that CEO Masayoshi Son predicts will drive future tech trends.
SoftBank’s bets so far have been as varied as small gaming startups, ride-hailing firms such as Uber Technologies, and e-commerce behemoth Alibaba Group Holding.
SoftBank Group aims to raise 2.4 trillion yen through the sale of 1.6 billion SoftBank Corp. shares at an tentative price of 1,500 yen each, a filing with the Ministry of Finance showed on Monday.

 

 The amount could rise by 240.6 billion yen if demand triggers an overallotment, taking the total closer to the $25 billion that Alibaba raised in 2014 in the biggest-ever IPO.
The final IPO price will be determined on Dec. 10, and SoftBank Corp. will list on the Tokyo Stock Exchange on Dec. 19 with an initial market value of 7.18 trillion yen — about 1 trillion yen above that of rival KDDI Corp, which has about 10 million more subscribers.
The parent will retain a stake of around two-thirds, depending on the overallotment.
The mammoth offering comes at a time when investors have begun questioning the outlook for Japan’s telecoms companies.
The IPO was initially expected to appeal to investors seeking stability, but the government has recently called on carriers to lower fees while backing more wireless competition, sending shockwaves through the industry.
Yet SoftBank’s brand is still likely to draw retail investors long accustomed to using SoftBank’s phone and Internet services. Many still see CEO Son as a tech visionary who brought Apple’s iPhone to Japan.
Japanese households are commonly seen as an attractive target in IPOs with their 1,829 trillion yen in financial assets, even if they are traditionally risk-averse with over 50 percent of assets in cash and deposits. More than 80 percent of the shares will be offered to domestic retail investors, a person with knowledge of the matter told Reuters.
“I think a reasonable amount of money will be attracted to this one,” said Tetsutaro Abe, an equity research analyst at Aizawa Securities. “It’s a mobile company, so the cash flow is steady.”

FACTOID

SoftBank to sell 1.6 billion shares at a tentative price of 1,500 yen ($13) each.